Housing continues to cool
Market 'ratcheted itself back a notch' with single-digit price gain, fewer sales
By Lori Weisberg and Emmet Pierce
UNION-TRIBUNE STAFF WRITERS
April 14, 2006
No longer steaming, the San Diego region's housing market continued a slow cooling trend in March, which marked the 11th month in a row of single-digit year-over-year price gains.
The end of the first quarter also marked the 21st consecutive month in which sales volumes were down on a year-over-year basis, DataQuick Information Systems reported yesterday.
“It looks to me as if the market, at all levels, has ratcheted itself back a notch but is still stable,” said DataQuick analyst John Karevoll. “There is nothing I can see that looks particularly ominous.”
Kenneth Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley, maintains that the market's future is uncertain.
“Prices are actually starting to decline in San Diego because of the inventory of unsold units, both single-family and condos,” he said.
“San Diego has had the biggest price increase of a major metro area in the last five years,” he continued. “You have the cash-out sellers now. You have investors trying to sell, and you have an affordability crisis for first-time buyers. We will probably have a soft landing, but if interest rates go much higher it will be a more difficult situation.”
Graphic:
signonsandiego.com
March housing prices
The overall median price for all homes sold in March was $504,000, a 5.7 percent increase over March 2005 and a slight rise over February's median of $502,000. The county hit a record overall median price of $518,000 in November 2005.
Among neighborhoods throughout the county, DataQuick's recent survey found a wide variation in trends. Top gainers during the first quarter included the Point Loma/Ocean Beach area (92106 ZIP Code) with a 26.3 percent rise in the median price; El Cajon (92020), which posted a 24.1 percent increase; and Allied Gardens and Del Cerro (92120), at 22.6 percent.
The pace of sales in the county continued to lag, with 9,744 homes sold during the past quarter, the lowest quarterly volume in eight years, according to DataQuick.
Tom Belway and his wife, Alexis, have been looking to diversify their holdings since selling their marketing agency last year. Not comfortable with just relying on their stock investments, they hope to purchase an investment property not far from their home in Poway.
“We are hoping that the opportunities are starting to come back around in San Diego,” said Belway, who lives in a 5,700-square-foot hilltop home with his wife and three children. “We feel that over the course of the next year, the likelihood of there being values will increase significantly. We're starting to see price reductions in our area.”
The Belways' broker, Calvin Goad, said he has noticed that sellers who are trying to get top dollar for their homes are having a hard time moving them. Some homes have remained on the market for as long as 180 days, he said.
He recently sold a four-bedroom home in Poway only after the sellers lowered their asking price of $498,000 to $480,000 and then sold it for 2 percent below that.
Alexia Spivey of El Cajon has seen the value of her 1,800-square-foot Fletcher Hills home soar since she and her husband Robert purchased it 4½ years ago. About two years ago, the couple began looking for a move-up home. In the beginning, it was a sellers' market.
“We definitely have noticed you getting more for your money right now, and it is not such a frenzy,” she said. “I have definitely seen the market slow down. Every single day I check the MLS (multiple listing service). Those homes are asking $950,000, and then two weeks later I see they have reduced the price to $875,000, $900,000. I don't think they are getting top dollar.”
Clearly influencing the slowdown in price escalation is the growing inventory of homes on the market. In June 2004, when the market was at its peak, the number of homes listed for sale was 6,657, according to the San Diego Association of Realtors. Yesterday, there were 17,010 listings.
In June 2004 it took an average of 25 days to sell a single-family home in the county. Today, it typically takes more than 65.
Richard Nesbitt, who manages the Coldwell Banker Point Loma and Ocean Beach offices, believes there is more sales activity at the upper end of the market in his area, which has helped boost the median price. But sales in general are down, he said.
“We're having people lower their asking prices because there are a lot of properties on the market, and buyers compare them, so multiple offers aren't coming in at list price or over list price.”
The trend is reflected in DataQuick's survey. Last month's overall sales totaled 4,146, a decline of 17 percent from March 2005. That was the lowest count for March since 1998, when 4,016 homes sold. An average March for the past 19 years has had sales of 4,029, Karevoll said.
While overall prices have continued to climb, one out of four of the 65 ZIP codes with at least 20 sales during the last quarter saw year-over-year declines. Experiencing the largest year-over-year drop was Chula Vista Northeast (91914 ZIP), with a median-price decline of nearly 32 percent.
In the new-home market, sales slowed dramatically, dropping 38 percent during the just-completed quarter, compared with the same period in 2005, according to statistics provided by MarketPointe Realty Advisors. Contributing to the large decline was a big slowdown in condominium conversions, with sales numbering 801 during the first quarter, compared with 1,306 a year earlier.
“It's just slowed down. There's no getting around it,” said Alan Nevin, chief economist for the California Building Industry Association and MarketPointe. “I don't think condo conversions will be as strong this year because there are not that many blockbuster projects. . . . So there's no way we'll do as well as we did last year.” The pace of resale condominium sales in March fell by nearly 30 percent to 841 units, compared with the same month last year. Karevoll said that's due, in part, to an increase in purchases of apartments that have been converted to condos. The conversion sales are counted as new units.
Christopher Thornberg, a senior economist at UCLA, said San Diego County's prices could flatten and remain that way for years, despite the region's strong economy.
“What goes up must come down,” he said. “The question is, how fast will it go down? The answer to that question is you are going to see it go down on the basis of inflation more than anything else. That may take three or four or five years.”
Karevoll remains optimistic. “We are not out of the woods here, but the numbers don't look so bad,” he said.
signonsandiego.com
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Emmet Pierce: (619) 293-1372; emmet.pierce@uniontrib.com
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