San Diego County home prices were nearly flat from October to November, but are still up 18.7 percent over the year, the S&P/Case-Shiller Home Price Index showed Tuesday.
From October to November, home prices rose 0.04 percent on the index, continuing a steady monthly slowdown from the roughly 5 percent gains seen in the peak spring and summer buying season. From September to October, prices rose 0.3 percent, and from August to September, they were up 0.9 percent. The last time home values fell was in January 2013, when they dropped 1.03 percent from December 2012.
“The market’s leveling off,” said Mark Goldman, a loan officer and real estate lecturer at San Diego State University. “Prices had gone too high, then in 2008 they went too low so they recovered from that. Now we’re back to where they ought to be. We’re on the trend line.”
Goldman said he expects annual price increases to level off over the next 12 months to around 3.5 percent.
The Case-Shiller index works by comparing repeat-sales of single-family homes. In November, the index reached 194.15 for San Diego County, up 18.7 percent from the same time last year. The annual gain ranks San Diego fourth on the 20-city index, which has an average year-over-year gain of 13.7 percent, up from 13.6 percent in October.
David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement that prices typically weaken in the winter months, and despite a monthly 0.1 percent decline, the November performance was its best since 2005.
Seasonality aside, the housing market has seen some headwinds, most notably lower affordability with higher median prices and interest rates that are creeping up. In November, the average 30-year-fixed was 4.26 percent, up from a low of 3.41 in January 2013, Freddie Mac reports. The November median price, according to DataQuick, was $415,000 in San Diego County. It rose to $420,000 in December, a 14.8 percent year-over-year gain.
Still, Blitzer said the market will continue slowing.
“While housing will make further contributions to the economy in 2014, the pace of price gains is likely to slow during the year,” he said.
Las Vegas had the highest year-over-year gain on the index, at 27.3 percent. San Francisco was second with 23.2 percent, while Los Angeles was third with 21.6 percent.
Jonathan Horn / UT San Diego / January 25, 2014
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Historically low interest rates and limited inventory in 2013 fueled some of the greatest housing appreciation in San Diego County since the early 2000s.
“Last year, we saw home values catch up to where they should have been if we didn’t have that market correction in the last of the 2000s,” said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University.
San Diegans bought 42,702 homes last year, a slight uptick from 2012 but the most since 2006, the last full year before the Great Recession.
Last year was a great year for investors, who in June enjoyed 24.1 percent annual appreciation — a post-Great Recession record — to a median price of $420,000.
Noncash buyers had a much harder time, routinely outbid by those who could write a check for a property.
“You can’t compete with buyers coming in all-cash because all that the sellers are looking for is a quick close,” said said Joe Bertocchini, residential real estate director at the University of San Diego.
The appreciation tempered by the fall and winter. For sales in December, the median was down to $415,000, still a 15.9 percent year-over-year increase, real estate tracker DataQuick said.
Goldman expects the market to stabilize in 2014. He said appreciation should continue slowing until it returns to single-digit levels. Prices are also seeing downward pressure, as interest rates rise and investors no longer can get the quick-flip return.
Build up seen in home sales, prices
Despite the seasonality during the year, overall the 2013 median price for a home finished at $402,500, up 18.4 percent from 2012.
San Diegans bought 26,921 resale single-family homes, 12,484 resale condos and 3,297 new homes, all upticks from 2012. Condos saw the biggest appreciation from 2012, jumping 28.3 percent to a median $295,000. Single-family home values rose to a median $440,000, up 18.92 percent from 2012. The median price of a new home was $514,000, up from $446,000 in 2012.
Low inventory helped home values appreciate.
Overall, in 2013, there was an average 5,523 active listings each month in the county, says the San Diego Association of Realtors. Some months in 2010 saw more than 13,000 listings.
Home values rose the most during the summer, increasing 24.1 percent from June 2012 to June 2013. That slowed to 15.9 percent though, when comparing December to December.
