July 23, 2006



Although it may appear to some that the sky is falling, Chicken Little can relax for now. As Southern California's real estate boom fades and a more normal market returns, buyers and sellers can take some comfort in what lies ahead.



Industry analysts say the tumbling prices, glut of houses and 8% to 10% interest rates that marked the recession of the early 1990s are nowhere in sight now. The area's strong, diverse economy will help prevent a market freefall similar to the one the region experienced then.



"The fundamentals today are vastly different than those of the '90s," said John Karevoll, chief analyst for DataQuick Information Systems, a La Jolla-based real estate research firm.



Karevoll says that by the end of the year, he expects Southland home prices will have risen by 6% to 7% from the median price of $460,000 in 2005.



"Even in a worst-case scenario, which is not expected, economists say homeowners will lose no more than 7% of their homes' value down the line," Karevoll said. So much for a real estate crash.



Much has been made recently of the downturn in San Diego County's real estate market, considered a harbinger for the region. Alarm bells went off when the June median home price there fell 1% and the number of sales dropped 24% from the same month a year ago ? a tumble experts attribute largely to conditions peculiar to that area, most pointedly the overbuilding of downtown condominiums.



That is not the case in the rest of Southern California, where in June, prices rose 7.4% from a year ago to a median of $494,000. The number of existing homes and condos sold dropped, but new-home sales, which made up 22% of the market, are showing strong gains, according to DataQuick analysis.



Taking a longer view, Los Angeles County prices rose 14.7% and sales of existing homes fell 13.8% during the first half of 2006 from the same period a year ago. In Orange County, during the same period, prices rose 10.7% and sales of existing homes remained level, while in San Diego County, prices went up 3.7% and sales dropped 12.4%.



In contrast, new-home sales in San Diego County dropped 16.9% during the first half of this year, compared with that period a year ago, while such sales, including condo conversions, soared 25.1% in L.A. County and 34.6% in Orange County.



The reason for such strong new-home sales activity is pent-up demand, a spillover from a half-decade of under-construction. Most big builders, wanting to avoid a repeat of the '90s ? when they were stuck with unsold homes after the recession hit ? now build houses only after preselling them.



Prices, meanwhile, have continued to rise. The median price of all homes in Orange County during the first half of 2006 was $624,000; in L.A. County, it was $505,000. Regionwide, however, prices in June ? which rose 6% from a year ago to $493,000 ? represent the smallest year-over-year increase since May 2000. The median is expected to continue to set records, but at a slower rate of appreciation than in June.



The move back to a "normal" market is resulting in unnecessary panic among some sellers, who are cutting prices too soon, industry observers say.



At this midpoint in the real estate cycle, sellers who are testing the waters are planting for-sale signs in frontyards, fishing for top dollar, then taking their homes off the market months later when they don't get those prices. Anecdotally, about half the listings on the market fall into this category, industry analysts say.



The consequence of this activity is that it falsely inflates the inventory, keeps homes on the market longer and can skew the realty picture. On the other hand, serious sellers who price their homes right are enjoying more timely sales, agents say.



Timing has made a difference in the mortgage market too. While buyers may be encouraged by the return to more normal home-price increases, they still face higher interest rates, said Mark Cohen, owner of Cohen Financial Group in Beverly Hills.



A year ago, a buyer with a 10-year-fixed, interest-only mortgage, for example, locked into monthly payments of about $2,448 for a $500,000 loan at 5.875%. Today, with rates at about 6.75%, that borrower would pay $2,813 per month, a 15% jump.



July 23, 2006

July 19, 2006


Southern California home prices set a new record of $493,000 in June but sales declined to their slowest pace in six years, DataQuick Information Systems reported yesterday.


San Diego County real estate turned in the only price decline among the six counties. As reported last week, the local median price was down on a year-over-year basis for the first time in a decade. But the $488,000 figure, off 1 percent from June 2005's $493,000, was wholly attributable to lower prices for condominiums and newly built homes and condo conversions.


Single-family-resale home prices for San Diego County real estate stood at a median $565,000, up $10,000 from a year ago but $4,500 lower than the record set in May.


