County Median Housing On Upswing

County median housing price on upswing
December report indicates stability
By Roger Showley, UNION-TRIBUNE STAFF WRITER
Tuesday, January 19, 2010 at 12:02 a.m.

San Diego County’s median housing price rose in December for the first time in four months, MDA DataQuick reported yesterday, adding further evidence that the housing market is stabilizing after four years of declines. Above, property for sale in Rancho Bernardo earlier this month.

San Diego County’s median housing price rose in December for the first time in four months, MDA DataQuick reported yesterday, adding further evidence that the housing market is stabilizing after four years of declines.
With sales rising, inventories lower, interest rates attractive and buyer interest growing, the latest report suggests that the market reached bottom last year and a recovery, if not under way, will come soon.
“Home values have stopped falling and there are signs that they’re edging up from the bottom,” said University of San Diego economist Alan Gin. “I think we’ll see some stability in the housing market. But it’s going to take a long time — we may not get to the inflated heights for a long time.”
DataQuick reported that the median rose $5,000 to $330,000 after remaining unchanged for four months at $325,000. It was up 10 percent from December 2008’s median of $300,000.
There was also nearly a 10 percent increase in the number of sales from December 2008. The 3,652 sales was the best showing in December since 2006.
Compared with a year ago, many doubts about the real estate market have dissipated, said Ross Starr, an economist at the University of California San Diego.
“A year ago, the world was falling apart,” Starr said. “We were hanging on for it to stop — and it stopped.”
Starr said the market is now in a “rocky period” of adjustment and it is unlikely prices will climb quickly.
“The good news is the market is in adjustment,” he said. “The bad news is this is as fast as it can go and it’s going to take at least another year to sort this mess out.”
San Diego County’s median price reached a peak $517,500 in November 2005 and fell to $280,000 last January before starting to rise again. Even with last year’s increases, the median is still 36.2 percent below the peak. Some experts don’t think the previous highs will be equaled for eight years.
Anticipating such a slow recovery may have prompted some owners to let their homes fall into foreclosure. In December, 35.8 percent of the county’s resales involved houses and condominiums that had been foreclosed on in the previous 12 months. That was up from 32.6 percent in November and the first month-to-month increase in a year.
“The notion of one-third of sales being distressed properties is really extraordinary,” Starr said. “That’s a problem that still has to play out.”
But DataQuick analyst Andrew LePage said the flood of foreclosures is being sopped up by investors and first-time buyers eager to take advantage of low prices.
LePage said that demand should lessen worries about the shadow inventory — homes that lenders have foreclosed on but have not yet been listed for sale. Some analysts have feared that banks would try to sell too many properties at once, depressing prices and leading to more foreclosures.
“My hunch is most foreclosures, if they’re priced right, go really fast,” LePage said. “We snapped up in California, on average, 17,000 to 18,000 foreclosure homes a month in 2009. It was an impressive clip, and that’s what kept the inventory of foreclosed homes from ballooning way out of control.”
In San Diego, he said 83.8 percent of foreclosures had been sold as of last fall and some that hadn’t changed hands are being rented.
For all of 2009, DataQuick said there were 39,298 sales, up 14.6 percent from 34,294 transactions in 2008. It was the highest volume since 44,580 in 2006. The year’s lowest median was last January and it has risen or remained unchanged every month.
However, the December report reflected significant differences among housing categories. The most striking month-to-month price change was the 28.4 percent increase in the new-home category, which includes new construction and condo conversions.
LePage said the increase likely reflects a surge in high-priced houses and townhouses that closed escrow last month, compared with lower-priced conversions and small condos.
In addition, builders typically offer incentives to complete a sale by year’s end for tax reasons. The federal first-time home buyer tax credit of $8,000 was originally set to expire Nov. 30, but it has been extended to spring and expanded to apply to move-up buyers who stand to receive a $6,500 credit.
Another sign of stability was found in the cost per square foot of homes that have sold. This helps eliminate the differences in homes of a different size, age and location. In every part of the region except East County, Le-
Page said, the cost per square foot was higher in December than a year earlier.
He also noticed that higher-priced homes are representing an increasingly larger share of the market, as distressed sellers find buyers eager to snap up move-up homes at prices not seen in years.
Using as a barometer the sales in the North County coastal zone excepting Oceanside, he said the market share in December was 9.3 percent of all sales countywide.
That’s not far off the 9.6 percent average since 2002.
Meanwhile, South County sales, where widespread distress and foreclosure have been endemic since mid-2007, have fallen back from a peak 18 percent market share a year ago to 15.3 percent last month; the eight-year average is 12.4 percent.
Looking ahead, LePage and the two economists agreed that forecasts are difficult.
“There are too many unknowns about the economy, foreclosures and government stimulation levels to call this a permanent bottom,” LePage said.
USD’s Gin said the worst appears to be over, but in the next couple of months, he cautioned, “I wouldn’t be surprised to see things weakening a little bit.”
As for potential home buyers, UCSD’s Starr said now may be the time to strike, given historically low interest rates and reduced prices.
“For a well-financed buyer who stayed on the sidelines in 2005, 2006 and 2007 and who said prices were ridiculous, his foresight has been fulfilled and this is a great time,” Starr said.
Roger Showley: (619) 293-1286; roger.showley@uniontrib.com