Bertocchini said large year-over-year price gains are unsustainable for the long-term.
Goldman said he sees appreciation at about 3.5 percent, while Bertocchini predicted upward of 7 percent growth by the end of 2014.
Mortgage payments on the ascent
As home prices increased and interest rates ticked up, people had to borrow more to buy properties.
That upped mortgage payments.
In 2013, the typical monthly payment was $1,534, a 23 percent increase from the previous year’s $1,245, calculated by DataQuick based on a 20 percent down payment at the annual median price, for a 30-year fixed-rate mortgage at Freddie Mac’s average for the year. For 2013, it was 3.98 percent. Interest rates for a 30-year fixed mortgage, while still at historic lows, began the year at 3.34 percent, only to end at 4.48 percent.
As those rates rose, some homebuyers opted for adjustable rate mortgages, or ARMs. In 2013, 9.1 percent of loans were ARMs. In 2005, two years before the Great Recession, 80.2 percent of loans were adjustables.
The number of jumbo loans, or those of $417,000 or more, made up 31.2 percent of all loans in San Diego County in 2013, up from 23.2 percent in 2012.
Hot market favors cash buyers
For the second straight year, cash buyers took a large chunk out of the market.
In 2013, they made up 30.5 percent of homes sold, slightly below the 32.2 percent in 2012. But it still trounces the 7.9 percent of all-cash transactions in 2006, the last full year before the Great Recession.
“As the market got intensely hot, it was certainly more attractive to the seller to see a buyer was paying all cash,” Bertocchini said. “You knew more or less a deal was done.”
Those buyers had a lot to do with the appreciation gains. With low inventory, some properties would see 20 or 30 cash offers.
Home-flipping trend may debilitate
Last year, flipping, or buying a property and selling within six months, comprised 7.1 percent of home sales in San Diego County, the highest percentage post-Great Recession, according to DataQuick.
But that trend is not expected to continue, as there is less opportunity to buy a home cheaply and sell it quickly for more money. Distressed properties, such as foreclosures and short sales, declined drastically in 2013.
Last year, foreclosure resales made up 7.5 percent of San Diego’s housing market, down from 18.7 percent in 2012 and 29.7 percent in 2011. Short sales made up 17.2 percent of the market, down from 28.9 percent in 2012, DataQuick reports.
Goldman said instead of flipping investors will start buying properties to rent them out.
Jonathan Horn / UT San Diego / January 25, 2014
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The median-priced house in San Diego County sold for $420,000 last month according to Dataquick.
The median-priced house in San Diego County sold for $420,000 last month, up $5,000 from November and an increase of nearly 15 percent from December 2012, according to San Diego real estate research firm Dataquick.
For the six-county Southern California region the median price for all single family homes and condos sold last month was $395,000, up 22 percent from the prior year’s December median price.
While prices have steadily risen in San Diego, home sales fell over the full year to 3,099 for December 2013, down from 3,757 for December 2012.
Sales regionally declined 9 percent year-over-year to 18,415. But sales were up from November when the total was 17,283.
John Walsh, Dataquick’s president, said the main reason for the sales decline was the ‘pitifully low inventory.’
Walsh said he expects that as prices continue to rise, more people will be interested in selling, which will help the inventory crunch. “More supply would put downward pressure on prices, as would rising mortgage rates,” he said.
Cash buyers made up 27.7 percent of the total sales in the region, down from 28 percent in November, and down from 35.8 percent for the like month in 2012; cash purchases hit a peak in February 2012 when they made up 36.9 percent of that month’s sales, Dataquick said.
Homeowners sold 5 million homes in 2013, a rebound year for the industry that marked the highest level of sales since the housing boom year of 2006.
The report from the National Association of Realtors showed that there were 5.1 million previously owned homes sold in the year, up 9.2% from 2012 and up nearly 20% from 2011.
December sales were up slightly from November, the first month-over-month rise in the reading since July. Mortgage rates have been rising steadily since hitting record lows in May, raising the cost of purchases for home buyers.
