Home Costs Still Rise, but Pace Has Slowed : Housing: New-home cost increases are leveling off after steep hikes fueled by fears of slow-growth limits, experts say.
The leveling off of the skyrocketing increase in prices of new homes in San Diego County continued during the first three months of this year as the average cost of a new single-family house increased by only 6% over the corresponding period last year.
According to Market Profiles, a San Diego-based research firm that tracks new subdivision sales, the average price of a new house during this year’s first quarter was $268,676, up from $253,460 over the same quarter last year.
Prices of existing homes in the metropolitan area showed a similar increase. According to sales statistics released Monday by the San Diego Board of Realtors, the average price of an existing single-family home sold by board members in March was $215,311, up 9% from the March 1989 figure of $197,494.
The 6% increase in prices of new housing so far this year is comparable to the 7% to 8% average annual price increase posted during the first six years of the 1980s, before anti-growth sentiment in San Diego County gained support and helped to accelerate prices of new homes, said Russ Valone, president of Market Profiles.
The price of a new single-family home climbed 12% from 1986 to 1987, increased 17% from 1987 to 1988, then jumped 29% from 1988 to 1989, Valone said. The price increase rate, however, from 1989 to 1990 was 5%--a rate that has continued through the early part of this year.
“Between ’87 and ‘89, people were getting caught up in the inflationary market and were seeing houses more as an investment rather than as a residence,” Valone said. “Housing had become more of an investment vehicle for them, and that kind of mentality continued to push prices higher. But the market can only stand so much appreciation.
“As we move into the 1990s, people will have to go back to the feeling that housing is shelter, whether they want to or not,” Valone added. “As a result, we won’t be seeing the price increases of late.”
A similar conclusion was reached by the Meyers Group, a La Jolla-based research firm, which also monitors new-housing sales.
According to the Meyers Group, the median price of a new single-family home sold during the three months ended March 31 was $238,990, up 5% over the $227,990 recorded during the same period last year. The median price means half of all houses sell at a higher price and half at a lower price.
Peter Reeb, vice president of the Meyers Group, added that activity at the county’s subdivisions slowed appreciably in the first quarter from the same period last year. For the three months ended March 31, 1,388 detached units were sold countywide, down 28% from the 1,938 units sold in the first quarter of 1989.
But the sales activity of existing single-family homes last month--1,647 units sold--was up 13% from March 1989, when 1,452, units were sold, the San Diego Board of Realtors said.
Last month’s prices for existing homes, however, also failed to show the dramatic price-increase pattern seen in recent years, according to Marjorie McLaughlin, president of the San Diego Board of Realtors. The median price of existing homes sold in March was $178,000, up 8% from the $165,000 median of a year previous.
If sellers get too far above the typical selling price, it will take longer to sell, said McLaughlin, who is also a real estate agent with Century 21 Northcutt Realty in Clairemont. “Buyers are no longer just snatching up anything. They’re being more cautious. They’re not rushing into things.”
Although the rate of price increases appears to be slowing, McLaughlin said she still expects prices to climb.
“As long as we have lots of people coming into San Diego and they have the desire to live here . . . you’re going to see prices continue to go up,” McLaughlin said. “But they’ll be minimal increases, maybe about 1% per month.”
With home prices still far out of reach for many home buyers, San Diegans are increasingly turning to condominiums and townhouses for housing alternatives. Such demand is causing prices of multifamily units to escalate, industry experts say.
According to the Meyers Group, the median price of condominiums and townhouses sold over the three months ended March 31, was $135,990, up 22.5% over the $110,990 median price posted during the same period in 1989.
Statistics compiled by Market Profiles also show healthy price increases for attached units, such as condominiums and townhouses. During the first quarter of 1990, the average price of attached units was $211,716, up 61% over the $131,647 average price posted in the first quarter of 1989.
But Valone of Market Profiles said the average price was skewed by sales recorded at One Harbor Drive, a luxury, bay-front, high-rise condominium now under construction but which has already begun sales. Condos at the 202-unit project are selling at prices from $271,000 to $2.5 million each, Valone said.
“That project really jacked up the (average) prices,” Valone said. A more realistic average sale price for condos and townhouses would be in the $160,000 range, which would still represent a healthy gain, he said.
NEW HOUSING PRICES
Average yearly price of new attached units and detached units in San Diego County.
Year Attached Units Detached Units 1980 $83,372 $118,264 1981 $91,302 $128,846 1982 $92,809 $126,826 1983 $100,818 $126,873 1984 $97,805 $136,640 1985 $103,326 $139,022 1986 $112,338 $149,774 1987 $130,759 $168,272 1988 $138,183 $196,788 1989 $150,908 $255,058 *1990 $211,716 $268,676
* 1990 prices reflect first quarter averages only. Prices for 1980-1989 are full-year average prices.
Source: Market Profiles of San Diego
