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When Will Local Real Estate Market Rebound?

When Will Local Real Estate Market Rebound?
What are the latest trends in the local commercial and residential real estate markets? Why are some areas of the market improving, while others are still struggling? Local real estate experts discuss what changes we've seen in 2011, and offer their predictions for what could happen in the spring and summer months.

What are the latest trends in the local commercial and residential real estate markets? Why are some areas of the market improving, while others are still struggling? Local real estate experts discuss what changes we've seen in 2011, and offer their predictions for what could happen in the spring and summer months.


Dr. Michael Lea, director of SDSU's Corky McMillin Center for Real Estate


Matt Battiata, CEO and broker in charge of the Battiata Real Estate Group

Gary London, real estate economist with the London Group Realty Advisors

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This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

MAUREEN CAVANAUGH: I'm Maureen Cavanaugh, you're listening to These Days on KPBS. Springtime is when the typical real estate market begins to pick up from the winter doldrums. But as we know, the last few years have been anything but typical for the housing market in San Diego. So many analysts are looking ahead to this spring real estate season as a mixed bag full of hopeful signs and cautionary tales. If you're looking to buy or to sell or just looking, we're about to discuss where the San Diego market is in terms of pricing, lending, and potential. I'd like to introduce my guests, doctor Michael Lee is director of SDSU's Corky McMillan Center for Real Estate, and Michael welcome to These Days.

LEE: Thank you, Maureen.

MAUREEN CAVANAUGH: Matt Battiata is CEO and broker in charge of the Battiata real estate group. Good morning, Matt.


BATTIATA: Good morning.

MAUREEN CAVANAUGH: And Gary London is a real estate economist with the London group realty advisors. Good morning, Gary. Thanks for coming.

LONDON: You're very welcome.

MAUREEN CAVANAUGH: Now, we are inviting our listeners to join this conversation. Are you going through a short sale or a loan modification? Are you planning to buy or maybe sell your property this spring? Give us a call with your questions and comments. The number is 1-888-895-5727. Mike, how would you describe the activity that we've seen in the residential market since the beginning of the year?

LEE: I think it's very muted where transaction volumes are historically low, don't really see a lot of activity in the market. And so I think things have yet to pick up.

MAUREEN CAVANAUGH: And would you agree with that, Matt?

BATTIATA: I would agree. What we've lost for the time being is our trade up buyer, which is a big part of the market. So many people -- I mean, I think it's -- the numbers might be as high as 50 percent of the homes in San Diego with mortgages are upside down. So what it means is most -- you have a lot of people who don't have any equity, and therefore they can't sell that one property and maybe move up to a bigger home or a better area or better neighborhood. And so there's a lot of people that for the time be, until the values come back up, are just out of the market.

MAUREEN CAVANAUGH: What -- I mentioned though in the beginning, hopeful signs of Gary, what are the hopeful signs you might be seeing in the market since the beginning of the year that may continue into the spring?

LONDON: Well, you mentioned winter. It's been a five-year winter.


LONDON: And the market has reached its bottom. I think that statistically, we're seeing that some months we see some ups, some months we see some down, but some are crawling along the bottom, and the market is sort of preparing for its long slog back. We're not seeing that play out much yet in much increase in transactional volumes [CHECK] move back, which is a function of essentially what Matt said, valuation declines and the fact that people that -- discretionary buyers are not coming back into the market yet, and discretionary sellers are not selling yet. Never the less, because the economy is in a rebound, it's a slow rebound, but because things are getting better, that inevitably will catalyze a recovery in the housing market. So I sort of look at 2011 as the second transitional year. We're gonna see a modest up side by the end of this year, but nothing that's really statistically significant.

CAVANAUGH: I want to start taking calls but I do want to get your feeling, the group's feeling, if you will, about housing prices. Because we hear so much conflicting information about housing prices. You know, it's down like one tiny tenth of a percent or up a tiny tenth of a percent. Michael Lee, what does that mean? Housing prices. Are they going up?

