Price Opportunities in the California Real Estate Market

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Prices are beginning to come down in areas of California real estate, which is not surprising since they were so high. July home sales were down more than 11 percent. The price of a condo dropped slightly. In San Diego, California, the Campus Walk Condominiums are for sale starting at $340,000. The real estate company involved is still busy converting apartments to condos. The number of these conversions has doubled over the last year, according to NPR. A condo selling for $450,000 is now selling at a price down by $50,000. The number of condos sold dropped 33 percent, and average price is down to $389,000. The speculators have been thrown out of the market, though residential high rises are still being built on the San Diego waterfront.
In June, San Diego became the first California real estate market to see its annual median real estate prices actually go down. It went down 1 percent to $488,000, according to a real estate tracking firm. Meanwhile, sales dipped 24 percent. This included a decline in demand for the hi-rises built on the waterfront. Since a lot of the purchases have actually been investments in second homes and rentals, when the speculators go out of the market, it will be felt. In San Diego County, 1,794 new condos were paid a down payment before actual construction - a third less than in the first half of 2005, according to MarketPointe Realty Advisors. A lot of new high-rises are still being built. The city's Centre City Development Corp. estimated 3,562 new condo units in 34 projects were being constructed. Excess condos that can’t be sold will have to be put on the market as rentals.
In places like Los Angeles, a two bedroom condo can cost over 500 thousand. But now there is a cooling trend hitting. In a city like LA, it is actually a lot cheaper to rent a house or apartment rather than to buy, even taking in account the tax benefits involved. Then this in turn creates a glut in the rental market. If you rent, you are not building any equity, but you could end up having a tremendous loss of equity in an overpriced condo purchase. Yes, it can happen in a downturn. Certain areas are considered safe zones which never ran up very high, in the Mid-West that is the theory at least. The bubble zone has been north of Wash DC on the East Coast, the Florida coast, and the West Coast, Sacramento, Las Vegas and Phoenix. This represents over 60 percent of the market value of all housing, even though it’s a lot less than 50% of housing. This is a housing bubble, like when the NASDAQ went over 5000, and then fell over 80%.
So the good part of the situation is that there may be some bargains in the market. People want to bail out before the market goes down. If you don’t have to sell, then you might as well ride out the cycle, and hope prices go up in another five or ten years.

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