As we saw in the last video, people are out buying houses! Are they reading articles like this one today in the U-T and figuring now’s the time?
San Diego County’s housing market was the strongest in the nation in February, the widely watched Standard & Poor’s/Case-Shiller Home Price Index reported Tuesday.
The price index for San Diego was up 0.6 percent from January, the only market out of 20 surveyed nationally with an increase. The index locally was up 7.6 percent from February 2009, second only to San Francisco.
Those who have a deep desire to buy will shrug off the overly-negative blogs and gravitate to glowing reports in the mainstream media. People want to buy, and they tend to focus on news that supports that decision.
Here’s more:
Alan Gin, an economist at the University of San Diego, was at a loss to explain San Diego’s Case-Shiller numbers.
“It’s very unusual that every other market is down,” Gin said, noting that the unemployment rate of 11 percent here is worse than the national average.
The Case-Shiller figures indicated that prices were up in the top and bottom thirds of the local market but down in the middle, priced between $308,000 and $461,500. Gin speculated that’s because there are relatively few bottom-end sellers to buy mid-level move-ups.
To the layman, Alan is a familar authority because he gets quoted every month, right or wrong. When he can’t explain the appearance of a stronger market, people want to read it as good news too. As he notes, the local unemployment hasn’t slowed down the real estate market, and even with the Fed out of the MBS business the mortgage rates are holding – if they just stay in the 5% to 6% range, we should be alright.
Sellers will have to get off their high horse and lower their unrealistic list-prices as the spring/summer market unwinds, but if there are still enough buyers with cash and jobs, there doesn’t appear to be any other obvious bad news coming our way to stop them from buying.
It would take a major unforeseen event to rattle the market over the next few months, because the reports keep coming out positive. Your not going to see any real estate companies or financial institutions issuing any report to the contrary – most everyone is talking it up now. Tread carefully.
Could it be because San Diego had the best weather in Feb.?
P.S. when you gonna re-visit San Elijo Hills? : )
I’ll be watching pendings and months of inventory in June/July to get a read on the market. I just think it’s way to early to say with any certainty that the bottom is definitely in or we have another 10-20% downside. Thing look great and most are pretty optimistic but I still think it’s too early to say. We’ve never seen a bubble of this magnitude deflate, so while the bounce is greater then anything we saw in the 1990’s before the bottom the decline was much greater also.
SAN DIEGO COUNTY HOUSING MARKET: AHEAD OF THE PACK
San Diego, CA- The United States has witnessed sporadic and ambivalent messages regarding our definitive position along the path to the much anticipated economic stabilization and recovery process. As the federal government rushes to provide financial aid to struggling homeowners and financial institutions in efforts to stabilize the largest recession in recent history, many still remain uncertain of what lies ahead for the San Diego County housing market and economy.
The San Diego County housing market has erupted from its dormancy as newly released MDA DataQuick market research indicated a 15.8 percent year-over-year increase in median home prices from March 2009- 2010, the largest year-over-year increase in home valuations in five years. Furthermore, of the six counties that comprise Southern California, home sales were up 33 percent in March over February, and were up five percent over 2009 levels, according to MDA DataQuick. Analysts have attributed many factors for this sudden rise in home valuations, and many remain skeptical of the sustainability of this type of growth.
An analyst for DataQuick, Andrew LePage attributes the large spike in home prices to the increase in sales in the upper-tier real estate market. LePage states, “It’s price softness in the high-end that is driving sales and bringing up the high-end total contribution to countywide sales.”
The first quarter of 2010 also saw fewer lending institutions initiate the formal foreclosure process on distressed homeowners. According to MDA DataQuick, San Diego ‘s notices of default, the first step in the foreclosure process, plummeted 39 percent compared to the first quarter of 2009. San Diego real estate economist and financial advisor, Rich Toscano states, “Much of the government intervention in the housing market, notably low-down payment FHA loans, government guaranteed conforming loans, and the first-time buyer tax credit, has had an inordinate impact on entry-level homes. The price tier that contains these homes is going gangbuster as a result. Meanwhile, the upper-tier, which doesn’t benefit from the stimulus as much as the low tier, stagnates.” Toscano believes this divergence illustrates how the “housing rebound” is mostly being driven by government stimulus and intervention rather than economic fundamentals. But wasn’t that the purpose of the government stimulus to begin with? The stimulus was purposefully instituted to stabilize declining home prices and provide aid to homeowners in distress, all of which has seemed to be realized from the latest statistical data. Buyers are taking advantage of the incentives to purchase within the hardest hit housing sector, the low-tier.
