But if reports are right, the area may have already bottomed out at a much more affordable levels.
This assessment was made during the UCLA Anderson Forecast conference at the San Diego Marriott Hotel & Marina Friday.
Peggy Johnson, a Qualcomm executive vice president, said while the decline in the housing market has been bad news for many, she likes the fact San Diego is now a much more affordable market.
“We couldn’t attract talent here due to the cost of housing,” Johnson related.
The California Association of Realtors (C.A.R.) reported that a starter single-family home was affordable to some 61 percent of San Diego region households in the first quarter of 2009.
The affordability rate was closer to 20 percent as recently as three years ago.
Jerry Nickelsburg, a UCLA Anderson senior economist, said the decline does seem to be leveling off. He added however, that it might be a while before housing construction picks up again.
A UCLA Anderson Forecast document projects permits for a total of 56,000 housing units of all types will be pulled between this year and 2013 in San Diego County. The Construction Industry Research Board reported permits for only 5,155 housing units were pulled in 2008. This was the lowest figure in at least a decade.
Nickelsburg said while there could be some modest rebound in residential construction by early next year, he doesn’t expect the building activity to build up a full head of steam before 2011.
“There are a lot of lost construction jobs. You might have a plumber who was working for a homebuilder who got laid off, tried going out on his own, but was unable to make it and is now among the unemployed. It has been difficult out there,” Nickelsburg said. “Home prices have fallen way back and they have remained soft.”
Mark Schniepp, a Santa Barbara-based consulting economist to UCLA Anderson, added that following a 45 percent drop within the past two years or so, he believes prices have bottomed out.
Nickelsburg did say that with few homes being constructed and population continuing to grow, a “huge pent-up demand for housing” is in the process of developing. Schniepp sees this as well.
“Unsold housing is starting to diminish. The existing inventory is getting depleted and it may already be too late to get the best deal,” Schniepp said.
Schniepp, who believes that housing is poised to recover now, nevertheless expressed some concerns about a recent spike in notices of default.
Both Schniepp and Nickelsburg said they believe the defaults shouldn’t return in waves the way they did during the past year, however. “We’re starting to get these defaults behind us,” Nickelsburg said.
Schniepp said the good news for San Diego County is the housing meltdown started earlier here than it did in most other parts of the country and should thus rebound sooner.
“Housing is poised to recover pretty early,” Schniepp said.
Schniepp said we are far from out of the woods yet noting that while home resales increased by 134 percent between the first quarter of 2008 and the first quarter of 2009, most of these were bank owned sales or short sales of properties that were in trouble.
“Homeowner distress was moderating, but it recently rebounded in February and March of this year,” said a UCLA Anderson Forecast document. “Defaults are rising but foreclosures have not followed. The recent (federal) Homeowner Affordability and Stability Plan, which is targeted to prevent foreclosures by modifying loans or postponing mortgage payments for delinquent homeowners is now just gaining traction. It may help to prevent a sizable portion of defaults from evolving into foreclosure.”
The report said if the number of foreclosures does decline, housing values will stabilize and bank-owned transactions at fire sale prices will no longer impact the market.
“We need to turn these into non-distressed sales so we can turn things around,” Schniepp said.
If that happens, Schniepp said the San Diego region could see the beginning of a housing recovery by mid-summer.