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Sunday, Jul 14, 2024

Real Estate–S.D. Home Prices Jump 28 Percent

Views Differ on Whether Economy Can Sustain Trend

The average price of a resale house in San Diego County hit $383,713 in May, the San Diego Association of Realtors said.

That’s 28 percent more than the average sales price of $299,579 recorded in May 1999. The median sales price, that figure, which is the exact middle of all sales, reached $272,300. It’s 21 percent more than the $225,000 for May of last year, according to the monthly statistics released by the association.

One expert doubts the rising price trend can continue much longer.

“My gut instinct is that this is not sustainable,” said Mark J. Riedy, a professor of real estate finance at the University of San Diego. “It’s one thing to say San Diego has a diversified economy and it will survive the next real estate downturn, but with that said and the Fed continuing to raise interest rates, I don’t think we will be able to sustain this torrid pace.”

Riedy said the higher average sales price figures are an indication that larger, more expensive homes are being built in the county and then sold, skewing the average price higher.

He also said that fact raises the moral question of whether to build affordable housing for working people and the poor.

“The more they build luxury homes, the less the owners of those homes are going to want low-income housing around them,” Riedy said.

Condominium prices also rose in May at almost the same pace as detached homes, the Realtors organization said. The average condominium sale price hit $199,304, an increase of 20 percent more than the $165,925 recorded in May 1999. Median sales price reached $165,000 and 19 percent more than the $138,500 for last year.

However, rising prices dampened the number of houses closing escrow in May. Last month, 2,984 attached and detached homes closed escrow, compared to 3,635 in the same month last year.

Slightly more new listings, 5,636, came on the market in May than May 1999, when 5,569 homes were placed on the market. Even so, there is still a shortage of realistically priced inventory, according to one real estate broker.

“Agents say there’s no inventory, but that’s not the case because the houses that are realistically priced sell and disappear from the inventory,” said Jack Forness, president of Century 21 Able in San Diego. “There is always standing inventory of junky homes and homes that are overpriced.”

Fixed home loan interest rates, which have risen in recent months to around 8.25 percent annually, are still low when compared to loan rates during the past 20 years, he said.

“People are recognizing the economy here is strong and we are having a ‘soft landing’ from the Fed’s credit tightening,” Forness said. “When consumers lack confidence in the economy, they create a recession by cutting spending, but people here feel good about being in San Diego because they feel secure about their jobs due to the tight labor market.”

The need for new employees by many firms here is driving an influx of people into San Diego County, according to one relocation services company executive. Judy Bailie, vice president of Corporate Moves of San Diego, said new employees being added to the work force at local high-tech companies are coming not only from other parts of the United States but from Europe as well.

She said many of the relocation buyers her company is working with have six-figure incomes and are buying houses for more than $500,000. Most of the transferees and new hires are buying in North County close to jobs in Carlsbad, Rancho Bernardo or Sorrento Valley, she said.


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