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San Diego housing market losing steam

By: Jonathan  Horn U~T San Diego July 15 2014

Low inventory, higher prices and rising interest rates sucked the air out of San Diego County’s housing market in the first half of 2014, figures released Tuesday show.

The county’s median home sale price rose to $450,000 in June, up 8 percent from June 2013, real-estate tracker DataQuick reported Tuesday. While that value is at a nearly seven-year high, the pace of appreciation has slowed considerably from just a year ago. In June 2013, median values were up 24.1 percent from June 2012, led by investor related sales of distressed properties.

“Last year everyone wanted to know why are prices rising so fast, and the three main reasons were extraordinarily low inventory, incredibly low mortgage rates and record or near record levels of investor purchases,” said DataQuick analyst Andrew LePage. “This year each one of those has sort of reversed to some extent.”

In the first half of 2013, interest rates hovered around 3.5 percent. Now, they’re up around 4.3 percent, Freddie Mac reports. With those higher rates and prices, the number of transactions fell by 2,344, or 11 percent in the first half of this year.

Mark Goldman, a loan officer and real-estate lecturer at San Diego State University, said in retrospect it appeared the price run-up was completed by the end of the 2013 and the market is now returning to normal.

“It’s better this summer but the first quarter of this year was unexpectedly slow,” he said. “Maybe it was just taking a breath. Houses are expensive and wages aren’t going up.”

Goldman said he sees annual appreciation on the way down to about 3.5 percent. He said it’s still a good time to buy because values have already recovered as much as they will in the near term. It’s different for speculators, he said, since buying doesn’t pencil out for a big gain. The number of cash buyers, which fueled the big gains last year, peaked in February 2013 at 36.5 percent of transactions.

Still, LePage said the recent gradual price increases should unlock more inventory, with people regaining enough equity to put their homes on the market. He said, however, that many are still trying to get their finances in order amid stricter lending standards.

“People just can’t stretch the way they could in particularly the 2004-2007 stretch. Financing, risky, exotic, subprime or other loans, they’re just not as readily available,” he said. “Maybe prices still would be going up by double digits or 20 percent if that kind of financing were available.”

June’s median was $10,000 higher than the median sale price in May, as activity ticked up over the month into peak homebuying season. Overall, in the year’s first six months, home prices rose 11 percent, or $45,000. That’s slower than the 19 percent gain of $66,500 from January to June 2013.

Inventory, while still constrained, is also increasing. In the first six months of 2013, there were 46,146 active listings in San Diego County, up from 26,294 last year, the San Diego Association of Realtors reports. Further, this month, inventory surpassed 8,000 for the first time since February 2012.

And there’s still some activity out there that could increase more affordable supply, said Marco Sessa, senior vice president of Sudberry Properties, developer of the Civita community in Mission Valley. Sudberry reports that 105 homes sold in the first half of 2014 at Civita, which includes a variety of single family and attached homes starting from the high $400,000s.

“The very start of the year things seemed to slow down a little bit, but as we’ve had different types of homes come available we’ve seen some pretty good traffic,” said Sessa. “Somebody in an existing home and moving up to a $500,000 home means they left a $300,000 or $400,000 home that they made available for somebody else.”

Across Southern California, homes sold at the slowest pace for a June in three years, with 20,654 transactions. Los Angeles county’s median rose 5.9 percent annually to $450,000, while Orange County’s median was up 10.1 percent to $600,000.

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