San Diego County's median home price crossed the half-million-dollar mark for the first time last month despite increasing signs that the rapid run-up of the last eight years is slowing, locally based DataQuick Information Systems said yesterday.



The year-over-year increase to $513,000 was 4.9 percent above October 2004's $489,000, the sixth month in a row that appreciation has been below 10 percent.



October was the 16th month in a row that sales volume has declined on a year-over-year basis for residential real estate in San Diego. The total last month was 4,155, down from 4,758 a year ago.



In a separate report from the San Diego Association of Realtors, the inventory of active, unsold listings crossed the 15,000 mark for the first time since the present boom began in 1997. By contrast, at the peak in March last year, there were only 3,113 listings.



Coupled with rising interest rates ? which rose to a two-year high of 6.31 percent this week ? and a suddenly soaring foreclosure notice rate ? up nearly 40 percent for the third quarter compared with a year ago ? industry analysts said San Diego's real estate boom seems to be coming to a quiet end.



The balloon isn't bursting, they said, but it's losing steam.



"We've got down times and up times and that's how real estate cycles work," said Tim Sullivan, a new home real estate consultant in San Diego.



The slowing market affects desperate sellers the most.



In Fayetteville, Ga., Vinse and Anji Evans are worried about just how soft San Diego County's real estate market will become. They moved out of their two-bedroom condominium in Rancho Bernardo about 30 days ago. So far they have lowered the asking price by $60,000, to a range of $375,000 to $390,000.



The vacant property near the corner of Avenido Venusto and Paseo Lucido is in the 92128 ZIP code, where the median resale condo sold for $433,000 last month.



Selling the unit "has been a real challenge," said Vinse, who left a career as a Navy officer to become a project manager for Caterpillar Inc.



"We put our house on the market in June, knowing we would be moving away from California in August," he said. "The summer usually is the best time of year for real estate in San Diego. We really didn't get hardly any bites at all. We've had maybe three offers . . . The market has really slowed. The condo is in pristine condition."



He recently offered buyers six months of homeowner association dues as an added incentive.



On the other side, buyers aren't afraid to come in with offers below the asking price, said veteran San Diego real estate agent Richard Mehren.



"We are seeing buyers submitting some aggressive offers," Mehren said. "Most prices today are variable-range. We are seeing mostly offers come in at the low end and even below. Buyers definitely are being aggressive, and there are a lot of people out looking for property. It definitely is going to continue to be soft. There is a lot of inventory. We are going to continue to see prices drop, at least for the next few months."



DataQuick analyst John Karevoll said the local median price for a home for sale in San Diego? the midpoint of all sales with half above and half below that figure ? is likely to "wobble" around the $500,000 mark for the foreseeable future. At current appreciation rates, it would take four years to cross the $600,000 mark, he said. It took only 22 months to go from $400,000 to $500,000.



"It means, if anything, that the market may plateau and go into a bit of a lull," Karevoll said. "But really there is no indication that we're in for any dire decline here."

The latest report showed only 15 neighborhoods out of 95 countywide posting lower prices than a year earlier for single-family resale homes. The median price for October rebounded to $560,000, the record level set in July, and up $10,000 from September.



On the condo resale side, all but six neighborhoods were below October 2004 levels. However, the overall median of $395,000 was also up $10,000 from September and just below the $398,250 record set in July as well.



The new housing market in recent months has seen the median price sag, mainly due to the resurgence in lower priced condo conversions. But in October, the median bounced up $22,000 to $520,250 as higher priced new construction took the lead. The record was $530,000 set last November.



Bob Cummings, president of K. Hovnanian Homes in San Diego, said the county's short supply of housing is going to keep real estate prices strong in the long run.



"Sometimes you have to take a step back and know that the real estate market is cyclical," Cummings said. "It is very interest-rate driven. The demand is going to still be there. Next year I can't imagine we would see a decrease in property values. Level-offs and slowdowns are healthy. They are expected events after a boom."



In Campo, KB Home has sold 71 of 221 one-story, single-family homes at its Campo Hills project, about a mile from the East County town center. The attraction, according to sales representative Mike Goldstein, is the price ? $395,000 to $430,000 for 1,432 to 1,966 square feet. Many other new subdivisions in the county offer homes double those prices.



"The majority of buyers are from East County or South Bay," he said. "The majority are first-time buyers."

Steve Hornburg, an Arlington, Va.-based housing policy analyst, called San Diego's flattening a good sign that affordability might improve. The California Association of Realtors reported earlier this week that San Diego continued to post a record low 9 percent housing affordability level ? the percentage of households able to afford the median-priced home.



But there are early signs of distress. DataQuick's Karevoll said the notice of default rate ? the first sign of foreclosure ? soared nearly 40 percent to 906 notices in the third quarter. But he said it was far below the peak of 5,139 in the first quarterly of 1996. Only 47 actual foreclosures occurred in the third quarter, compared with 33 a year ago.