LEE: I think it's difficult to generalize from indices that you see Kay Schiller or Core Logic because they're averages. Okay? And there's a lot of variation across the county. Different submarkets are very, very different from each other. And the mix changes in terms of what's selling at any particular month. So I don't put a lot of credence on looking at these national or these metropolitan wide figures. That said, I'm a little more pessimistic than Gary for the short run because I think we haven't yet figured out all of our lending problems of we still have a lot of foreclosures to process through, and eventually that supply's gonna come on the market in a gradual sense. Because I think the banks don't want to deluge the market with a lot of real estate owned. And you still have problems with lending and borrowers being able to qualify. Even though prices are down so much in San Diego, it's still a relatively expensive city compared to income. It's much better than it used to be, but it's hard to qualify given the new regime that lenders are putting in front of us.

MAUREEN CAVANAUGH: For instance, Matt Battiata, are the people who are trying to sell their homes, are they getting closer to what they wanted in terms of price?

BATTIATA: I don't think anybody's getting what they wanted. That's the big issue. A lot of people -- you know, the reality is right now, for the most part, the only people that are selling are the people that have to sell. And that's why a big part of the market is distress cell sales, people that are upside down who are doing short sales, or homes that the banks are selling that they've foreclosed on. The average home seller, they might think they want to sell, once they find out what their home is realistically worth in the market, if they don't have to sell, they just decide I'm gonna stay put and wait. Because it doesn't make sense for me to sell at that price. And as Michael said, are that's really -- the biggest issue, the biggest cloud that's hanging over our market is the fact that you've got a huge number of people that are upside down. And if for any reason they need to sell, because there's a lot of people that owe at peek levels in this market. And the market has to get all the way down to the bottom, and I think we're pretty close. We're maybe 20 percent away from the bottom, let's say. It's gotta get all the way to the bottom, and then get all the way back up to those peek prices. And until it does, all those people that owe at those peek levels, if for any ran they need to sell, whether it's a job transfer or they lose their job or they get divorced or any of the reasons people typically sell, they're all unfortunately going to be a short sale as opposed to an equity cell. And that puts a lot of down pressure on prices.

MAUREEN CAVANAUGH: And Gary, is that really the bottom line? If somebody says I wanna sell or I want something, and they contact a real estate agent and they find out the house is worth, I mean -- it's such a shock how low that number is, and then they just decide, well, I guess we'll stay here.

LONDON: I think Matt is spot on. I think that's exactly the problem right now. Listen, statistics locally have suggested that from the top in 2005 to the bottom last year that housing prices in San Diego dropped 40 percent. I don't believe that for a minute. I think that if you're trying to transact right now, that is the case. But as Matt has suggested, virtually all of the transactions that have transpired over the last few years have been distressed transactions, either really distress as in trust deed sales or functionally distressed, I lost my job, I better sell my house. And until we get past the sort of have to sellers and into the want to seller stage, which is going to happen some time, you know, past this year, we're not going to see really how far housing prices have dropped or how far that they have to recover. But from peek to peek, we're probably looking at a ten-year -- you know, ten years from now at this point.

MAUREEN CAVANAUGH: Right. That is Gary London. My guests are Dr. Michael Lee and Mat Battiata, and we're taking your calls at 1-888-895-5727. Steve is on the line, he's calling from the five freeway. Good morning, Steve, welcome to These Days.

NEW SPEAKER: Thank you for taking my call. I have a comment based on what I observed in the last Southern California housing bust in the early 90s. There was actually -- somebody put together a series of LA Times articles extending from about the end of the early 90s recession in 1991 until the housing market actually reached bottom which was around 1996, and year after year, these articles document that people said this is the year the market is gonna hit the bottom. I think bottoms are hard to identify until they actually materialize. Of and you can see them in the rear-view mirror but you can't see them up front.


NEW SPEAKER: And given it took five years for the market to bottom out between the end of the last recession and when the market finally reached bottom, and that this current recession just ended in 2009 and the housing boom was much, much larger this time, I find it very optimistic to assume that we hit a price bottom already just a couple of years after the end of the recession.

