Tuesday, September 28, 2010
SAN DIEGO Today the Case-Shiller home price index came out and it looked pretty good for the San Diego market. Case-Shiller tracks housing markets in 20 cities and it showed home prices in July were up in San Diego about 9 percent from the year before.
San Diego did better than average. The average index, for all cities examined, was up 3.2 percent from the previous year.
But the seers of trends caution we’re not looking at any fast-moving home-price inflation train. In fact, DataQuick Information Systems, which tracks homes sales in Southern California, showed a reduction in the median home price for August.
The really good news for the local housing market is not the value of homes but their affordability. With interest rates down at around 4 percent, affordability in San Diego is “spectacular,” to quote John Karevoll, an analyst with DataQuick. He says affordability is at record low levels.
This is the part I don’t quite get. I moved to San Diego in 1998 and bought a house for $186,000. I sold that same house this year for $422,000. If affordability is as good as it’s ever been, then somebody explain to me how a $422,000 house is more affordable than a $186,000 house.
“The measure for affordability is not just the price,” said Karevoll. “The question is how big a check you write each month and how much your average family income is. If you look at it that way, affordability is at record lows.”
But even if we should be celebrating the affordability of homes there is still one problem: The down economy that has buyers extremely skittish. That and the fact that home lenders have gotten very hard-nosed, demanding documentation of income and high down payments. Okay, I guess that's two problems.
Russ Valone, president of MarketPointe Realty Advisors says he expects it will take about a year for San Diego’s inventory of distressed homes to go into foreclosure and/or get sold. After that he actually sees light at the end of the tunnel.
His scenario is based on the fact that San Diego has virtually stopped building homes at the same time the population has continued to increase. In 2005, he says, San Diego was building one home for every two new members of the local populous. By 2009, home building had dropped to one home for every eight new San Diegans. That means more people and not a lot more homes. That means lots of doubling up and lots of college grads still living at home with mom and dad.
When the economy finally bounces back, will demand for houses shoot skyward as the kids move out and start seriously looking for their own place? Will we have another run-up of prices, not unlike the one we saw 5 to 10 years ago? Russ thinks maybe so, and maybe he’s right.
PS: Leave a comment below and let me know if you’ve recently tried to buy or sell a house. What’s it been like? Is your home still worth what you paid for it, or are you under water?