The seagull view over Moonlight Beach:
Of the top 25 metro areas in America, San Diego is the least affordable, according to this report from Zach Fox at SNL (and formerly of the North County Times):
From a renter’s perspective, San Diego might be even less affordable than San Francisco, which famously boasts the nation’s most expensive real estate.
Prices in San Diego shot up 19.4% year over year in January, according to the latest data available from the S&P/Case-Shiller home price indexes. With prices so high, real estate agents said first-time homebuyers need to adjust their expectations.
Young renters can only make the leap to homeownership in San Diego with help from a government down-payment assistance program or their families, said Leslie Kilpatrick, president of the Greater San Diego Association of Realtors.
“I think we’re seeing more and more of that,” Kilpatrick told SNL. “This generation of parents is realizing the difficulties their children are facing in buying a home.”
A recent study by HSH, a provider of mortgage interest rate data, details how much income a household needs to afford the typical home in a given market. HSH calculated the minimum income needed to purchase a median-priced home in a given market. The study assumed a 28% front-end debt-to-income ratio and a 20% down payment and only covered principal and interest.
The results of this study raise an interesting question: How many renters in each market could afford to buy the typical home?
While it may not be possible to come up with a definitive answer, SNL explored the question using the HSH study, recently released U.S. Census Bureau data detailing renter incomes and corresponding Census data on housing units.
By one measure, San Diego had the lowest ratio of income-eligible renters — meaning they earned enough to buy a median-priced home — to housing units among 25 major metropolitan areas.
In San Diego, real estate agents think the market might be stabilizing, but prices are so high that first-time buyers are struggling to find entry. But that does not necessarily mean the market is in a bubble again.
Rich Toscano, a financial adviser with Pacific Capital Associates in San Diego, launched a blog in 2004 presciently predicting a housing crash based on overvaluation. He maintains a graph that compares home prices to a blended value of rent and per capita income. The index is now at the peaks seen in 1979 and 1990, but it is still well-below the most recent bubble.
“People say to me, ‘Are you worried about it?’ And I think, ‘It’s expensive, but it’s always been that way,’” Toscano told SNL. At the same time, he does not think there is much more room for prices to sustainably rise.
“I wouldn’t say there couldn’t be more upside, but what I would say is that whatever upside there is, I would expect to be given back eventually, at least in relative terms,” he said.
Real estate agents in the San Diego metro area seem to agree with Toscano that prices are starting to stabilize and that the days of double-digit annual growth have likely passed. Still, for buyers interested in the lower end of the market where homes are more affordable, bidding wars remain fairly common.
“Most people miss a few before they understand that when they see something they like, they have to act boldly and put in a strong offer,” said Kilpatrick, president of the local association.
Jim Klinge, a real estate broker in the metro area, similarly told SNL via email that the most recent low-end buyers he represented lost several bidding wars before nabbing a home. On Klinge’s blog, which gained national fame during the housing crisis for its candor and brash style, the agent reports hyper-local statistics on supply and demand. For now, the fundamentals suggest San Diego’s housing market is strong.
“What really matters is wondering if/when we will run out of rich people,” Klinge wrote.
Those who live near the new Sage Creek High School in north Carlsbad will have another large new-home tract beginning shortly. The West Village of Robertson Ranch was recently acquired by Toll Brothers, and they expect to be selling new homes there in 2015.
Shapell Homes purchased the acreage for $30+ million in 2010 from the Robertson family. At the time, they said they would build:
Single-family homes ranging from 1,800 to 4,000 square feet and townhomes from about 1,400 to 1,800 square feet. A senior housing project, probably for rent, also is expected.
If you are thinking of selling a home that is close to Tamarack/Cannon and El Camino Real, you may want to consider selling this year when there is less competiton!
Here is a tour of the area:
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted.
No surprise here.
With no pressure from anyone to foreclose on non-payers, mortgage servicers can be picky about who gets foreclosed. It makes sense to foreclose where you can make a profit, and let the still-underwater folks ride the gravy train for another year or two.
Deadbeats don’t need to panic, it’s still quiet around SD County:
I like this reporting – instead of speculating with the usual mumbo-jumbo about why sales are slower, Madeline states a fact:
While the price of a California home rose to a level not seen in six years, it didn’t drive buyers out of the market. In March, the median price for a home rose to $366,000, which was up $16,000 from February and marks the highest price since March 2008. Despite the high price tag, home and condominium sales were up nearly 21% for the month.
March’s sales may have been up from February’s figures, but they were still down 13.3% from March 2013.
“Despite the nice jump in March home sales, sales continue to be slower than we’ve seen since 2008,” said Madeline Schnapp, director of economic research for PropertyRadar. “The supply of lower-priced distressed properties is disappearing at a rapid clip and is not being replaced by an adequate supply of non-distressed properties.”
The number of homes for sale on the lower end has dropped considerably, and where the low-inventory has the most dramatic impact – higher up hasn’t had the same problem. Here are the number of NSDCC homes listed for sale under $600,000 in the first quarter of the year:
There just aren’t as many lower-priced homes for sale.