MAUREEN CAVANAUGH: Steve, let me get a response to that. Who'd like to -- yeah, Gary.

LONDON: Yeah, I actually I think the caller is mostly right. The market peeked in 89, it didn't recover until 96. Where he's wrong is that the bottom was in the middle of that period, 92, 93. This feels to me like 93 again. It's going to be a few years before we start seeing some reasonable price appreciation. We're gonna start seeing it gradually beginning about now. And I'm not prescient. I don't know if it's now or three months from now or a year from now, but we're sort of -- in that we're sort of approach, at, or I think coming off of that bottom now, it's gonna take a few years before we get to normalcy, then we get to the point where we begin the ride back up again, and that ride back up again is a long ride up.

MAUREEN CAVANAUGH: Isn't this recession just a little bit different because the real estate market -- the crash in the market wasn't the response to the recession, it was kind of the cause of the recession? Is that different.

BATTIATA: It is different. But the effects are the same.


BATTIATA: And the other thing is this drop has been extended by the government intervention into the mark, which is well intentioned of it is different but at the same time, it still was a boom, it's a bust, and the best way to look at it is that real estate markets are like a cruise ship out on the ocean, they get momentum, regardless of which direction they're going in. So when the market was changing ahead in 2004, you can turn -- we turned off the engines and the propellers in this cruise ship in 2004, but the median price kept going up until 2006, because the market had momentum. Now we're steaming full speed in the opposite direction. Maybe -- I think we're getting to the point where we're starting to throttle down the engines and turn off the propellers, but even if we do that now, the reality is this market will have a year or two of momentum going in a downward direction. Of so they don't turn on a dime.

LEE: I'd like to come back to the lending side of that.


LEE: Because in the past, the housing has tended to lead us out of a recession because it's an intrasenstive type of investment.

MAUREEN CAVANAUGH: What kind of investment?

LEE: Intrasensitive. So when we have low interest rates that the federal reserve is trying to help get us out of a recession, housing will pick up quicker because it becomes more affordable. The problem is, you've got two off setting winds here. You've got the off setting wind that negative equity that Matt referred to before that people just can't qualify or aren't going to sell. And secondly that we offset some of the affordability advantage and low interest rates with the tighter -- much, much tighter under writing guidelines that we see, and new vis-a-vis the last time.

MAUREEN CAVANAUGH: Let's take another call, again we're talking your calls at 1-888-895-5727. Jason is on the line from Point Loma. Good morning, Jason, and welcome to These Days.

NEW SPEAKER: Hello, how are you?

MAUREEN CAVANAUGH: Just fine, thank you.

NEW SPEAKER: Basically I'm a home buyer just calling in to ask a question about short sales. My wife and I have been submitted offers on multiple short sales, we're finding that some banks are a little more logical. Basically, you know, from the agent's point of view, are there certain banks that they're steering their clients towards in terms of short sales or are there any banks that they're -- if they can, they're steering them away from. I've been heard rumors that Wachovia is very easy to deal with. And then on the other hand I've heard rumors that some basics, I don't know if I should name them, are a lot more difficult to deal with. Are there strategic moves that agents do to get them into short sales involving certain institutions.

MAUREEN CAVANAUGH: Thank you Jason. Matt?

BATTIATA: I can take that. Jason, i would say that you and your wife should be looking for a home that you like, and that's a good deal that you can get at a good price. All the banks are different to deal with. It also depends on who the investor is. Many times a certain bank might be the servicer, but then there's a different investor behind that servicer. So you really can't -- and some banks are most difficult to deal with than other the. But at the end of the day, if you're willing to be patient, most short sales do go through these days. You just have to be patient. The caveat is that you might wait six months, and then the bank might come back with a ridiculous price. They might say we want 300 when really the property is worth 265. But you can get around that as well. So you just really need to be patient. Short sales are very frustrating for everybody solved, whether it's the listing agent, the buy are's agent, [CHECK].

MAUREEN CAVANAUGH: A recent news report that came out earlier this month noted that 70 percent of people who were -- who did recently close their short sales said that it was a difficult or extremely difficult experience.

