State of the La Jolla Market

For the first eight months of the year, the high-end La Jolla real estate market seems to be caught in a quagmire. This has been due to these major unknowns: unemployment, uncertainty of the credit restrictions on Jumbo loans, and the number of defaults and foreclosures.

In the past three months, the high-end home inventory in La Jolla has been decreasing as many homeowners perceive a loss in current value and see what the future value could be worth in the next three to five years. Thus, the trend for high-end homeowners in La Jolla has been to take their property off the market and wait for the values to return.

The good news for the La Jolla high-end market is that this past week, our economy has experienced the return of stated income loans up to $1.5M with 30% down, $100,000 in the bank, and a FICO score of at least 720. If this trend continues, in the next six to twelve months, there will be more stated income loans dispersed for high loan values. However, even as the La Jolla inventory shrinks, there are still some defaults and foreclosures due to the homeowners being over their leverage as their loan mounts exceed the home’s value. That said there is going to be another twelve month or so period for people to purchase properties in default and foreclosed homes. For savvy buyers with cash, this presents great opportunities to purchase luxury homes within the next year at steep discounts without buyers behind them trying to purchase the same property at a discounted price.

However, a year from now, we will start to see the foreclosed and defaulted properties diminish as more and more stated income loans come into play and more homeowners are obtaining loan modifications.

This opportunity only comes around once or twice in a lifetime to purchase luxury foreclosed homes in the La Jolla marketplace.