With total home sales volume significantly down in San Diego County in 2007, local economists and brokers differ in opinion on when the housing market will rebound. Foreclosure rates are significantly up and sideline sitters continue to ask if median prices will continue to weaken in 2008.
The California Association of Realtors forecasts home prices will post modest declines next year. The association also predicts a 9 percent decrease in number of units sold next year. CAR estimates median home prices in San Diego County peaked in May 2006 at $622,380. The latest San Diego Association of Realtors’ report indicates that the median home price of single-family detached units was at $529,900 in November 2007.
The residential real estate industry has become a drag on the local economy, according to the San Diego Institute for Policy Research. The economic, policy and public opinion research organization reported that the imbalance of home prices to population, jobs and income levels was largely a result of loose lending standards.
The San Diego Institute for Policy Research expects the slow housing market to continue through 2008 and into 2009 before returning to more normal levels. It also forecasts construction of single-family and attached units to remain at 2007 levels.
Rick Palacios, a consultant with Irvine-based John Burns Real Estate Consulting, is not forecasting through rose-colored glasses.
“I think 2008 will be the worst year,” said Palacios. “’07 was bad, very bad, but ’08 is going to be worse.”
Palacios predicts the residential slowdown will begin to gradually improve in 2009. He also sees median prices continuing to fall through 2010, flatten in 2011 and rebound in 2012.
“There is just a glut of inventory right now and until we whittle away at that inventory I don’t think we will see any hint of stabilization in the market,” said Palacios.
Gregg Neuman, real estate agent with Neuman & Neuman Prudential California Realty, also sees plenty of housing inventory but predicts numbers to be stable in 2008 from 2007.
“I think that we will be generally flat throughout the county,” said Neuman. “I think we will see certain locales where prices will be hit hard like Chula Vista and Otay Ranch. Places where there is a lot of foreclosures and a lot of inventory.”
Predicting Steady Sales
Ada Kaiser, principal with the Encinitas office of Corona Del Mar-based Meyers Builder Advisors, projected total sales and median sales prices to remain flat in the San Diego County residential real estate market for 2008.
Kaiser estimates that pricing of new homes in most submarkets has hit bottom, but the sales prices in the resale market will still fall.
Usually down cycles take a few years to work through, said Kaiser. She said this cycle is unique because most speculators believed the fast and sharp decline in sales would be followed by a quick rebound, but the recovery period is more prolonged than initially projected.
“If we can make it through this year, we will be doing well,” said Kaiser.
Kaiser said the residential real estate market will not likely begin to pick up until 2009.
Consumer confidence is the main force moving the economy forward, added Kaiser.
“The home buyers’ mentality is really the issue today,” said Kaiser. “They are not convinced we are at the bottom and they are not convinced it is the right time to buy.”
Already, national homebuilders K. Hovnanian Homes of Red Bank, N.J.; Pulte Homes of Bloomfield Hills, Mich.; Richmond American Homes of Denver; Standard Pacific Homes of Irvine; and William Lyon Homes of Newport Beach have pulled out or slimmed down their operations in San Diego.
Scott Murfey, owner of La Jolla-based GDC Construction Inc., said 2008 may be the year of the remodel. He said San Diego County residents may consider remodeling their homes due to the tumultuous residential market rather than buying or as a strategy to position their homes for resale.
Murfey also said the San Diego wildfires in October may have been a detriment to hundreds of property owners, but provides opportunities for general contractors, who were impacted by the slowdown.
“The fire victims are going to get the attention that they deserve,” said Murfey.
GDC Construction saw an increase in revenues in 2007 from the previous year. It hopes to maintain revenue levels in the following year.
Page Donovan, vice president of client services with San Diego-based Interactivate Inc., said homebuilders will have to work smarter, better, faster and cheaper in 2008.
Donovan said homebuilders are trying to reach potential buyers with nontraditional types of advertising. Online, social and mobile marketing will continue to grow within the next year to support the slow real estate market, she said.
“The smart homebuilder will be adopting these technologies in an appropriate and relative way,” said Donovan.