San Diego Housing Costs Still Rising, but There Are Signs of a Cooling-Off
The average price of an existing house sold in the San Diego metropolitan area continued to increase at a brisk pace in February amid indications that last year’s feverish escalation may be slowing because of the dampening effects of higher price tags and mortgage rates.
According to the San Diego Board of Realtors, the average price of resold houses in the San Diego area was $187,636 in February, a 14% increase over the same month last year, but down 7% from the record $202,240 average price in January.
A sign that the housing market may be cooling somewhat was that the median sale price, the point at which half of all houses sold for less and half for more, has remained flat since November. February’s median price was $159,500, down from the $161,000 median price in January and only slightly above the $159,000 median price reported by the board in November.
The San Diego Board of Realtors, whose members broker home sales in San Diego, El Cajon, La Mesa and Chula Vista, has been keeping median price statistics only since August, 1988.
Brokers say market activity continues strong, however, mainly because demand is far outstripping the inventory of houses available for sale in the county. “We have one-third the inventory we would like to have in a normal marketplace,” said Ann Throckmorton, a broker at Century 21-Regents Properties, a residential brokerage active in the University City area.
An indication of the market’s strength, Throckmorton said, is that only 1% of residential listings in the Mira Mesa area are expiring without having been sold, contrasted with typical expiration rates of 12% to 25% of listings. Listings usually last 90 days, she said.
Demand for houses remains high, brokers and lenders say, despite the half-percentage point increase in fixed mortgage rates over the past 90 days to 11%. Fixed mortgage rates, as well as starting rates on variable mortgage rates, are up a full point from a year ago, said Rick McGill, residential lending manager at Great American First Savings Bank.
“I have not seen the higher rates translate into lower buyer activity,” McGill said. “Our loan volume is about level and may be a bit stronger than a year ago.”
Blaming higher mortgage rates, Dennis Casey, group vice president at Home Federal Savings, said his S&L;’s total year-to-date loan applications are about even or possibly a little below last year’s volume.
San Diego board members sold 910 houses and condominiums in February. That total is down from 1,095 units sold in January, but up significantly from the 518 units sold in February, 1988. San Diego board members handle about half of all resales in the county.
“The market may not be quite as hot as six months ago, before the growth-control initiatives were defeated, but it is still very active,” said Chuck Hoffman, president of the San Diego board and head of ACI Investments, a Mission Valley brokerage. “Brokers are still getting multiple offers on houses as soon as they hit the market.”
In November, San Diego voters turned down a ballot initiative that would have placed strict limits on new housing construction within city limits. Fears among prospective home buyers that the measure would pass caused what some observers described as a buying frenzy last summer and fall. Those fears helped drive the price of an existing house up 18% in the San Diego area last year.
Builders of new housing struck a more cautious view of the market Tuesday. Bill Fontana, a partner in Westana Builders Developers of San Diego, said there has been a slowing of buyer activity at new subdivisions because of higher prices and interest rates.
Fontana, whose company will open a 142-unit subdivision in Rancho Penasquitos next month with homes priced in the $240,000 to $275,000 range, said the skyrocketing cost of developable lots has pushed the price of new units beyond the reach of many buyers.
That high cost of land is the main reason new houses in the county cost significantly more than existing houses, Fontana said. According to Market Profiles, the average price tag on all new units available for sale in the county at the end of 1988 was $211,800, or $30,000 more than the average sale price of existing units sold by San Diego board members that month.
“I think we’ll see a leveling off of price increases of new housing in the first quarter (to end March 30),” said Market Profiles President Russell Valone. His firm, a housing market research and consulting firm that tracks new subdivision sales, will report new housing prices for first quarter 1989 sometime next month.
“This is the quarter that I have really been waiting to see,” Valone said. “Last year we had the growth-control initiatives hanging over the market, putting pressure on prices. Now that they have gone down to defeat, this quarter’s data will really tell us something.”