San Bernardino County posted the highest median gain, up 14 percent to $367,000, followed by Los Angeles, up 8.8 percent to $517,000. Riverside and Ventura tied at 7.4 percent, with prices standing at $422,000 and $627,000, respectively. Orange County was up 7.1 percent to $646,000.


The overall 6 percent year-over-year regional increase was the smallest since May 2000, DataQuick said, and recent trends suggest a further slowing even as prices continue to set records in the summer months.


On the sales side, the region saw 29,237 transactions closed, down 17.5 percent from June 2005. The sales volume was the lowest since June 1999 but above the 26,608 June average recorded since DataQuick began keeping records in 1988. The lowest June figure was 16,335 sales in 1992 at the depths of the recession.


June was the seventh straight month of declining sales on a year-over-year basis regionally but for San Diego real estate it was the 24th consecutive month of year-over-year declines.


However, San Diego's home sales 24.1 percent drop to 4,301 sales was not the region's biggest. That ranking went to Ventura, which saw a drop of 32.3 percent to 1,155 sales, followed by Orange County, down 26.3 percent to 3,608 sales.


San Bernardino was down 14.9 percent to 3,998 sales, Los Angeles was off 14.6 percent to 10,248 sales and Riverside declined 8.6 percent to 5,927 sales.


?Many view this as a great conundrum,? said DataQuick President Marshall Prentice in a statement. ?Prices continue to rise, even set records, as sales continue to slow. It happened for two years in San Diego real estate before prices last month finally fell slightly below year-ago levels.


?We view this as a normal winding down of a real estate cycle, where declining demand gradually erodes price growth until it halts or reverses. We expect more markets to see prices flatten or decline a bit in the second half of the year.?


Meanwhile, the San Diego Association of Realtors issued a monthly housing sales report that echoed DataQuick's findings. The association reported sales down 34.5 percent from June 2005 to 2,782 transactions. The total is smaller than DataQuick's figures because the realty group does not track newly built housing sales or those not involving a member real estate agent.


The association said it took an average 60 days to sell a single-family home last month, compared to 45 days a year ago, and 64 days to sell a multifamily home compared to 44 days over the same period.







July 20, 2006

July 17, 2006



SAN DIEGO ? For a long time, this was a cruel place for any would-be San Diego homeowner who didn't have a wad of bucks or a tolerance for the high-risk, short-term mortgages that some call suicide loans.



Finally, the seemingly unstoppable ascent of real estate here has stopped. Last week, reports showed that the city's median home price dropped 1% in June from a year earlier, the first decline in a decade.



The long-awaited shift in the San Diego real estate market's direction isn't pleasing many others, either. Sellers are chopping prices to get deals done. Buyers worry that values will continue to fall, putting their investment at risk. There's widespread uncertainty, and some anxiety, about what happens next.



San Diego?s real estate had the wildest run-up among major California cities, with prices tripling since the mid-1990s. The boom was stoked by cheap loans, changes in tax law, creative financing and a generalized mania that fed upon itself.



The real estate market also began to fade first in San Diego. The craziness seemed to peak about two years ago, when bidders routinely submitted letters saying that they and their children would be forever honored if the seller would consent to choose them.



Whatever happens here, optimists and pessimists agree, will happen later in the rest of the state.



That's about the only thing everyone agrees on. The size of the coming hangover is a particularly contentious matter.



Most analysts and people in the real estate industry insist it will be mild. The housing bears say the bulls are either misguided, uninformed or shills.



The last San Diego real estate collapse, which hit in the early 1990s, was triggered by convulsions in the aerospace industry. The post-Cold War downturn caused widespread unemployment and a generalized exodus from much of Southern California. High interest rates contributed to the misery.



In some cases, the prices are dropping faster than the fliers can be reprinted.



A two-bedroom town home has its price of $324,900 crossed out with a marking pen, replaced by $309,900. Another house, a four-bedroom in suburban La Mesa, has a printed price of $575,000.



Below that is handwritten $549,000.



