Are you more likely or less likely to buy now?

User Forum Topic
Submitted by TheBreeze on October 23, 2007 - 10:28am

I'm curious what others are thinking about the housing market now. Does this fire make you more likely or less likely to buy now?

I can see at least two schools of thought here. One (the one I subscribe to) says that almost all houses in San Diego are worth less now because of the risk of future fires. For someone like me who looks at homeownership versus renting as purely a value proposition (no emotional attachment either way), this fire causes the value of most houses to go down due to the risk. This is kind of like how the stock market declined after 9/11 due to the new risk premium for terrorism.

On the flip side, I can see those who thought the bottom might come next year wanting to jump in now. Supply is going to be reduced, so it's possible that this event could accelerate the coming of the bottom. However, the coming increase in insurance premiums may cancel out the decrease in supply.

I'm just curious what others are thinking. BTW, I apologize if this post seems heartless. I'm not trying to make light of this devastating situation. However, I would like to know what others are thinking from an analytical point of view.

Submitted by patientlywaiting on October 23, 2007 - 10:43am.

Since, like you, I'm not emotional, I'm equally as likely (or unlikely) to buy. For me, it's a question of the right price for what you get.

Yes, insurance rates will go up. How much is insurance for an average 2000sf house these days? Around $1,400/year?

Submitted by farbet on October 23, 2007 - 11:00am.

Unlikely to buy anytime.
Isn't San Diego the plsce to be,yada yada etc.
Looking st Portlsnd,Oregon.

Submitted by mixxalot on October 23, 2007 - 11:02am.

Less likely

With the fires every few years burning most of the county down and major smoke pollution does change ones mind quickly.

I would much rather buy a motor yacht and have the ability to escape the land rather than be stuck in a crowded shelter.

Looking at northern california, Texas, Colorado and Florida.

Does Texas have wild fires like San Diego?

Submitted by jimmyle on October 23, 2007 - 11:23am.

I am less likely to buy in Poway, Rancho Bernardo, and may be Scripps Ranch and more like to buy in either West Mira Mesa or West Rancho Penaquitos where the risk of fires is less.

Submitted by farbet on October 23, 2007 - 11:34am.

less likely add San Elijio Hills. Don;t forget this was a deadly fire here a few years ago in the Rancho Santa Fe Road-La costa area

Submitted by mixxalot on October 23, 2007 - 11:35am.

PB or OB

would be safest bet- north county and north coastal areas are off my list due to risk of fires.

I'd rather have a small 2 bedroom condo in Pacific Beach, Point Loma or Ocean Beach than a big home in north county that will burn down every few years.

Submitted by Diego Mamani on October 23, 2007 - 12:10pm.

The fire affects people differently. And even among those whose perceptions are affected, some have short memories and will some day buy properties in fire-prone areas (which most of San Diego county is not).

Fire or not, every week we get at least one knife catcher in this forum telling us that they are ready to buy because they found "a bargain" selling at "below market value," and that they don't care about potential depreciation b/c they expect to live in the house for the next 20 years, etc., etc.

Actually, I'm grateful for the knife catchers. Thanks to them, we'll have declining comps all the way to the bottom. If all buyers were like us Piggintionians, no one would be buying and we would be stuck with the 2005 comps.

Knife catchers: Keep on buying!

Submitted by Bubblesitter on October 23, 2007 - 11:55am.

Personally, I'm less likely to buy out here. In last couple days, my wife pressuring me to considering moving the family back east. I don't blame her. I'm beginning to actively consider it.

I wanted to salute all the fire&rescue folks who are putting their lives on the line. Thanks.


Submitted by stop_the_bubble_hype on October 23, 2007 - 12:13pm.


Good luck on the east coast. I lived there for 5 very long years. Weather can be a drag depending on where you live. We were in CT where the winter lasted what seemed to be 6 months and the summer dragged on forever with humidity that made it practically impossible to do anything during the day. Noreasters shut the coast down a few times a year and then you spend the next week or so shoveling your way out of your driveway.

Every place has it's drawbacks and in the end being close to family/friends matters most. We decided that we liked being outdoors more than we liked experiencing the long winters and oppressing summers and we wanted to actually live near people who did not have a constant frown on their faces. Be sure to check out any state you choose, people can be very closed/reserved on the east coast -- it's a cultural thing and once you break through the demeanor you may actually meet a few people you can call a friend.

From what we hear people like NC quite a bit. I believe someone on this site lives there now.

Good luck and be safe.

Submitted by GBD on October 23, 2007 - 12:31pm.