A couple of old classics, take your pick – or watch both!
If I lose the drone, ”too bad, you’re not getting another one.”
There was some real panic today when I lost the wi-fi connection – which also terminated the camera feed – while the drone was over the lagoon. For a moment, I was thinking about going for a swim!
Hat tip to daytrip for sending this along from the latimes.com:
Southern California home prices are surging as the spring buying season heats up, with the median price in March hitting $400,000 for the first time in six years.
But a deeper look at the market reveals a recovery divided between the rich and everyone else.
The market for high-dollar homes is hopping, with sales on the rise and buyers launching bidding wars. But sales of low- to medium-priced homes have plummeted during the same period — with many potential buyers priced out.
Carey Chenoski, a real estate agent in Redlands, said she has seen less interest in homes for sale lately as first-time buyers struggle to afford the new higher prices. There are more homes on the market than last year — which is keeping further price growth in check — but they’re not selling.
“Lately on Saturdays and Sundays, you see open house signs everywhere,” she said. “The houses that last spring would be gone in the first day are sitting maybe 60 days.”
That, in turn, is frustrating some sellers. Chenoski recently saw the price on a three-bedroom in Redlands reduced to $299,000 from $315,000 — and it still didn’t sell. So it was taken off the market.
It’s a different story in pricier pockets of the region, where high-end sales are climbing, all-cash offers remain common, and well-priced homes go fast.
“We’re getting multiple offers on just about everything,” said Barry Sulpor, an agent with Shorewood Realtors in Manhattan Beach, where he said there is a new wave of tear-downs and new construction in prime beachfront locations. “The market is really on fire.”
This is a marked shift from a year ago, when investors raced to scoop up bargain-rate homes with cash offers and plans to rent them out. That sparked price increases at the low end and sapped the supply of those homes. Now investor activity is down, but for many, prices remain out of reach.
In fact, prices of lower-end homes have risen a greater percentage over the last year than prices of expensive homes, despite the current bidding wars on high-end properties.
Still, some signs indicate a broader recovery may be brewing.
The number of homes listed for sale in March, while still historically low, was up 54% in the Inland Empire and 64% in Orange County compared with the same month last year, according to the website Realtor.com. The job market is gradually improving, says Appleton-Young, which should make more buyers more confident. And investors are slowly backing out, said Derek Oie, an agent who has done many investor deals in the Inland Empire.
That’s making room for families and first-timers who were crowded out this time last year.
“You are seeing a lot more traditional buyers come into the picture,” he said.
Still, the spring buying season in Southern California got off to a “very slow start” in March, said DataQuick analyst Andrew LePage. And from her office in Redlands, Chenoski doesn’t see much evidence that’s changing in April — so far at least.
“Springtime is usually a pretty hot market,” she said. “We’ll see what happens.”
This builder paid $20 million for the land in December, 2010, and have already sold over 50 homes averaging around $1M each. This site was a pile of rocks three years ago – here’s a tour of the neighborhood now:
This article promises proof that the bubble is about to burst:
But there is no proof in the article, just more speculation from an ivory-tower type who rattles off the same tired speculations, including lagging incomes, unaffordability, FHA, blah, blah, blah.
Regurgitating the same old beliefs ignores the reality – the market is driven by the affluent. Because listing agents give preference to cash buyers, the rich folks have a distinct advantage, and they have been gobbling up investment properties and most of the quality homes in which to live.
I am really sick of this old adage – from the article:
Without housing affordability there cannot be a rise in first-time buyer participation.
Without the entrance of first-time buyers, those wishing (or hoping) to move up to a larger home or relocate into other neighborhoods will not be able to so, at least not readily. This can produce a cascade effect on housing prices, starting to drive them downward to reflect a decrease in demand.
There are many first-timers buying homes – they pay cash, or have a big down payment so they can compete. Besides, first-timers aren’t the only buyers interested in the cheaper stock – BlackRock and other investors are happy to buy up all of the cheaper homes so those sellers can move up.
Here’s another from the same article:
If housing prices begin to fall, wouldn’t one expect the investors to at least consider dumping homes onto the market to minimize potential losses? If they did so, the aforementioned cascade-effect would drive prices down even further.
This is the new normal, where we have learned that unless sellers can get top dollar, they aren’t interested in selling. Investors have already gained 10% to 30% appreciation, if they lost some or all of that, they wouldn’t dump at any cost – they’d wait until next time.
The new lesson has been learned right before our eyes – don’t dump properties; instead let’s resort to any other means necessary, including bending the foreclosure and accounting rules. Ben Bernanke said as much here:
The general public needs to become wise to these gyrations. The fix is in, and the new normal is unlike anything we have ever seen or imagined. Wall Street will conspire with BigGov to ensure that there is a floor – and you might as well get your share while you can.
The media insists on scary headlines, rather than exploring the truth - and they wouldn’t mind if we did pop another bubble, whether we need to or not.
Don’t believe anything you read, and only half of what you see!