New developments

This is a look at three major new developments in the county: 4S Ranch (with its older sibling Bernardo Springs), San Elijo Hills/Old Creek Ranch, and Eastlake/Otay Ranch.



Take these graphs with a grain of salt. There's a lot of noise due to insufficient data: less than 200 resale pairs are available for 4S Ranch and San Elijo Hills. I'm surprised that graphs came out as nice as they are.

Notice the periodic structure of the 4S Ranch chart. Seasonal variations are fairly common but they are far stronger in 4S than anywhere else. (Has something to do with Poway school district, maybe?)

Affordability - 12/2007

"Affordability" is basically an inflation-adjusted mortgage payment for a median house, normalized so that July 2000 = 100%. To measure inflation, I use CPI. (Actual incomes are good too, but incomes in San Diego county got artificially inflated due to all the bubble money flowing in.)

Some assumptions that go into this model:
* Average conventional mortgage rate as published by St Louis Fed
* Coast and RB/RP/4S etc. require jumbo mortgages (1% premium over conventional rate, starting in August 2007)
* Down payment equal to 20% of July 2000 median house price, adjusted for inflation
* To simplify things, it's assumed that the entire balance is financed using the aforementioned rate (although in reality, the amount borrowed would be above 80% of purchase price, so a 2nd mortgage with higher interest rate would be required)
* Property tax equal to 1% of purchase price

Things are rapidly normalizing, partly because of falling prices, partly because of low mortgage interest rates.

December 2007 data

Countywide, as of December, we're 22.5% off the peak:



My numbers are 3 months ahead of Case-Shiller. The official Case-Shiller for October is 13.1% off the peak and it really reflects the situation as of September, because their October numbers are averages of August through October. We had a 9% decline in 3 months.

Not every area is 22% down, though:



This plot will help explain why. It shows relative appreciation vs. July of 2000.



This is not to say that "Coast" and other upscale areas don't need to fall. Of the two causes of the housing bubble (speculative/investment buying and subprime) they were spared one and it kept prices relatively sane. Yet, a 15-20% drop is warranted just to get prices back to 2003 levels (most other areas are already closing in on 2003 levels fast). Besides, jumbo mortgages are more expensive and harder to come by than in 2003.

Area definitions:

"Southeast": Bonita (91902), Eastlake, Otay Ranch (91913, 91914, 91915)
"Southwest": old Chula Vista (91910, 91911), Nestor (92154), Imperial Beach (91932), San Ysidro (92173)
"Coast": all coastal towns from Coronado to Oceanside, UTC, Pacific Beach, Ocean Beach.