Median for all houses in county sinks to $478,000
By Roger M. Showley
UNION-TRIBUNE STAFF WRITER
February 11, 2005
signonsandiego.com
A changing mix of new home sales dealt San Diego County housing prices their biggest loss in three years, dropping the area's overall median by $13,000 to $478,000, locally based DataQuick Information Systems reported yesterday.
The decline was entirely due to prices paid for new housing, DataQuick said. Meanwhile, prices paid for resale single-family houses in January set a record median of $530,000.
Prices in the new-home category increasingly are being influenced by sales of lower-priced, newly built condominiums and former apartments that have been converted into condos. Both types of condominiums are included in sales figures for newly built houses as are those for new single-family detached houses, which generally carry higher prices.
Sharon Hanley, whose Oceanside-based new-housing research company publishes weekly sales information, reported an upsurge in attached housing sales, which include condos and townhouses.
Sales of single-family houses usually far outpace sales of condos.
But through Jan. 30, Hanley said there were 828 sales of attached units and only 409 sales of detached new homes.
"It's certainly unprecedented in the last 13 years," she said. Unlike DataQuick, which tracks completed sales, Hanley reports on escrows that have opened.
DataQuick said the January month-over-month drop was the largest since January 2002, when the median price of local housing also posted a $13,000 decline from December 2001.
Still, the median last month was 20.7 percent ahead of the $396,000 posted in January 2004. And San Diego County's year-over-year increase was higher than Los Angeles County's 17.6 percent and Orange County's 18.7 percent.
DataQuick analyst John Karevoll cautioned against drawing any conclusions from the January data.
Figures for the month typically are lower than for December, when builders rush to close escrows and clear up their balance sheets for the end of the year, he said.
"January and February are easily the lousiest months to read trends into," Karevoll said.
While new home prices were down, the resale house median of $530,000 was up $5,000 from December and $130,000 from a year earlier. The resale condo median of $380,000 tied the record set in September. The new-housing category median was $457,000, down from $513,500 in December but still up $12,000 from a year earlier.
January sales slowed to 3,324 from 4,807 in December, as is typical, and were off 6.8 percent from the 3,567 recorded in January 2004.
The median represents the halfway point of all sales with half above and half below that figure. Prices recorded in neighborhoods and for individual homes can vary widely from the median, depending on size, age and other factors.
Despite the drop in the overall median, the California Association of Realtors said San Diego County's affordability index slipped back to 11 percent in December after staying at 12 percent for several months. A record 10 percent low was reached earlier last year.
The figure represents the proportion of households that can afford the median-priced home based on income, interest rates and a 20 percent down payment. However, more than three out of four San Diego buyers have been choosing lower-cost adjustable-rate mortgages.
Karen Peterson, last year's president of the San Diego Association of Realtors, said the San Diego market continues strong, although not as hectic as last year.
Aiding buyers is a larger pool of properties to choose from. The inventory of unsold homes stood at 8,771 yesterday, compared with an average 3,126 last February.
With a bigger inventory, it's taking longer to sell – 61 days for detached and 53 for attached homes last month, compared with 45 and 34, respectively, in January 2004.
Low mortgage rates, which have been declining even as the Federal Reserve has been boosting short-term rates, may be helping to keep the housing market afloat.
Freddie Mac reported yesterday that the average rate for 30-year, fixed-rate loans stood at 5.57 percent, compared with 5.63 percent last week. The popular adjustable mortgage that stays fixed for five years and then adjusts annually also dropped from 5 percent to 4.99 percent.
University of San Diego economist Alan Gin confessed to being confused by interest rate trends.
"The general view is that when long-term rates are low that is an indication that investors – financial people – are not worried about inflation," he said.
Existing-home sales hit record
Resales soar as prices rise and affordability falls, Realtors say.