July 17, 2006

July 16, 2006


San Diego County's once blistering real estate market moved into negative territory for the first time in 10 years as overall prices declined 1 percent last month from June 2005.


With San Diego home sales slowing for the 24th consecutive month, real estate analysts said the decline clearly indicated a softening market, but not one that is destined to crash.


?Across the region, prices are coming down, incentives are rampant, and sellers are adjusting to longer times on the market,? said Peter Dennehy of Sullivan Group Real Estate Advisors.


?People have come to regard their homes as a cash machine, and that's not how you should be looking at real estate,? he said.


DataQuick Information Systems reported Wednesday that last month's median San Diego home price slid to $488,000, off 1 percent from a year earlier, and down 6 percent from last November's peak of $518,000.


Although resale prices for single-family homes showed a gain of nearly 2 percent from June 2005, the real estate market's drop was brought by sagging prices for resale condos and new houses, DataQuick analyst John Karevoll said.




July 17, 2006

July 14, 2006


While the news that home prices finally went negative year-on-year last month grabbed plenty of attention this week, a new report shows that the price dip has been even more exaggerated for condos and townhomes.


When compared with June 2005, median prices dropped $20,000 in the county last month for single-family attached homes, a category that includes condos, condo-conversions and townhomes. That?s a 5.2 percent drop over the year. The prices also decreased by 2.4 percent from May to June and 5.7 percent from the beginning of the year, according to HomeDex, a resource compiled by Dr. Robert Brown, professor of economics at California State University, San Marcos.





As usual, those in the industry are divided over what the numbers mean, with some predicting a calming of the market and others seeing a potential crisis. Many real estate professionals and analysts view the change as the attached housing market starting to return to normal after the escalating prices of the last few years.


While marked decreases in the median prices of single-family attached homes were noticed in all areas of San Diego in June, South County experienced the largest differential, with decreases of 11.3 percent from the same month last year, 12.6 percent from January and 7 percent from last month. That?s a year-on-year price drop of more than $40,000.




July 15, 2006

July 13, 2006


San Diego County's once blistering housing market moved into negative territory for the first time in 10 years as overall prices declined 1 percent last month from June 2005.


With home sales slowing for the 24th consecutive month, real estate analysts said the decline clearly indicates a softening market, but not one that is destined to crash.


DataQuick Information Systems reported yesterday that last month's median home price slid to $488,000, off 1 percent from a year earlier, and down 6 percent from last November's peak of $518,000.


Although resale prices for single-family homes showed a gain of nearly 2 percent from June 2005, the market's drop was brought by sagging prices for resale condos and new houses, DataQuick analyst John Karevoll said.


The numbers should come as little surprise to many home sellers who have watched their properties sit on the market for months, in some cases lowering their asking prices in hopes of getting an offer.


Amid the overall price drop ? the first since July 1996 ? there were some positive signals in the market report for last month, including substantial price jumps for some communities from a year ago.


Single-family resale houses, more than half of the local housing market, showed a price gain of 1.8 percent over June of last year, DataQuick found. The median price last month in the category reached $565,000, a slight decline from May's record of $569,500. The median represents the midpoint of all sales, with half above and half below that figure.


Meanwhile, overall sales in June were up slightly from May, a hopeful sign of a strengthening market, some analysts said.


Nevertheless, sales were down 24 percent from a year earlier, the 24th consecutive month of year-to-year sales declines.


Still, long gone are the heady days of double-digit price gains. The last time San Diego County saw year-over-year increases in the double digits was April of last year, topping off a trend that had held steady for 64 consecutive months, Karevoll said.


Home prices for the first half of this year rose a mere 2.7 percent, compared with 11 percent during the same period last year, a clear indicator of a deflating market.


?At this point, we're willing to take a loss,? said Daugherty, who has two sons, ages 20 and 22, who will be moving with their parents. ?We really need to get this off our back so we can get on with it. I'm obviously frustrated because we worked so long and hard on this, but sooner or later the prices had to back down.?


Countywide, the number of homes for sale has been rising steadily, with active listings hovering at 19,803 last month, according to the San Diego Association of Realtors. That compares with about 10,900 a year ago and 6,600 in 2004.