LEE: Excruciating.

LONDON: That's a very euphemistic way of putting it.


LONDON: Everything's difficult when you're dealing with lenders right now. This was a credit crisis, the lenders made a to know of mistakes, the pendulum has swung as Mike has suggested to the other extreme where interest rates are extremely low, where it's difficult to find -- to get a loan even if you think you're traditionally quite qualified. But having said that, this is the window of opportunity for buyers. Interest rates are low, if you have some money that you can put down perhaps at a higher level as down payment on a home, pricing is cheap, it's never been this good in San Diego before. From the perspective of a buyer. And it's a window. And the visual is, windows open and shut. And this window will shut. And it really doesn't make any difference whether Matt Mike or Gary are right, almost at the bottom and on our way up. We're almost in that floating period where homes are real cheap, interest rates are low, and if you can figure out a way to qualify for a short sale or a regular sale, now's the time to strike.


MAUREEN CAVANAUGH: I'm curious about just a quick about how is the profession doing? How are agents doing? I would imagine that a lot of people really got out of the business in the last couple of years.

BATTIATA: Definitely.

MAUREEN CAVANAUGH: Are brokers, are agents taking smaller commissions? What are you guying doing to stay afloat?

BATTIATA: Sure, well, yeah, I think a lot of agents and brokers have gotten out of the business. Both real estate brokers and mortgage brokers. And really here in San Diego if an agent has not adapted to the market, meaning transitioned into -- just transitioned into the market in whatever way they could, then they have gone broke and gone out of the business, and it's a really unfortunate reality but it's the case.

MAUREEN CAVANAUGH: Anything else gentlemen?

LONDON: Well, I'm not on the ground like Matt is, but statistically of course as we got a huge reduction in the amount of people at every level, you know, every part of the real estate and finance business that are out of business. Of the whole industry is compressed. Where you really see it is in the builder business, because we only delivered somewhere in the range of 3200 homes or got 3200 permits last year in San Diego County, which is a number that's not gonna get much larger this year. So the whole industry has gotten smaller and what's interesting about it is that once the market and the economy do recover, we'll inevitably see a [CHECK] it's supply and demand, we're not gonna be quickly supplying new homes again with the depression that has occurred in this sector.

MAUREEN CAVANAUGH: Diane is on the line from San Diego, we're taking your calls at 1-888-895-5727. Good morning, Diane, welcome to These Days.

NEW SPEAKER: Hello. I'm actually calling to ask a question about the home loan modification program.


NEW SPEAKER: And I have a friend that I was assisting with this process, and he was doing his home loan modification through B of A, and he's in the construction industry, everyone knows the construction industry has just crashed in San Diego, so he filled out his application showing his income has just plummeted since the last year. [CHECK] I know how to make a case. We read it real carefully, did a great job, submitted it of A, and it said we're sorry, but it doesn't demonstrate that you've had a reduction in your income. And I'm just wondering, first of all, I thought it was a federal program, so I was a little surprised that it was going through B of A, and there's an appeal process, but it's just a ridiculous response that maybe this isn't a real thing. Maybe there isn't any [CHECK] for people who have suffer indeed this economy.

MAUREEN CAVANAUGH: Let me go to Michael Lee on that because you've been talking about lenders. What about -- this seems to have done it perfectly correctly, there has been a dramatic drop in income, and this is the response they get.

LEE: Well, I think this is not unusual. The program while a federal program is administered by servicers and basics and the lenders that are in collecting payments. And they have significant discretion, and they look at it from the standpoint of what is highest value that I can get from different alternative approaches? So I look at it as -- if I make this loan modification and the borrower then essentially gets back on track and pays off the loan, what is the value to me of that E(REPEAT LAST PHRASE) if I don't think that's gonna happen, I go ahead to a foreclosure, sell the house, what kind of value I'm gonna get that way. So that aspect is there, but you can see from the numbers in early its of the amount of people who have applied versus the amount of people who actually get through the process it's been very low.