Unemployment and job creation, both hot topics amongst political adversaries, have also shown incremental gains in the first quarter of 2010 within San Diego County. According to the California Employment Development Department’s latest estimates, San Diego not only added jobs in March, but the year-over-year rate of employment decline also fell to its slowest pace since December 2008. The skeptical Rich Toscano, states on his blog, Piggington’s Econo-Almanac, “Employment has been increasing for two months, while at this time last year it was dropping in spite of a tendency towards seasonal strength. There may be fewer people actually employed than last year, but that number is now growing instead of shrinking.” He adds, “It’s too early to tell whether a more enduring employment recovery is underway, but for the first time in a while, the data suggests that it’s at least a possibility.” Lawrence Yun, Chief Economist for the National Association of Realtors, has similar concerns. In his latest commentary, Yun states, “Steadily rising employment will be essential to keeping housing positive once the credits disappear.” While the national unemployment rate remains high and many believe unlikely to improve much in the near future, economists like Mark Zandi of Moody’s Economy.com, expects the unemployment rate to be 10.2 percent at year’s end, up from 9.7 percent in March. At the end of 2011, he predicts a still hefty 8.6 percent jobless rate.
Credit conditions remain tight and are expected to get tighter. Around a third of home sales in recent months have been financed by loans by the Federal Housing Administration, which allows down payments as low as 3.5 percent, however, the FHA is tightening its terms somewhat. James Hagerty of the Wall Street Journal states, “By early summer, the FHA plans to reduce the maximum amount a seller can contribute to the buyer’s costs—such as loan origination, legal appraisal fees—to 3 percent of the home price from 6 percent. That means buyers will have to save more to meet their closing costs. John Burns, a real estate consultant in Irvine, California adds, “A survey of builders by his firm found that they expected the FHA changes to eliminate as many as 15 percent of potential buyers.”
Despite growing concerns surrounding the sustainability of a full economic recovery in the near future, San Diego County has remained a bright spot and glimmer of hope for those searching for answers and signs of any substantive economic progress. San Diego can be viewed as a microcosm for the greater US or a sample market, as we begin to see empirical evidence and data supporting signs of incremental progress.
I see houses that are priced well sell quickly and I see houses that aren’t priced well sit waiting for a miracle buyer.
*shrug*
We’ll see what happens this summer/fall.
I work for a Manufacturing Company in San Diego adn our business is doing great. Hiring has picked up, a lot of new $80k engineers hired along with many production entry level positions. We always went bad before the economy and do good before the economy in general does better. I think things are looking better. You may have to rename the site to realestateinfo.com
I think I’m the only one that works in my neighborhood. My husband is unemployed but whatever…not stopping us from buying our next home. Unemployment in my area is not material. I realize this is unusual but I think it represents San Diego more and more especially with the retirees with more money than time left to live by the beach.
Mikey,
Just interested, where are your engineers living, for the most part? Seems like all of that influx has to go somewhere. What are the new hot areas?
Chuck
I don’t know where there living. Kind of rude to ask new employees that
“[You aren’t] going to see any real estate companies or financial institutions issuing any report to the contrary”
When have either ever issued any report saying even one bad thing about the market? The market would crash if not for gov / fed intervention, yet according to them it’s time to break out the courvoisier and spend $2M on a tract house. Tread carefully indeed.
I wish that chart applied to all areas equally. If only we could get a 40% discount from peak pricing in LJ/DM/SB.
whiskey tango foxtrot
No, keep the blog name the same Jim. This is a bubble like any other. Government housing credits, bank bailouts, low interest rates, stimulus spending, are not the foundations of a healthy economy, just the illusion of one.
At what point do we say a that new cycle has begun countywide? One year of steady gains?
New one today Jim in 91913, not 92067, B of A. If the banks start getting aggressive on the “free renters” then this uptrend we are in will disappear quickly.
91913, is that the other CV?
I’m practically best friends with your wife, and I’ve never met you. Don’t send your people down there, go yourself and take a 1-minute youtube video for the bubbleinfo readership – please contribute, we’d love to see more!
Here ya go Local Boy, from the U-T:
Fueled by rising stock prices and an improving outlook for the national economy, San Diego County’s leading economic indicators rose 1 percent in March, marking a full year of continuing rises in the index after three years of decline.
Since when is it rude to ask people where they live?
I have been asked a number of times where I live, by everyone as far low as an accountant, and as far high as the CEO. I also don’t have an oversensitive outer veneer that prevents me from disclosing where I live or being personable enough to ask people where they live, it give a frame of reference to have something in common with someone else, and often shows them you’re interested in them. It’s like talking about the weather.
I was simply interested in where those newly minted in the workforce are moving to.
Chuck