What do I do with a home in San Diego when I Divorce?
If you are faced with making a decision to keep or sell your family residence during divorce, the first thing you must understand is how our real estate markets work. San Diego area Real Estate markets tend to run in cycles of 8 to 12 year durations top to top. See what I mean by “top to top” by looking at the chart below which gives you a general idea how cyclical markets work. A cycle starts on the left of the chart at a “top” or boom market and ends on the right side of the chart with another “top” or boom market. In general you want to avoid buying at a top or selling at a bottom.
Take a look at the next chart to see how San Diego’s real estate market has performed over the last twenty-five years. Our last bottom was around 1997. The last top was 2006. The small up tick in 2009 and 2010 is likely based largely upon the increase in demand caused by government stimulus in the first time home buyer credit and artificially low interest rates. The two variables made purchases cheaper on the lower end of the price point and did nothing for the higher end for coastal areas like La Jolla and Del Mar and their inland neighbor, Rancho Santa Fe. I do not believe these areas of San Diego have seen the bottom of prices as of the drafting of this report. Many coastal areas such as La Jolla and Del Mar are seeing an average of 25% discount from listing to selling price. This makes me think the owners and Realtors in these areas believe their homes are worth more than others are willing to pay for them. Until they adjust their expectations these areas will continue to be over-priced and resist making a bottom in prices. Interest rates can only go up from here making it more expensive for buyers to foot the monthly bill, creating another road-block to transactions and further complicating price movement.
There are far more variables, than we can discuss here, involved in determining where the values of real estate will go in the years to come. San Diego real estate is still a good long-term purchase if you plan on living in the property for a long period of time and think of it as a home meant to provide security and comfort rather than an investment meant to earn a return and coincidentally provide you a place to live.
Many divorcing couples are faced with a reality of our current economic circumstances. Their house is worth a lot less than they paid for it 5 years ago. For many that means they are under-water, meaning they now owe more on their mortgage than the property is worth.
Give us a call if you are faced with making a decision about what to do with the family home now that you are divorcing. It may be the biggest financial decision you make during the divorce proceedings.
Justin A. Reckers can be reached at:
Telephone: 858-509-2329