The Realtors attributed the full-year gain to rising prices, lower unemployment, a drop in foreclosures and pent-up demand, as well as mortgage rates that are still low by historical standards, even with the steady increases most of the year.
The median price of a home sold in the year was $197,100, up 11.4% from the previous year. Rising prices have reduced the number of homeowners who owe more on their mortgage than their home is worth, helping to bring more buyers into the market. Tight supplies of homes for sale are keeping prices high, as the report showed less than a 5-month supply at the end of the year.
Part of the tight supply is due to the sharp drop in distressed home sales. Only 14% of the homes sold in December were in foreclosure or were short sales for less than the amount owed on the existing mortgage. A year earlier, nearly a quarter of sales were distressed home sales.
Chris Isidore / CNN Money / January 23, 2014
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Despite declining foreclosure starts over the year, distressed sales made up a higher percentage of overall home sales in 2013 than they did the previous year, according to the U.S. Residential & Foreclosure Sales Report released Thursday by RealtyTrac. The report also revealed an uptick in cash purchases at the close of the year.
Foreclosure sales—which include sales to third-party buyers at foreclosure auction and sales of REOs—combined with short sales to make up 16.2 percent of residential property sales in 2013, an increase from 14.5 percent in 2012, according to RealtyTrac.
“It may surprise some to see distressed sales rising in 2013 given that new foreclosure activity dropped to a seven-year low for the year,” said Daren Blomquist, VP at RealtyTrac. However, Blomquist pointed out that “there are still more than 1.2 million properties in the foreclosure process or bank-owned, providing a sizable pool of inventory that the housing market is in the process of absorbing.”
About 29 percent of home sales in 2013 were all-cash deals, up from 19.4 percent in 2012. All-cash sales increased during the month of December and were significantly higher than a year ago. Cash deals made up 42.1 percent of December’s home sales, according to RealtyTrac, up from a share of 38.1 percent in November and just 18 percent in December 2012.
Cash purchases made up more than half of December home sales in five states, including Florida (62.5 percent), Wisconsin (59.8 percent), Alabama (55.7 percent), South Carolina (51.3 percent), and Georgia (51.3 percent).
Institutional investors were more active in the residential market in 2013 than in 2012, contributing to 7.3 percent of the year’s home sales, up from 5.8 percent the previous year. The share of institutional investor activity in December was slightly higher and was also up from the previous month. Institutional investors contributed to 7.9 percent of December’s home sales.
They were most active in December in Jacksonville, Florida (38.7 percent); Knoxville, Tennessee (31.9 percent); Atlanta, Georgia (25.2 percent); Cape Coral-Fort Myers, Florida (24.9 percent); and Cincinnati, Ohio (19.3 percent).
The percentage of home sales that were purchased by third parties at foreclosure auctions doubled over the year in 2013, rising from 0.5 percent in 2012 to 1 percent last year, RealtyTrac reported.
About 5.8 percent of home sales in 2013 were short sales, and 9.3 percent were REO sales, according to RealtyTrac. Short sales made up 5.7 percent of December’s home sales and were most common in Nevada (15.3 percent), Florida (14.4 percent), and Illinois (9.0 percent). REO sales contributed to 9.3 percent of sales in December and were most common in Nevada (18.9 percent), Michigan (18.4 percent), and Ohio (17.8 percent).
The national median home price in December was $168,391, according to RealtyTrac. Distressed homes sold for about 38 percent less than non-distressed homes. The median price of a distressed home was $108,494, compared to a non-distressed median price of $174,401.
Krista Franks-Brock / DSnews.com / January 23, 2014
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Sales of previously owned homes climbed in December for the first time in five months, capping the best year since 2006 and indicating the real-estate market is starting to adjust to higher borrowing costs.
Purchases rose 1 percent to a 4.87 million annual pace, the National Association of Realtors reported today in Washington. Other reports showed claims for jobless benefits held last week near the lowest level in more than a month and the index of leading indicators climbed in December.