MAUREEN CAVANAUGH: Very low percentage. Yeah.

LEE: Part of that is the bank, but I think part of it also reflects the issues for the borrower. If you're deeply under water, then loan modifications, which only work to reduce your front end payments really aren't gonna help. Of and the banks won't process that. Also if the -- you have a lot of situations where even though they can get your front end ratio, which is your housing to income ratio, down to 31 percent, often the back end ratios with all your other kind of debt is still over 60 percent. And so there are a lot of factors that go into the decision making.

MAUREEN CAVANAUGH: And we're up against a break but you wanted to mention something. Of the.

BATTIATA: Just to respond to the caller. Let me just bottom line it. In general, lenders have no interest in modifying anyone's loans. They are going through the motions because they have been pressured by the federal government to do it. It is a government program, but it is -- it's a voluntary program for the banks to participate in. And in general, 95 percent of the people that, apply for loan modifications are rejected. And even the loan mods that are granted are such a Band-Aid, in other words it's not dropping someone's payment from $3,000 a month down to 1800, it's going from 300 down to 2700, and normally, the $300 that they save every month is just tacked onto the back end of their loan. And the disingenuous thing that the banks are doing, [CHECK] is if the banks are not gonna modify people's loans, they should not lead borrowers down the primrose path of telling them that they're going to and telling them to take the next year to 18 months to submit all this paperwork knowing full well that they're not gonna do anything meaningful. They should just simply state, you know what? We don't do loan mods. Because people waste a huge amount of time and get themselves in worse situations. Because the banks also say, well, if you're current, we're not gonna modify your loans of so people stop making payments, they destroy their credit, they get into a situation where they're in [CHECK].

MAUREEN CAVANAUGH: We have to take a break. Of when we return, we will continue taking your real estate questions and phone calls and continue our spring real estate outlook here on These Days. You're listening to These Days on KPBS.

I'm Maureen Cavanaugh, You're listening to These Days on KPBS, and we're quieting an update on the San Diego real estate market. My guests are Gary London, a [CHECK] CEO and broker in charge of the Battiata real estate group. And Dr. Michael Richard earnest is director of SDSU's Corky McMillan Center for Real Estate. And we are taking your calls at 1-888-895-5727. Let's start out with a call from Ed, calling from east lake. Good morning, Ed, and welcome to These Days.

NEW SPEAKER: Good morning, thank you. Well, my question is, in 2007, I did I bankruptcy. I had a primary residence, and I have had two rental incomes. Unfortunately I was caught up in the market. And I had to claim bankruptcy. Now I'm in the market three years later to purchase the home. The income is there, the down payment is in a savings account, but now the obstacle I'm coming across is now the banks are telling me, yes, you have to wait at least 2 or 3 years after a bankruptcy before you can qualify for an FHA loan. But now after the bankruptcy, it took about a year for one of my homes to actually get foreclosed on. Of so now the payments are telling me that I have to wait three years after the foreclosure. So I'm kind of confused. Of I really don't know which direction to go now.

MAUREEN CAVANAUGH: Any advice for ed.

BATTIATA: Well, my advice would be, if you haven't already, check with a credit union. Sometimes credit unions because they're lending their own money have different guidelines of he's gonna run up the against that there are federal -- if he wants to get a fed -- government insured loan, Fannie Mae, Freddy Mac, [CHECK] so he's not gonna be able to get around that. I mean, he could, it's unlikely, so my suggestion would be to try a non-government insured loan which would be, like, three a credit union.

MAUREEN CAVANAUGH: You know, before we leave our discussion about lending, I want to get your -- your impressions about this idea of shutting down Fannie Mae and Freddy Mac, a proposal by president Obama and house Republicans to slowly dissolve these two lending giants. And let me go to you, Gary. Of what is your take on that?