I live in Texas. No we do not usually have wildfires like the ones that blow through So Cal periodically. We don't experience the kind of extreme low humidity, we get more rain (although we are prone to droughts, just not low humidity ones).

Of course we do have big thunderstorms which is certain areas also come with hail and tornadoes. And of course southern coastal Texas has the occasional hurricane. So it's a trade off. We get tornadoes, hurricanes, hail. So Cal gets earthquakes, mudslides and fires. Take your pick.

Submitted by mixxalot on October 23, 2007 - 6:09pm.

But housing is CHEAP in Texas

So would rather deal with that and get a bargain price on a nice home. Will see what happens next year to San Diego real estate prices.

Submitted by hipmatt on October 23, 2007 - 10:03pm.

I won't buy until the housing bubble corrects and RE prices return to a more reasonable level in line with rents and incomes. The fire has very little, if nothing to do with this.

Submitted by 4Sbuyer2002 on October 23, 2007 - 10:29pm.

What a bunch of ignorant dumba$$es. Fires make So. Cal RE less valuable? News flash there have been fires of this type in So. Cal for all of known human history. There is lots to deflate the sky high prices in So. Cal. Santa Ana winds and fire aren't one of them. If anything, the influx of insurance money followed by a mini re-building boom will put a significant fraction of out of work construction workers back to work and be mildly stimulative. Check out what RE prices for the unaffected area of New Orleans did after Katrina. They almost doubled. That won't happen here but this event, as devastating for SOME as it is, wont' affect the RE market much one way or another. If anything it may bolster it slightly.

grateful owner . . . .

Submitted by Bubblesitter on October 23, 2007 - 11:45pm.

I guess time will tell the impact on local housing pricing.

Next fight for all those who lost their houses will be against the insurance companies.

This is a very sobering story from Bloomberg

Victims of the Cedar file were victimized a second time around. Insurance companies will be slow-rolling and nickel&diming all the way out.

It is likely that insurance rates in all the fire zones and evac zones will see appreciable rises in insurance rate, if they can get decent coverage at all. Allstate has already exited the market. Underwriting is typically based on historic fire burn and evac zones.


Submitted by one_muggle on October 24, 2007 - 1:46am.

Re Katrina,
NYC also boomed post 9-11, go figure.

Though,strong quakes do tend to send people packing and RE down, at least in the short term.

-one muggle

Submitted by Ex-SD on October 24, 2007 - 7:47am.

I moved from SD to the upstate area of South Carolina 2 1/2 years ago after living in SD for over 30 years. The weather here is not bad. We have three months of hot weather that I don't care for but the rest of the year is fairly pleasant. Winters are very mild and snow is rare but less than an hour away if we want to see it in the higher elevations of the Smokey Mountains. Homes & taxes are cheap when compared to CA prices. You can buy a nice home here for $250k and up. There are more than a few religious zealots and more churches per square mile than any place in the country but we're not into organized religion and don't let them interfere with our enjoyment of the area. We're in the Greenville-Spartanburg area. If you're considering a move to the east coast, the economy is very good in this area and growing.

Submitted by TheBreeze on October 24, 2007 - 8:06am.

I doubt we'll be seeing something similar to the post-Katrina and post-911 region-specific booms. 911 happened right at the start of the bubble and Katrina was during the bubble. The bubble has popped now and even the few crazy speculators that are still out there probably do not want to buy in the fire zones.

Submitted by FormerSanDiegan on October 24, 2007 - 8:15am.

The fires have not changed my mind/strategy. I've never considered most of the areas that were severely impacted. My favorite parts of town are in Central San Diego and Central-coastal SD. Unfortunately, the fires just underscore another reason these areas are more desirable in the first place.

One more note: With the mortgage shake-out the past several months and now the fires, I would not be surprised if the lows in home sales (numbers sold, not price) for the current cycle in San Diego will be reached between August and December 2007.

Submitted by 4Sbuyer2002 on October 24, 2007 - 8:23am.

Yea those crappy undesirable areas in SD like Rancho Santa Fe, Fairbanks Ranch, and Olivenhain will probably drop like rocks in value - (insert sarcastic roll of the eyes here).

grateful owner . . . .

Submitted by sdrealtor on October 24, 2007 - 10:09am.

Simple supply and demand will play out of the next 12 to 24 months on this one. We just took what will likely end up being about 2,000 homes out of the market. We will see increased needs for rentals. We will have more contractors going back to work. I doubt the the weather will change. Some will leave because of the fire, others will come as prices have become relatively more affordable. If anyhting, this will help the market a little, but the impact will likely be unmeasurable.

The only

Submitted by FormerSanDiegan on October 24, 2007 - 10:39am.