By Andrew LePage -- Bee Staff Writer
Published 2:15 am PST Tuesday, January 25, 2005
sacbee.com
More existing homes sold in the capital region last month than in any previous December even as evidence mounts that first-time buyers are being squeezed out of the market in record numbers.
The California Association of Realtors refers to it as today's "housing market paradox": Golden State home sales climbed to record levels last year even as their affordability, as measured by CAR, plummeted.
The seeming contradiction is also true in Sacramento County, where a record 28,579 homes resold last year, and the December median price of $317,000 was up 27 percent from a year ago, according to a report released Monday from DataQuick Information Systems.
A statewide CAR survey of Realtors, reported Monday, found the percentage of homes sold to first-time buyers has dropped to 26 percent - the lowest in the survey's 24-year history. Sacramento County figures weren't available.
There is debate among the experts as to just how dependent the housing market is on first-time buyers. Some insist they're a crucial fuel for the market and that home prices could flatten or fall if the trend toward fewer first-time buyers doesn't reverse. But others argue that the supply of housing is so short of demand that entry-level buyers are less important now to the overall strength of the market.
Last month an analysis by DataQuick found a similar - but more severe - decline in entry-level home buying. Statewide, a record-low 23 percent of buyers appeared to be purchasing their first home, while in Sacramento County the percentage of first-time buyers fell to 20 percent, down from 40 percent a year ago and 60 percent two years ago.
DataQuick uses county property records and identifies first-time buyers by looking at factors such as down payment size and whether the sale occurred in neighborhoods with lower-end prices.
Many economists agree that California's economy will eventually suffer if housing affordability continues to erode. In the state Capitol, the governor, some legislators, the building industry and others argue California mustn't deny "the American Dream" to future generations.
"It's changing ... the decisions households make about where to live," said Leslie Appleton-Young, CAR's chief economist, referring to waning affordability. "It's impacting companies' decisions about expanding or relocating, and it's fueling the boom in housing we're seeing in Nevada, Arizona and Utah."
"The Central Valley looks very affordable if you're used to coastal prices," she added, "but if you're a native of the Valley then things are getting way out of hand in terms of your kids being able to buy in that community."
Among the reasons for the hot housing market is the high number of homes bought for investment. Those who buy for investment or tax purposes purchased a record 16.2 percent of California homes that resold last year, eclipsing the previous record of 15.3 percent in 1991, according to the recent CAR Realtor survey.
CAR's widely cited "housing affordability index" showed that 19 percent of California households could afford the state's median price home - measured at $473,260 by CAR - in November. In Sacramento County, the percentage was 24 percent. At the median, half the homes cost more, half less.
CAR officials say the index is useful as a way to compare housing affordability among California regions and to compare the state and the nation. They also acknowledge that the 20-year-old methodology behind the index masks the impact of modern home financing, such as borrowers' ability to put 40-plus percent of their income toward housing, and doesn't take into account the equity held by households that own homes.
CAR's index assumes all buyers put down 20 percent, use a fixed-rate 30-year loan and put 30 percent of their income toward housing.
However, if CAR's index is tweaked so that the amount of income put toward housing is changed to 40 percent, then the percentage of Sacramento County households who can afford the median-priced home jumps from 24 percent to 40 percent, noted G.U. Krueger, chief economist at Institutional Housing Partners, an Irvine-based real estate investment firm.
If an adjustable-rate loan with a 5 percent rate is also assumed, the percentage of Sacramento County households able to buy rises to 45 percent. DataQuick reports that a record 77 percent of statewide home buyers used adjustable-rate loans in December.
"The changed mortgage financing environment must have had a significant impact in terms of how many people can afford to buy a home," Krueger said. "It must be significantly higher than what the old-fashioned affordability numbers are telling us because they assume a mortgage financing environment from 20 years ago."
CAR acknowledges as much in a December research document on its Web site. The report states CAR will begin reporting a companion affordability index sometime this year that "more closely parallels the performance of the market as a whole."
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