San Diego home builders are also feeling the effects of a sluggish market and are responding by dropping prices and offering generous incentives, noted Dennehy of the Sullivan Group.


The segment of the housing market showing the biggest drop last month was new home sales, which saw prices decline 8 percent. That was influenced, in part, by a weakening demand for condo conversions.


While many neighborhoods throughout San Diego County continue to experience sizable upswings in home values, there were nearly three dozen ZIP codes where median prices fell in June, according to DataQuick. And of the more than 90 ZIP codes in the county, all but 10 had median prices last month that were lower than their peaks set in previous months, Karevoll said.


Some homeowners still have the luxury of waiting out the stalled market until price appreciation resumes.




July 13, 2006

June 10,2006



NORTH COUNTY ---- Defying buyer expectations that housing costs would level off and perhaps even slide down a tad, the median price for a single-family home in North County rose 4 percent in May over prices last year and reached a new all-time high of $645,000, the North San Diego County Association of Realtors reported Friday.



The new high slightly exceeded the previous mark of $644,899 set in November, and compared to a single-family median of $620,000 in May 2005, the report showed.



"We are not seeing the type of double-digit growth we had in the past, but we are still seeing a solid market," said Paul Cauci, spokesman for the North San Diego County Association of Realtors.



More in line with expectations, the median price for condominiums did slide down a bit last month ---- by 3 percent year over year ---- in landing at $387,500. That compared to $400,000 a year earlier.



At the same time, sales continued to fall sharply across the board in North County and the inventory of unsold homes on the market has now reached an all-time high for the county as a whole.



"It is a little surprising to see the detached houses continue to go up," said Carlsbad real estate agent Dennis Smith. "It really does surprise me quite a bit because we are seeing a lot of downward pressure. A lot of buyers are saying, 'Why should I pay full price?'


And buyers are making low-ball offers, Smith said. But, so far, most sellers aren't biting, he said


As a result, prices are staying high and even edging up for the relatively few properties changing hands


Every month so far this year, home sales have fallen sharply all over San Diego County, according to Sandicor Inc., a multiple listing service. Sales declined 18 percent year over year in January, 17 percent in February, 16 percent in March and 34 percent in April


Sales have declined every month in North County, too. And in May, the single-family sales total of 833 was 22 percent off the May 2005 pace of 1,063 homes, according to the association. North County condo sales, totaling 370 last month, were off 10 percent from 411 in May 2005.


Earlier in the year, some real estate analysts expressed optimism that a busy spring would eclipse concerns about sharp year-over-year sales declines during winter. Instead, the trend has continued and the inventory of unsold homes on the market reached 8,503 in North County at the end of May, the association reported.


Given the area's total sales of 1,203 detached and attached homes, North County in effect has a seven-month supply of homes, up from six months as of March. Even if no new homes were to come on the market in June, it would take seven months to exhaust the area's supply.


Countywide, the inventory had reached 19,674 as of 3 p.m. Friday, a new all-time high that has eclipsed a previous mark set 11 years ago during the recession, Smith said. And the number keeps rising by close to 50 homes a day


"By the end of the month we should be over 20,000 properties," he said.


While economic experts suggest that the market cannot sustain its high prices indefinitely because wages have risen much more slowly in recent years, Smith said a sharp drop is unlikely because San Diego County and Southern California continue to enjoy strong, if slowing, job growth.





"Eventually, prices are going to have to come down some," he said. "What's ultimately going to happen is, some people are going to have to sell and they may begin to take lower prices."




June 10, 2006

May 26, 2006











The median price of an existing, single-family home in the San Diego area fell slightly last month, and sales were down 27 percent compared to the same period last year, a real estate group reported Thursday.





The median price of a home in San Diego stood at $601,070, compared to $607,370 the previous month and $593,600 in the year-ago period, according to the Los Angeles-based California Association of Realtors.





Home sales in the region were down 9.8 percent from the previous month, and down 27.1 percent from a year ago, according to CAR.





