Bargain-Hunting in San Diego's Real-Estate Slump After more than doubling in five years, home prices in San Diego have hit the brakes, and sales have slumped. But a few brave buyers see the chance for bargains as sellers grow more distressed.
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Bargain-Hunting in San Diego's Real-Estate Slump

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Bargain-Hunting in San Diego's Real-Estate Slump

Bargain-Hunting in San Diego's Real-Estate Slump

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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And while we're on the subject of finances and housing - past and future - we turn to San Diego where the real estate party is so over. The big question now is how bad the hangover will be. After more than doubling in five years, home prices in San Diego have hit the brakes. And while some are forecasting tough times ahead, a few brave buyers see opportunity. NPR's Scott Horsley reports.

SCOTT HORSLEY: A new kind of real estate sign has been popping up on telephone poles around San Diego. The lettering on the cardboard is plain - and so is the message: Curious customers who checked out that Web site last week would have seen an ad for a four-bedroom, four-bath home that was auctioned off over the weekend by Bill Shepner, AKA William the Liquidator.

Mr. BILL SHEPNER (Auctioneer): This house was on the market for, it would've been a year now and they just don't want to wait any longer. You know, waiting six months may cost them $50,000 in depreciation.

HORSLEY: Depreciation is an unwelcome newcomer in San Diego, where for years, home prices were climbing at a double-digit annual pace. Not any more. Last month, the average sales price was about 4.5 percent lower than it was a year ago. And the number of homes sold plunged by 35 percent.

Shepner says, at a recent condominium auction not many bidders showed up, and the unit went for about $50,000 less than he expected it would. He says sellers are reluctant to discount prices that far, because in many cases they've borrowed heavily against their homes while prices were going up.

Mr. SHEPNER: If you're looking for the next foreclosure, follow the Hummer. You know, a lot of those Hummers were paid for out of equity lines and refinances -and the Lexuses and the Mercedes. Maybe I'm being too cynical, but we'll see what happens.

HORSLEY: Others homeowners never really had much equity to begin with. Aggressive lenders have made it possible for many families to buy into the pricey San Diego market with little or no money down and low introductory interest rates. When the monthly payments increase some of those families can't afford them, and with home prices now flat or dropping, it's getting harder to sell and walk away.

Mr. SHEPNER: You know, their income maybe was never enough to afford the loans, and now the adjustable-rate mortgages are kicking in, and there's going to be some blood flowing in the streets.

HORSLEY: The smell of blood already has some wannabe sharks circling.

Mr. GENE BURNS (Author, 52 Homes in 52 Weeks): Hi, everybody. Is there any doubt that it's not a buyer's market right now?

HORSLEY: On a recent Tuesday night, half a dozen aspiring real-estate moguls sat in a classroom at an adult education center. They'd paid $55 apiece to hear from Gene Burns, co-author of the real estate buying guide 52 Homes in 52 Weeks.

Mr. BURNS: You got to write this down and remember. As an investor, you only buy 20 percent below market.

HORSLEY: The students dutifully scribble in their notebooks as Burns, who lives in Las Vegas, tells how to scout for distressed homeowners or their lenders, who might be willing to unload houses on the cheap.

In an interview, Burns said the time for buying is almost ripe. More than 2,300 San Diego households defaulted on their mortgages in the last three months. That's the highest number of defaults in more than eight years.

Mr. BURNS: Right now, I have maps on the wall of the entire coast of San Diego, areas that I want to invest in. And in a market like this, you can negotiate very, very well.

HORSLEY: Burns knows what it's like to be on the other end of a down market. He lost his own home in California during the last real-estate downturn in the early 1990s. He's convinced this market will rebound, just as it did then, and that patient investors will be rewarded.

Mr. BURNS: And that's my saying. It's like, you know, don't take advantage of people but take advantage of the market and then it will always come back.

HORSLEY: Waiting out the downturn could take deep pockets, though. While Burns expects the San Diego market will bottom out next year, other forecasters see a longer slump. One of Burns' neophyte students asks how do we know that, if we buy now, it won't drop even lower? Many buyers are staying on the sidelines still waiting for an answer to that question.

Scott Horsley, NPR News, San Diego.

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