"Even in the best of times, there is always economic stress out there," Karevoll said.



On the other hand, he said, many borrowers who took out risky loans are refinancing with safer fixed-rate loans.

Nicolas Retsinas, director of Harvard's Joint Center for Housing Studies, said that while homeownership remains a sound long-term investment, San Diego County buyers who expect to make a quick profit are probably out of luck.

"You see all the signs of moderation: slowing rates of appreciation, a growing inventory, incentives offered by builders," he said. "But prices weakening doesn't mean that prices are retreating. The message to the home buyer is, if their primary motivation is investment, they probably have missed the wave."



FRONT PAGE ? BUSINESS SECTION







November 12, 2005

The unemployment rate edged higher in San Diego County and statewide last month, as the pace of job growth slowed, dragged down by a cooling in the San Diego real estate market.



In California, employers added 6,800 jobs to their payrolls in October, after seasonal adjustments to the data. That was less than half the monthly job growth over the past year.

In San Diego County, payrolls rose by 6,200 jobs. But that figure ? which was not seasonally adjusted ? was boosted by more than 6,000 education-related jobs as teachers and school staff members returned to work.



The unemployment rate inched up from 4.2 percent to 4.4 percent in the county, while California's jobless rate rose from 5.1 percent to 5.2 percent. Nationwide, unemployment slipped from 5.1 to 5.0 percent.



Economists blame the sluggishness in the job market partly on the slowdown in the San Diego real estate market.



"Over the past couple years, employment has been completely driven by real estate," said Christopher Thornberg, senior economist at the Anderson Forecast of the University of California Los Angeles. "But now the real estate market is cooling off, and the state isn't adding many jobs anywhere else."



Statewide, the strongest employment sector last month was leisure and hospitality, which added 8,600 jobs. Manufacturing also showed some signs of life after a long decline, adding 2,400 jobs.



But the gains in tourism-related jobs and factory work were offset by the loss of 2,700 information technology jobs and 4,200 business and professional positions.



Financial firms, such as San Diego real estate and mortgage brokerages, which have been a prime driver of employment growth during the recent housing boom, lost 200 jobs. Employment in residential construction dropped by 1,300 jobs statewide and 200 jobs in San Diego.



Real estate experts note that fall is typically a slow season for home construction and that dips in employment are common.



"It's always hazardous to judge construction work by a single month or two, since construction tends to be more volatile than a lot of other economic figures," said Ken Simonson, chief economist for the Associated General Contractors of America, the nation's leading construction trade association. "For the year to date, construction employment in California and San Diego are still well ahead of last year."



On the other hand, San Diego home sales data show that the market is cooling.



Over the past 12 months, 56,324 homes were sold in San Diego County, according to Dataquick, a La Jolla real estate information service. That's a 9 percent drop from the previous year, when 61,886 homes were sold.


"The market has definitely cooled off, and it's getting worse," said Robert Feher, who heads All Mission Properties in Carlsbad. "Homes are languishing on the market much longer than we've seen in a number of years, and that's definitely had an influence on the job market for real estate agents."



Building permits for housing in the first nine months of the year are 2 percent lower than last year. Although there has been a sharp rise of multifamily units this year, it has been offset by an even steeper decline of single-family San Diego homes, which could hint at further weakness in construction employment.



"It takes more construction workers to build 100 single-family homes than to build a single 100-unit apartment complex," said Alan Gin, economist at the University of San Diego.



Real estate experts note that fall is typically a slow season for home construction and that dips in employment are common.



"It's always hazardous to judge construction work by a single month or two, since construction tends to be more volatile than a lot of other economic figures," said Ken Simonson, chief economist for the Associated General Contractors of America, the nation's leading construction trade association. "For the year to date, construction employment in California and San Diego are still well ahead of last year."



On the other hand, San Diego home sales data show that the market is cooling.



Over the past 12 months, 56,324 homes were sold in San Diego County, according to Dataquick, a La Jolla real estate information service. That's a 9 percent drop from the previous year, when 61,886 homes were sold.



"The market has definitely cooled off, and it's getting worse," said Robert Feher, who heads All Mission Properties in Carlsbad. "Homes are languishing on the market much longer than we've seen in a number of years, and that's definitely had an influence on the job market for real estate agents."



Building permits for housing in the first nine months of the year are 2 percent lower than last year. Although there has been a sharp rise of multifamily units this year, it has been offset by an even steeper decline of single-family San Diego homes, which could hint at further weakness in construction employment.



"It takes more construction workers to build 100 single-family homes than to build a single 100-unit apartment complex," said Alan Gin, economist at the University of San Diego.

November 19, 2005

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