There are a few signs of a slowing economy, but the residential real estate industry is still speeding forward in a seller’s market.
Many of the local residential real estate agents said the San Diego market is still attractive for selling homes, but inventory is rapidly being depleted by high demand.
“Be prepared to bring your checkbook and make an attractive offer to the home-seller,” said Joe Garzanelli, broker and owner of Century 21 All Service, No. 12 on the San Diego Business Journal’s List of Residential Real Estate Agencies.
The 18 real estate agencies on The List reported $16.69 billion in local sales volume in 2000, an increase of 27 percent from its previous year. Seventeen of the 18 agencies on The List also reported $410.8 million in gross commissions.
With real estate agencies reporting significant sales growth, many agencies cautioned the lack of inventory may prove to be an obstacle for the growing San Diego population.
“We could probably sell around 1,500 homes last year if we had more inventory,” Garzanelli said. “With this market, we sell (homes) as fast as we can bring them in.”
Century 21 All Service reported $264 million in local sales volume and $6.3 million in gross commissions. The agency also reported 1,026 in local sales closed. The agency mainly focuses on selling homes in East County and some parts of central San Diego County.
Patrick Park, president and CEO of Prudential Dunn, Realtors, agreed many more people are migrating into the county than homes are being sold on the market.
“It’s like a kid in a candy shop,” Park said. “People want to purchase homes in a reasonable price range.”
According to the Los Angeles-based California Association of Realtors, the median home prices for San Diego County rose to $282,180 in January 2001, an increase of 1.2 percent from the previous month and a 12.3 percent increase from January 2000.
The realtors association reported the current median home price at $246,380 for California, but San Diego County is not listed among the top 10 cities and communities with the highest or fastest growing median home prices in the state.
“A house in San Diego can easily receive multiple offers and become a quick sale,” Park said. “From our offices alone, the prices of homes went way up, but the number of homes on the market aren’t keeping up with the pace of prices.”
Prudential Dunn reported $101.9 million in local sales volume in the year 2000, an increase of 17 percent from the previous year. It has three offices that service all of San Diego County.
Park said the appreciation of home prices needs to level off a bit, particularly to make the homes affordable to an average buyer.
CAR reported 24 percent of San Diego households could afford to purchase a median-priced home in December 2000, compared to 32 percent for all of California. San Diego County remains higher than San Francisco at 18 percent, Santa Clara at 18 percent, and Monterey at 14 percent recent affordability indexes.
David Johnston, senior vice president with McMillin Realty & Mortgage, No. 6 on The List, said despite the low affordability index for San Diego, many San Diegans can buy homes through other financial vehicles.
Some of the other financial vehicles include easy qualifying programs or mortgages for households with good credit.
“Residential real estate still seems to be the hot commodity,” Johnston said. “However, with these current California Association of Realtors reports, it’s signaling to the rest of us to not make as many loans.”
McMillin Realty closed 2,861 homes in 2000 for $768.2 million. McMillin Realty is part of The Corky McMillin Cos., which also develops, builds and sells commercial and residential real estate.
Park also observed many of the homebuyers in San Diego are people relocating from the San Francisco Bay Area due to the relative affordability of San Diego County homes.
“San Diego is a pretty nice place to live,” Park said. “They can actually get more product for their money.”
Park believes many families will move into more affordable areas like Carlsbad and communities along the Interstate 15 corridor, where homes are more affordable and households can commute to work.
However, despite the booming seller’s market of San Diego County, the national economy is a big concern on the minds of many real estate observers.
According to the Washington, D.C.-based National Association of Realtors, existing home sales fell 6.6 percent in January compared to the previous month despite low mortgage interest rates across the nation.
McLean, Va.-based Freddie Mac, a mortgage corporation established by Congress, reported the national average interest rate on a 30-year conventional, fixed-rate mortgage was 7.03 percent in January, which is lower than the 7.38 percent reported in December.
David Leareah, National Association of Realtors’ chief economist, said the slide in consumer confidence outweighed the benefits of lower interest rates.
“For two consecutive months we’ve had big drops in existing home sales, which resulted from a decline in consumer confidence and the deteriorating economy,” Leareah said.
Despite signs of a slowing economy, local real estate agents remain optimistic the seller’s market will continue.
“We’ve seen a hiccup recently in the last quarter of last year,” Park said. “All of us are still waiting for the other shoe to drop, but it hasn’t.”