October median up 1.2% from September, 2.9 percent from 2009
MONDAY, NOVEMBER 15, 2010 AT 10:50 A.M.
San Diego County home prices rose slightly in October after a two-month decline, but sales were off substantially, MDA DataQuick reported Monday.
The overall median was $334,500, up $4,000 or 1.2 percent from September and up $9,500 or 2.9 percent from October 2009 levels. The figure was still below the $340,000 most recent peak reached in May and the record high of $517,500 set in November 2005.
The sales count probably was the most dramatic statistic to come out of the DataQuick report.
The total for October was 2,750 transactions, down 10.4 percent from September, mirroring a typical seasonal downturn as buyers slacken off of their purchases once their children return to school.
But on a year-over-year basis, the total was off 25.1 percent from 3,671 logged in October last year -- the third biggest such drop, after 1990's 35.7 percent decline in the last big recession, and 2007's 32.5 percent fall in the aftermath of the subprime mortgage meltdown.
"It's a combination of a lousy economy and low consumer confidence, and we're still paying the price for the tax credits," said DataQuick analyst Andrew LePage.
The federal homebuyer tax credits, worth $8,000 to first-time buyers and $6,500 to move-up buyers, expired in April, but buyers had until September to close escrow to claim the credits.
That means October was the first month in which the credits did not figure into any sales. Economists have been saying for months that the credits likely sped up buyers' plans to purchase a home but did not necessarily bring new buyers into the market. Consequently, they believe there was a time shift that piled more transactions into the first of the year and robbed sales from the second half, thus leading to the current slowdown on top of the usual seasonal dropoff.
"Fundamentally, the market is in the doldrums," LePage said. "October had the second slowest sales since 2007."
The median price was up from the low of $280,000 set in January 2009 as foreclosures and defaults were multiplying and distressed properties dominated the market.
The increase took place in resale condos and new housing but not in single-family resales, whose $369,000 median was down $3,000 or .8 percent from September. The house price still was up 2.5 percent from October 2009's $360,000.
"You saw prices and sales perk up in late-spring and early-summer, thanks to the rush to get homebuyer tax credits, and the overall improvement in the economy," LePage said. "Now, the tax credits are gone, job growth is anemic, and people are worried about losing their jobs. It's worse than normal, because of all the drags out there on home sales."
He added, "If prices drift lower over the winter and in the meantime the economy improves and consumer confidence rises, then we could see much improved sales in the spring, especially if there is ample inventory and rates are still super-low."
Drilling deeper into the figures, LePage said the percentage of sales involving foreclosures going back 12 months rose to 30.3 percent from 28.8 percent in September but were down from 34.5 percent in October 2009.
Sales of homes costing $500,000 or more represented 25.1 percent of total sales in October, compared with 22.3 percent a year earlier. The overall median may have been down because those sold at the high end were fewer than what sold last year.
Similarly, the North County coastal market without lower-cost Oceanside turned in a market share of 9.7 percent, up from 8.8 percent in October 2009. Low-cost South County, the center of the housing meltdown locally, saw a smaller market share, 12.4 percent, compared with 15.5 percent a year earlier.
Finally, new homes turned in their slowest October on record, going back to 1988. There were only 269 new homes sold in October, including both new construction and condo conversions. That compares with the high of 1,829 in April 2004.
"Most builders can't afford to build cheap enough to beat foreclosures," LePage said. "It's a pitiful state of the new-home industry. But San Diego isn't alone. The numbers are extraordinarily low statewide."
Looking ahead, LePage said it is clear that many would-be homebuyers are holding back, uncertain about their own economic future and general economic conditions.
"There's a pentup demand mounting," he said, "and at some point that will be unleashed and probably show up in a big way in the statistics."
Mark Marquez, president of the San Diego Association of Realtors, said that upswing is likely to take three or four years to develop because of the overhang of distressed properties -- both foreclosures and short-sales, those sold for less than their mortgage balance.
"In San Diego there is a tremendous appetite for distressed properties," he said. "We're still seeing investors trying to buy properties for cash."
But he said he doubts banks will accelerate the pace of foreclosure beyond what is already occurring. They are approving short-sales, he agreed, but it takes much longer to close a deal than a foreclosure.
"Even on a good day, it can take 90 days to get it done," he said. "That will drag out our sales cycle, which will prolong market conditions. That has to aggravate what I think is an improving condition."
His association said inventories dropped to 12,202 active listings from 13,000 at this time in October. Contingency sales were down to 3,522 from 3,798 and pending sales were off to 4,562 from 4,810.
One new twist in the housing market is the proposal from the chairmen of President Obama's deficit reduction commission that the mortgage interest deduction be eliminated or scaled back to cover mortgages below $500,000 and no second homes.
Marquez said the mortgage deduction means more to San Diego buyers than in other metro areas because of the relatively high prices here. He said elimination or scaling back the tax benefit would play "havoc" with local buying preferences.
"The tax deduction is one of the biggest benefits of homeownership," he added.
However, the proposal has yet to be approved by the full deficit commission, much less meet the blessings of Congress or the president
The chairmen's recommendation was tied to a provision lowering overall tax rates, which have the net effect of lessening the loss of the deduction.
Marquez said the National Association of Realtors is already denouncing such a change in deductibility, a stance it has taken in past efforts to chip away at the popular deduction, said to be worth more than $100 billion in federal tax revenue losses.
Roger Showley, (619) 293-1286, roger.showley@uniontrib.com, Twitter: @rmshowley