Statewide, the median price of an existing, single-family detached home in April was $562,380, relatively unchanged from the $562,630 in March, but up 10.2 percent from the $510,400 in the year-ago period.





Statewide, sales decreased 21.4 percent compared with the same period a year ago, according to CAR's report.





"Sales fell this year compared with April 2005 when they hit the second-highest monthly pace on record," said CAR President Vince Malta.





"Concerns about the likelihood of future interest rate increases continue to influence the market," he said. "While still near their historic lows, mortgage interest rates are at their highest level since June 2002 for fixed-rate mortgages, and August 2001 for adjustable-rate mortgages."





In a separate report covering more localized statistics generated by CAR and DataQuick Information Systems, 84.5 percent, or 339 out of 401 cities and communities, showed an increase in their respective median home prices from a year ago.













May 27, 2006

May 26, 2006


With new home construction declining and sales slowing, the predicted 2006 housing market slowdown in San Diego County is very real according to the Sullivan Group Real Estate Advisors, who spoke as part of a housing seminar this month.


For the first quarter of 2006 new and existing home sales activity is down by 30 to 60 percent when compared to the first quarter of 2005, according to Peter Dennehy, senior vice president with the Sullivan Group.


Employment growth in the county has been accelerating since the summer of 2003, Dennehy said, citing a 1 to 1.5 percent increase in job growth for this year. In a different seminar in November 2005 he predicted 30,000 new jobs in 2006.


While local economic fundamentals are positive, that is not carrying over to housing as buyers are sitting on the fence watching how the market will react following a period (2005) that experienced the second most home sales in history.


Housing appreciation, similar to amount of sales has also declined.


The decline in appreciation rates and amount of sales equates to increased inventory and time on the market.


At the end of the first quarter the average days on the market for a home was 56 days, which according to Sullivan is not terrible, as even 60 to 70 days on the market is considered healthy. He said a key to selling homes in this type of market, from a builder or developer's standpoint, is differentiation through location or design.


While the San Diego market is on a decline Sullivan reminded the attendees that the market is cyclical and perspective is key, as average inventory and time on the market figures are still below historical averages. Additionally the unemployment rate is below the average of five percent and interest rates remain historically low.




May 27, 2006

April 24, 20066

A Burnham Real Estate report says the average price of an apartment unit was $177,189 -- up 6 percent from 2004 and 143 percent since 2001.


George Carlson, a Burnham apartment specialist, said the flood of condominium conversions, which actually began to taper off as the year drew to a close, had the effect of driving the apartment prices to record levels.


While prices have been climbing, the rate of increase has tapered, mirroring what has been happening in the home resale market.


The Burnham report shows that the 6 percent increase in the average countywide price per unit in 2005 compares to a 35 percent increase in 2004 to $166,153 per unit, a 21.2 percent increase in 2003 to $123,152 per unit, and a 40 percent increase in 2002 to $101,544 per unit.


The report also shows that while the average countywide price per unit reached a new all-time high in 2005, the average per-unit price within the city of San Diego fell slightly, from $195,067 in 2004 to $192,765 in 2005.


Carlson likened what is happening now to what occurred after the run-up in per-unit prices in 1989 and 1990.


But Carlson also noted that the market climate today is very different than the early 1990s when cap rates approximated 8 percent with interest rates in the 8 percent to 9 percent range, resulting in poor cash flows given the high sales prices.


In the county of San Diego, Carlsbad reported the highest price increase, up some 94 percent to $276,734 per unit. It should be noted here that the spike had more to do with the projects being sold than significant price increases.


The community reporting the highest average per-unit price was Coronado, at $340,580 at the end of last year -- up 20 percent from 2004's $283,646 average price per unit.


Investors who don't intend to convert look to strong rent growth to keep their projects profitable. Although rents like per-unit sales prices have continued to hit record levels, here again, the rate of rent increase has slowed. MarketPointe Realty Advisors reported the average monthly rate for an apartment in the county in March was $1,211, or only $41 more than a year earlier. MarketPointe placed the average apartment vacancy at 3.05 percent.




April 29, 2006

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