San Diego Home Prices Falling at A Slower Rate

Home prices still falling in S.D., but at slower rate

By Roger Showley Union-Tribune Staff Writer

2:00 a.m. February 25, 2009

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Home prices in San Diego and four other cities have slowed their decline, according to a widely followed index released yesterday.

The Standard & Poor’s/Case-Shiller Home Price Index for December showed that while prices were down 18.5 percent nationally from year-ago levels, prices in Boston, Denver, Los Angeles and Washington, D.C. – as well as San Diego – fell less than previously.

The national decline was the biggest in 22 years of record keeping.

“The broad downturn in the residential real estate market continues,” David Blitzer, S&P’s index chairman, said in a statement accompanying the latest monthly report. “There are very few, if any, pockets of turnaround that one can see in the data. Most of the nation appears to remain on a downward path.”

Indeed, San Diego continued downward. But for the second straight month, the decline was slightly less than for the month before, both on a monthly and year-over-year basis.

The drop from November to December was 2.1 percent, compared with a negative 2.3 percent from October to November. December’s year-over-year decline was 24.8 percent, compared with 25.8 percent in November.

“There is, in any month, variation city to city,” Blitzer said in a teleconference with reporters. “There’s a handful of cities where the monthly rates declined and appeared to moderate a bit in December over November. Unfortunately, for a few, the reverse was true,” particularly for Minneapolis and Seattle.

Nationally, San Diego ranked sixth-worst of 20 markets in terms of year-over-year decline. Prices cumulatively have fallen 39.2 percent since housing peaked in November 2005, according to the index drawn from same-home sales dating to 1987.

But overall, prices are still 52.2 percent ahead of where they were in January 2000, according to the S&P/Case-Shiller Home Price Index, which set all metro areas and the nation at an index value of 100 for that month.

San Diego real estate consultant Gary London said the Case-Shiller numbers do not reflect the market as a whole, because they are based only on homes that sell. Currently, a record proportion of those are discounted, previously foreclosed homes.

“This is a market of ‘have to’ sellers and not ‘want to’ sellers,” London said. “Anybody who puts a house on the market has to sell, and anybody who wants to buy wants a bargain.”

But considering all the data on housing prices and sales available, London said he feels that Southern California, San Diego and coastal markets will emerge from the downturn first.

“I’m hopeful that this is an indicator that the market has started to stabilize at the bottom,” he said of the Case-Shiller data.

In a separate report, the Burbank-based Construction Industry Research Board reported the slowest-ever rate of building-permit activity in California, with projections this year at only 56,600 units authorized, compared with the all-time peak of 314,569 in 1986.

San Diego County and its 18 cities issued permits for only 88 dwelling units in January, a monthly record low since the bureau began tracking the county in 1967. Statewide, only 2,007 units received the go-ahead.

The year-over-year decline was 72.2 percent for San Diego and 57.1 percent for the state.

Construction Industry Research Board director Ben Bartolotto said virtually every county was down in January, and he suspected code changes and building-fee increases effective Jan. 1 might have prompted some builders to speed up permit applications at the end of 2008.

London said that if home building doesn’t begin soon enough, prices could skyrocket as demand outpace supply in an economic recovery. Fed Chairman Ben Bernanke told Congress yesterday that the recession might end this year.

“Once the marketplace normalizes, whenever that happens, there will be no new supply of housing – it just can’t be delivered instantaneously,” London said.

“There will be a 24-month lag period before new housing comes back in the market, which in and of itself will bid up the price of housing.”

He said a 20-percent jump might be a “conservative” projection.

In the meantime, London said low prices are pushing affordability toward a modern record level.

“This is about the most affordable time ever,” he said. “If you’re going to buy a house, this is a perfect time to buy. San Diego can’t possibly be more affordable than it is at this time. These prices will not stay down. I will stake my career on this.”

However, some economists believe San Diego’s housing costs are still too high and need to fall more in line with national affordability standards.

The latest measurement from the National Association of Home Builders found that 44.6 percent of homes sold in San Diego in the fourth quarter were affordable to households earning the median income, the highest in 12 years. But it was still far below the national mean of 62.4 percent.

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774