LONDON: Well, you know, we talk about a lot of changes. This discussion we've talked about the problem of government intervention that we haven't been able to clear the market quick enough. We've talked about the pendulum swung the other direction with lenders. But -- and there's even a proposal in the Obama administration to reduce mortgage deductibility on some level. All of these issues pale in comparison to what would happen if the secondary [CHECK] the backbone of our sort of home finance delivery system in this country for several generations now, since the mid-20th century. Now, the good news is that whatever happens to those agencies is not gonna happen immediately. We're talking about probably a ten-year period of change. There will be change. And presumably, someone will fill in the gap of buying up the notes that get originated from the homes that Matt sells. But that problem, that issue has to be addressed. Because the backbone of our home purchasing system is in the ability of lenders to sell their notes to the secondary market, thereby infusing liquidity or cash back into them, so they can lend more money. And if that goes away or doesn't exist as it doesn't exist in many other countries, it portends a dramatic change in the amount of people that can be home buyers going forward.

MAUREEN CAVANAUGH: Because, Michael, half of all the mortgages in the United States are held by Fannie Mae and Freddy Mac. So it would seem that these are rather important institutions of what's the rationale for getting rid of them?

LEE: Well, you pointed out the first rationale which is it's very dangerous to have two institutions that hold half of a $10 trillion market either in the form of guarantees or loans they hold in their portfolio. They pose a systemic risk, they are clearly too big to fail. So the option to scale them back to a point where they're no longer systemically important I think is very important for the future stability of the system. If it's done slowly and gradually over time, I'm very confident that the private market will come back and securitize these loans because I agree with Gary that you cannot finance all of our mortgages through bank portfolios. That said, I think as they are scaled back both private label securitization, a new European style financing instrument called covered bonds issue as well as more banks holding bonds in portfolio will fill the gap. And through that [CHECK] the government will still have a back stop in case the market seizes up.

MAUREEN CAVANAUGH: Let's take calls. Of Al is calling from La Jolla. Of good morning, Al, welcome to These Days.

NEW SPEAKER: Good morning. I had a question for the guests. If the inflation sets in and the dollar value declines, how would that affect the market?

MAUREEN CAVANAUGH: Would anyone like to take that? If we go into an inflationary period.

LEE: That gets back to Gary's sweet spot. We're in a sweet spot now, and it's not gonna last forever because I think interest rates are likely to rise. Of the fed is gonna quit the QE2 by the summer, that has been keeping long-term rates down, at the same time we're gonna see a bit more inflationary pressure build up. So I think interest rates are bound to rise.

CAVANAUGH: I want to take a moment to talk about the commercial real estate market too, Gary, and I know that's pretty much your area. How are commercial properties doing and what do you expect to see in the short term?

LONDON: Well, the transactions in quality commercial have been very strong at most prices. The problem is that [CHECK] is not high quality. Of it's older, and when we say commercial, we're talking about office and retail. And we have too much of it. So we're going to see really a much longer period of valuation decline in the commercial sector, a much higher period of vacancy in the office sector, lots of transition in the retail sector 'cause it was way over built, so we're gonna see a lot of old shopping centers that are gonna sort of be reconceptualized into mixed use and housing projects and that sort of thing. I think a shopping center that [CHECK] may not have a reason to exist anymore. Terror a lot of troubles in the commercial sector right now. Of there's competition in the retail sector from the Internet, which is only becoming more pronounced, which has an impact on bricks and mortar. I think that that sector, the buy word in that sector is look at the existing inventory and think about new uses, rehab, renewal, reuse.

MAUREEN CAVANAUGH: Is that the linkage between the commercial and residential property outlook, that kind of innovative use of old retail properties? Or are there other links as well to the health of commercial real estate and residential real estate?

LONDON: Well, let me give you the short answer then I won't dominate the conversation here.


LONDON: The answer's yes. Essentially, the kind of housing that we're going to only be able to deliver in San Diego County is going to be higher density, urban housing, probably in many instances on former commercial sites. So yeah. I think there is a linkage there.

MAUREEN CAVANAUGH: And I don't want to leave the conversation either without talking about people who are renters, people who are not gonna be buying property. What's the outlook for them? Are we gonna see a lot of properties available? Are rents gonna be going up? Are they stabilize something what kind of feelings do you have about that?

