Tuesday, March 31, 2009

More Speculation of a Bottom

A recent article (paid subscription required) published by San Diego Source in The Daily Transcript summarizes a discussion by seven local real estate experts. The consensus was that a bottom is currently forming on the lower end of the market, which re-enforces what I have been seeing. I won't republish the entire article due to copyright issues, but here is a link to the bubbleinfo blog that did republish it if you want to read the whole thing.

These experts further confirm that it is investors who are putting the floor on low end home prices. Mark Goldman, professor of real estate at San Diego State University said, "It’s a great opportunity for first time buyers. But the restrictions are getting so tough that first-time buyers can’t hop in and if they can, they’re being outbid for these by investors -- all cash." Guy Asaro, president of homebuilder McMillin Homes added, “Everyone in the money world recognizes historic opportunity to buy property at below replacement cost. Once this stuff is gone, it won’t be at this price ever again because we can’t replace it at this price whether it’s new or used.”

Obviously Mr. Asaro is a biased source, however, what he says is true. Many homes on the lower pricing tier are selling at far below replacement cost. The laws of economics say this condition simply cannot persist over the long run. For it to persist, houses would have to become an obsolete asset, and I highly doubt that is the case.

1 comment:

  1. Ask the people of Detroit how long home prices can stay below replacement value.