Yea those crappy undesirable areas in SD like Rancho Santa Fe, Fairbanks Ranch, and Olivenhain will probably drop like rocks in value - (insert sarcastic roll of the eyes here).

I never stated or implied that these were crappy and undesirable. However, I am not yet in the market for properties over $2 Mil in these elite areas. So communities like RSF are pretty irrelevant for me and my very biased south of the merge/ north of the 8, less than $1 Mil point of view.

Submitted by JWM in SD on October 24, 2007 - 10:49am.

Umm, were all 2,000 of those homes in the For Sale inventory that currently exists? Unless they were all future comp drivers, I'm not sure how this would affect the market decline. If anything, it will drive sales down even further as the last thing on buyers minds is shopping for a home in RB or 4S firehazard central.

Come on now, you are just reaching here.

Submitted by juice (not verified) on October 24, 2007 - 11:03am.

Exactly, for sale inventory may have just dropped by, oh, 100 homes? Guessing that 100/2000 were for sale. So we now have 23,000 instead of 23,100 homes for sale. And the entire county now has 1,100,000 housing units instead of 1,102,000 units. Not as significant as you may expect. Also, how many pendings will fall out as a direct result of fire damage, being burned down, or people simply deciding not to buy now. If I were in escrow anywhere near Poway, Rancho Bernardo etc., I would seriously think about cancelling right now...just a gut instinct many others will likely feel. Perhaps those in the know can post some data on cancelled pendings...

Submitted by sdrealtor on October 24, 2007 - 11:41am.

You guys are idiots. I never said they came out of the for sale inventory. I said they are out of the market as in they no longer exist. Some of the owners will look for new homes, some will rent, some will rebuild etc. The impact is lower supply and higher demand for what is out there, albeit very insgnificantly. I said the impact would be imeasureable. I'm not reaching for anything. To the contrary you are looking for anything to support your position.

Submitted by bsrsharma on October 24, 2007 - 11:52am.

I think the single most important factor, besides psychological trauma, is insurance. If insurance rates jump up by a factor of 10, definitely there will be a serious impact on prices. Even more if insurance simply becomes unavailable for certain areas. Nothing to kill values faster than the knowledge that one can't get insurance. The Billion $ loss has to come from somewhere, and the most likely place is insurance premiums. If the $1000 p.a. premium jumps to $10,000 p.a., a lot of potential homebuyers suddenly can't afford to buy anymore.

Submitted by sddreaming on October 24, 2007 - 12:57pm.

I think people outside of San Diego will be less interested in relocating into San Diego. Also those in San Diego who were considering a relocation out of San Diego will probably be more likely to do so. I doubt these two sets are very significant though. I don't think most San Diegans will be swayed by the fire. I think Rancho Bernardo and most of Poway will still be considered desireable, just like Scripps Ranch remained so after the Cedar fire.

Submitted by JWM in SD on October 24, 2007 - 1:18pm.

"I never said they came out of the for sale inventory. I said they are out of the market as in they no longer exist."

No longer exist ='s Out of Market...hmm, that's a new to me. Try being more precise in your language then.

Submitted by JWM in SD on October 24, 2007 - 1:25pm.

"I think Rancho Bernardo and most of Poway will still be considered desireable, just like Scripps Ranch remained so after the Cedar fire."

Possibly, but from a personal perspective, the fire issue will get a higher weighting in my future decision process than it might have a week ago...and I really liked the RB area too....

Submitted by Raybyrnes on October 24, 2007 - 1:29pm.


The insurance premiums have already been paid with premiums collected and the stock market has been fantastic over the last 4 years so the insurance companies have done extremely well investing those premiums. They will continue to write policies as long as the Reinsurance markets continue to help mitigatte exposure to catastrophic loss.

The place to look for this is who is reinsuring the insurance companies. I would suggest that a Bershire Hathaway can easily eat this loss and go on writing policies. Insurance represents a very small amount in a housing transactions. Right now a Homewowners policy might run $1000 a year. Even if it doubled I would say it would be insignificant in terms of a buy decsion.

Submitted by bsrsharma on October 24, 2007 - 1:45pm.

The experience in Florida & Louisiana is that usually, many insurers walk out of markets after mass disaster. The remaining ones tend to jack up the rates multiple folds and the State has less control since having insurers is the main priority. Past premiums will be used to pay present claims; but the premiums have to readjust in light of increased risks. Billion $ loss today means the insurers should be ready with $3B reserves for the next disaster. A $1000 increase in premium is equivalent to a hidden price rise of, say 3%, (assuming annual mortgage payment of $30,000). That should reduce affordability/demand by 3% if you assume a 1:1 price elasticity.

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