LEE: Well, I think that we're transitioning from excessive emphasis on home ownership to a more stage tenure mix, which means a lot more people will stay renters, and as households enter home buying age, they're really gonna stay being renters of so demand for rental, multifamily in particular, is gonna be strong, and rents are gonna rise. Am you're already starting to see that.

BATTIATA: Which invariably leads to people wanting to buy.


BATTIATA: Because rents get high, and I think what Gary mentioned earlier is this is a window of opportunity over the next few years, whether we're at the bottom now, or the bottom's in 2013, because you've got low interest rates, and in various -- especially -- even the upper end, for first time buyers issue it's definitely an opportunity. But if you look in the upper end, homes that are a million plus, the majority of those homes are now selling below replacement value. In other words, you could not go, even if you got the land for a song, you couldn't build these homes for what they're currently selling for. So I said back in 2005, I thought the market would drop about 35 percent. I didn't think it would drop as much as it's dropped. But I always said, once we get to the bottom, it will be the buying opportunity of a lifetime here in San Diego. And I think that it is, and it will be.

MAUREEN CAVANAUGH: Let's take a call. Mark is calling from San Diego. Good morning, mark, and welcome to These Days. Of.

NEW SPEAKER: How are you doing?


NEW SPEAKER: I just wanted to know, is the condo market toxic? Is it radioactive, [CHECK] we had a short sale, and that's another matter all together. It was a huge relief to get rid of the condo. Of but I have a bitter taste in my mouth about condos, and condo conversions and just that market in itself.

MAUREEN CAVANAUGH: Yeah, mark, let's get a reaction to that. Of there are a lot of people in condos of what's the situation there?

LONDON: Well, was that a paid caller? Matt always has one ringer in every conversation we have here. Listen, there's two points to be made here. The condo conversion market is a once every 25-year if nom. When there's an expression of an extreme shortage [CHECK] that party's over. But the condo market itself is going to become more and more the predominant product that will be transacted in San Diego. Of and more and more people will be buying condominiums. Of and I think even in the condo sector, whether you look downtown or any -- or wherever a condo's exist or delivered, that market is probably reaching, you know, its bottom stability, you know, its bottom point stability now. And I think the point is is that that's the product, we're not gonna give up on it, and that's how people are gonna find their first house, and perhaps even their second or third in their future in San Diego.

MAUREEN CAVANAUGH: I can almost hear people saying when? When? When is it gonna come back?

BATTIATA: Just to answer mark's question, some condos are toxic because of -- if you're gonna buy a condo, condos are great of that's some incredible condos downtown. It's a great option for a lot of people. Some people who are downsizing, etc. But the issue is, you gotta look at the H, on A, look if it's funded, look if that's lawsuits. You gotta be really careful because some condos are toxic because of the number of foreclosures, a low level of owner occupancy, [CHECK] can be a great opportunity also.

MAUREEN CAVANAUGH: I gotta ask sort of a closing question, I'm gonna direct it first to Michael Lee because we don't have an awful lot of time. But as the market picks up, and it sounds as if there's great caution in this group, it sounds as if everybody sort of agrees that that's the slow direction that we're going in. Of has the real estate crash affected the market in any permanent way do you think, Michael?

LEE: I think it has because people realize very vividly now that prices can go down and that maybe housing is not the great investment that we thought about it as in the part of. So I think going forward, people are really gonna be a lot more conservative in their buying habits and not stretch themselves as much thinking that, well, are house prices are just going to always go up and I'm just gonna cash in.

MAUREEN CAVANAUGH: Buy the most house that you can, right?

LEE: It's gonna change buyers' attitudes.

MAUREEN CAVANAUGH: Right, right I think we have to leave it there, gentlemen. I want to thank you all so much. Gary and Matt and Michael. Thank you very much.

LEE: Thanks Maureen.

MAUREEN CAVANAUGH: Everybody that we couldn't get on the air, please do go on-line and place your comment there at Days. You've been listening to These Days on KPBS.