The continued dearth of available homes for sale in San Diego is driving up prices and causing much consternation among buyers, who often find their offers on properties too little or too late.
“It’s difficult to get offers accepted now,” said David Tal, president of ShortSaleAgentFinder.com, a San Diego online service connecting short sale sellers with experienced real estate agents. “Even when buyers are offering the full listing price, they’re surprised that they’re not the winning offer, and that someone else made a higher offer … It’s creating a buyer urgency.”
After several months of higher median prices, fewer foreclosure and distressed sales, and more move-up sales, local housing sources say San Diego’s ravaged housing market is well off the bottom, and clearly shifted to the advantage of sellers.
“There’s a ton of buyers who had been sitting on the sidelines and are now trying to find a property,” said Rick Ungar, a broker with Casa Bella Realty Services in Encinitas. With many properties attracting multiple offers, and pushing up prices, the effect is lifting the values of the entire market, he said.
Ungar recently represented a buyer of a foreclosed house in San Carlos that was listed at $439,000. Because the buyer had been outbid previously, he increased his offer to $455,000, which the bank accepted. “Banks aren’t giving away stuff. They’re selling at market prices, not at discounts,” he said.
The tight housing inventory has been going on for most of the past year, and shows no signs of improving any time soon, say industry sources.
“We’re at the incipient stages of what I expect to be a perpetual situation of housing shortages in San Diego County,” said Gary London, president of The London Group Realty Advisors.
Because the county’s amount of land available for new construction is severely limited, most new development will occur in patches that were passed over in past years, London said. That means it’s going to be mainly condos and apartments that go up, and very few single family houses, he said.
With the local population still growing and the economy gradually recovering, London says demand for housing will get more intense and ultimately lead to another housing price spike.
The next housing peak is just “around the corner,” he said, adding, “We just don’t know how long that walk to the corner is.”
According to a recent view of the Multiple Listing Service, San Diego County had 2,996 detached units or condos for sale, and 1,073 attached or single family houses for sale, or a total of just above 4,000.
“That’s about half (the number) of what a normal market here is,” said Ungar. The MLS number includes foreclosures and short sales, which come with various complications.
Improved Consumer Confidence
Linda Lee, president of the San Diego Association of Realtors, said the local real estate market is definitely rising in value and out of balance with far more buyers than sellers.
“About 15 to 18 months ago, a lot of clients were asking me when a good time to buy is. Now they’re asking me where they can buy, and how soon can they secure a property,” Lee said.
As to causes of the spike in increased buyers, Lee says it’s due to the low interest rate environment and a clear improvement in consumer confidence.
“With mortgage interest rates going lower and the job market looking more promising, people are feeling more confident,” she said.
According to data compiled by SDAR, the median price of a single family house sold in San Diego County in January was $390,000, down from $418,000 in December. The price was a 12 percent increase over January 2012’s price.
The latest report from Dataquick, a La Jolla real estate research firm, put San Diego’s median priced house at $350,000 (including both single family and condos), down from $366,000 in December, but up 15 percent from the level in January 2011.
Steadily Rising Prices
Both reports show steadily rising prices over the past year, an indication that there’s more sales activity in higher priced homes instead of those at the lower levels, as had been the case starting in 2008 and continuing through most of 2011.
John Walsh, Dataquick’s president, said the lack of housing for sale should gradually ease as more homeowners react to the rising market prices and decide to stick a for sale sign on their front yards. “Fewer will owe more than their homes are worth, enabling them to sell,” Walsh said, in the firm’s recent housing report.
Jay Berger, a broker for SoCal Real Estate in Carlsbad, said inventory levels should rise as prices continue trending up. That will lead to more folks realizing a sale would cover what’s owed on the mortgage and leave enough for a down payment on another property.
“It could take another year or two for that to happen,” Berger said. “In the meantime, you’ll see more short sales, fewer foreclosures, and a bidding war on anything that hits the MLS.”
While prices in the local market may be rising, the effects of the financial crisis and recession pushed down prices so much, great deals abound, say many housing sources.
Mark Goldman, a lecturer at San Diego State University’s Corky McMillin Center for Real Estate, said many move-up buyers are locking in on great deals. Houses that were going for $1 million to $2 million pre-recession are now selling at $700,000 to $800,000. “There’s a lot of bang for your buck for the move-up buyer,” he said.
Stricter Lending Conditions
A key factor that could be inhibiting many homeowners from selling is an inability to obtain a mortgage under the stricter lending conditions that exist now, Goldman said.
“These are people who may have purchased their home before 2007 with a stated income loan, and are now unable to do a full documentation loan so they are unable to buy again,” he said.
Anyone getting a mortgage today is put through the proverbial ringer and the process requires an “excruciating” amount of documentation about a buyer’s income, assets, and ability to repay, Goldman said.
“It’s hard to get a loan today,” he said. “You need to be squeaky clean on all aspects of the loan request.”
Another well-known driver creating an imbalance of buyers is the fact that rents in the region continue to rise. When comparing a rental payment to a monthly mortgage payment, the latter often looks lower, says Lee.
The average rent on a two-bedroom in San Diego was $1,389 according to a recent report from the San Diego County Apartment Association. In Dataquick’s report for January, the average mortgage payment for the six-county region in Southern California then was $1,140, which was up from $983 in January 2011.