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Pent-up Housing Demand Will Soon Rip Loose

— Home prices in San Diego have ebbed and flowed since the spectacular run-up became a spectacular nose dive. Lately they’ve been ebbing. And real estate experts have spoken of pending drop in the median price of homes due to the “shadow inventory.” These are distressed homes on the cusp of foreclosure that will soon flood the market.

But that’s only one side of the coin. John Karevoll is a housing specialist with DataQuick and he says the pent-up foreclosures are accompanied by a pent-up demand for housing. Falling home prices and the difficulty people have in getting mortgage financing these days have stood in the way of many people who want to sell or buy.

That means college graduates are living at home with mom and dad. Homeowners who want to make a lateral move, to a different neighborhood, have been unable to qualify for financing. Karevoll says even divorced couples are still living under the same roof because they can’t get financing or have been unable to sell at an acceptable price.

Once financing becomes more available, he expects to see a “tsunami” of home sales as the pent-up demand is finally expressed. Take a look at my iPhone video interview with him (forgive the shaky frame). In case you’re curious about the background scenery, he’s on the patio of the Living Room, on El Cajon Blvd.

Karevoll begins with another interesting point. Old homes, built in the 1930s and 1940s, have been very resistant to the whims of the marketplace and have held their value extremely well.

Video

John Karevoll on Housing Demand

Above: John Karevoll talks about pent-up housing demand in San Diego.

Comments

Avatar for user 'hopeheadsd'

hopeheadsd | February 8, 2011 at 11:14 a.m. ― 3 years, 7 months ago

The "will" to buy a home and the ability based on current lending standards still have yet to meet eye to eye.

I follow RE on a daily basis here in SD. For the most part, in more sought after areas, sellersare not lowering their asking prices.
On the other hand, the other inventory is not particularly great inventory.

There are pent up buyers for certain, I was one of them, but had to be incredibly patient. Just because there is shadow inventory, it doesnt mean it will have an impact on prices or that there will be some flood if "good" homes for sale. Banks will release them when momentum starts to swing in the job market.

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Avatar for user 'Tom Fudge'

Tom Fudge, KPBS Staff | February 8, 2011 at 11:24 a.m. ― 3 years, 7 months ago

I just went though a year-long house hunt before buying in El Cerrito, just south of San Diego State. My new house is one of those 1930s-era homes Karevoll says hold their value very well. But in our case, I'm sure the family that sold it did so reluctantly. They ended up taking a loss of tens of thousands of dollars, compared to what they bought it for in 2004. That's why so many people, who would like to sell are standing pat. I don't know what it will take for mortgage financing to loosen up. But when it does, Karevoll is convinced sales in San Diego will see a huge increase as high-quality properties finally come on the market.

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Avatar for user 'tickyul'

tickyul | February 8, 2011 at 11:52 a.m. ― 3 years, 7 months ago

Well, there was never this huge "housing crisis" to begin with, it was a needed correction that is a natural part of any free society. The bubble was built up to a point where it needed to pop. Sadly, Big Brother did everything in his power to try and keep this bubble from fully deflating, this keeps responsible first time buyers out of the housing market.

The fact is a lot of housing TRIPLED in value during this period of American stupidity and irresponsibility. Then the correction dropped those values 30%.....uh, that is not a true correction.

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Avatar for user 'hopeheadsd'

hopeheadsd | February 8, 2011 at 1:35 p.m. ― 3 years, 7 months ago

Tom, I remember you your personal story on that a few months back was it?

I agree with Karevoli to a certain extent, although calling it a tsunami seems a bit extreme.

In a broader sense, I dont think there was a housing bubble per se, it was a credit bubble and more so the ability to obtain financing without much enforced restrictions. Real estate became one of the biggest assets within that credit bubble as were car purchases and credit card usage.
As a national crises, this one is makes for a nice slice of a chapter in an Econ 101 book :)

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Avatar for user 'Greg Duch'

Greg Duch | February 8, 2011 at 5:57 p.m. ― 3 years, 7 months ago

While mortgage rates have been near the floor, banks have been very reluctant to lend money to all but those with platinum credit ratings. As inflation begins to be felt; and as interest/mortgage rates climb substantially upward in response, the more incentive banks will have to lend to more potential buyers. ? Why lend money now at bargain basement prices, when inflation and higher interest rates will be the rule in the long run? We are still in the midst of a credit embargo, and will remain so, until the price of credit reaches an acceptably high level for the banking industry. The Banking Cartel will then open up the spigots, and let money start flowing in greater volume.

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Avatar for user 'Greg Duch'

Greg Duch | February 9, 2011 at 2:34 p.m. ― 3 years, 7 months ago

LOW INTEREST RATES ARE BOTH ESSENTIAL AND VERY DESTRUCTIVE TO THE ECONOMY AT ONE AND THE SAME TIME. THE ECONOMY AS A "Financial SYSTEM" NEEDS LOW INTEREST RATES; BUT ***NOT*** IN A WAY THAT BENEFITS THE AVERAGE WORKING CLASS INDIVIDUAL CONSUMER. IF THE "average" CONSUMER WERE TO BENEFIT FROM THESE LOW INTEREST RATES TOO, THE ECONOMIC SYSTEM (i.e.CORPORATE AMERICA) WOULD SUFFER. THAT'S WHY CREDIT CARD RATES AND BANKING FEES ARE IN THE STRATOSPHERE, EVEN WHILE MORTGAGE RATES HAVE PLUMMETED. SO, IT'S GREAT TO LOWER MORTGAGE RATES TO ALL-TIME LOWS--JUST MAKE IT IMPOSSIBLE FOR NONE BUT THE WEALTHIEST CONSUMERS TO ACTUALLY TAKE ADVANTAGE OF THESE RATES.
To put it in different terms: THE MORE MONEY YOU HAVE; THE MORE THE OVERALL ECONOMY BENEFITS FROM OFFERING YOU LOW, LOW INTEREST RATES SO THAT YOU WILL SPEND SPEND SPEND--- THEREBY SOME OF YOUR SPENT DOLLARS WILL TRICKLE DOWN TO THE LOWER CLASSES. IN THE COMPETITION FOR BORROWING MONEY, IT'S FAR FAR BETTER FOR THE ECONOMY WHEN A WEALTHY INDIVIDUAL TAKES OUT A LOAN THAN WHEN A POOR OR MIDDLE CLASS PERSON DOES. A rich person's dollars always go farther than a poor persons.--- "Those that have, get more; those that don't have, apply for unemployment and food stamps."

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Avatar for user 'SanDiegoAgent'

SanDiegoAgent | September 23, 2011 at 9:37 a.m. ― 2 years, 12 months ago

For the San Diego real estate market let's all hope that Karevoll is correct in his prediction.

But, there is a distinct possibility that Karevoll is 180° off base!

For a good article (San Diego Real Estate Pent-Up Demand .. It’s Real & About To Kick-In) detailing another hypothesis, though written in 2008, I believe still relevant today, can be found with a search for July 14, 2008 at:
http://www.brokerforyou.com/brokerforyou/

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