Faster employment growth, rising property values and a decline in consumer debt are giving would-be buyers the confidence to take the plunge into homeownership. Growing demand will also spur new construction and home improvements that will boost gross domestic product in 2014.
“We’ll see better job growth, a better housing market and better overall GDP growth throughout 2014,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc., among the biggest mortgage lenders in the U.S. It “will be another year of recovery for the housing market with more sales, more homes constructed and prices up.”
Lorraine Woellert & Victoria Stilwell / Bloomberg.com / January 23, 2014
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Foreclosures and default notices in San Diego County in 2013 dropped to their lowest total since 2006, the year before the official start of the Great Recession.
Last year, lenders filed 6,300 default notices, which officially begin the 90-day foreclosure process. Of those, 2,407 properties were repossessed, real estate tracker DataQuick reported Tuesday. In 2006, there were 8,816 default notices filed and 1,621 foreclosures.
“Home values continue to increase, which makes it easier for defaulted borrowers to resolve their defaulted loan,” said Mark Goldman, a loan officer and real estate lecturer at San Diego State University. “They can sell their house because they have equity in it.”
In 2013, the median home price in the county was $402,500, an 18.3 percent jump from 2012, when there were 14,666 default notices filed and 5,994 foreclosures. Default notices peaked in the county in 2008, the middle of the Great Recession, with 35,215 filed. Foreclosures hit their high the next year, with 17,712 trust deeds filed.
Statewide, foreclosures hit a seven-year low of 8,205, while default notices dropped to an eight-year low of 82,749.
“Some of this decline in foreclosure starts stems from the use of various foreclosure prevention efforts – short sales, loan modifications and the ability of some underwater homeowners to refinance,” said John Walsh, DataQuick president, in a statement. “Most of the drop is because of the improving economy and the increase in home values. Fewer people are behind on their mortgage payments.”
In December, when San Diego’s median price was $415,000, there were 136 foreclosures, down from 355 a year ago and the lowest since the 134 properties repossessed in August 2006. There were 387 default notices filed in December, a slight uptick from November, but down from the 878 filed in December 2012.
Jonathan Horn / UT San Diego / January 21, 2014
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Soaring mortgage costs already discouraging local buyers
The stakes are high for San Diego’s housing market as the Federal Reserve tapers the national economy off super-low interest rates.
Some experts think interest rates have been held back more by sluggish global growth than by Fed stimulus, so the “taper” that began this month won’t matter much. Then again, nobody can reliably forecast short-term rate movements.
And there’s little question that higher rates would hurt potential homebuyers. Already, skyrocketing mortgage payments may have chased away enough demand to halt price growth.
Further increases would pile a new problem onto the region’s housing market, which is distorted by a chronic supply shortage and soaring costs caused by local and federal government polices.
Waiting has certainly punished potential buyers lately. A typical new mortgage in San Diego County hit a modern low of $1,150 a month in February 2012, but by last month it had jumped nearly 47 percent to $1,695.
Most of the increase came from home prices, which surged 38 percent in less than two years.
Last summer the action shifted to interest rates, which have climbed from 3.5 percent to nearly 4.5 percent for the average fixed-rate, 30-year mortgage. That run-up started in May, when Fed Chairman Ben Bernanke outlined his plan to gradually reduce bond purchases the central bank began in September 2012 to keep rates low.
Maybe it’s a coincidence, but San Diego’s soaring housing market leveled off at almost precisely the same time.
The median price has inched up less than 1 percent since June, when it was $416,500, to $420,000 in December, according to DataQuick, a San Diego-based reasearch firm.
In contrast, the median had shot up 36 percent before the announcement from $305,000 in February 2012, when the typical payment reached its low.
Now that the Fed has begun its “taper,” what comes next is anybody’s guess. There are lots of moving parts in San Diego’s housing economy.
On the bright side, many experts see little risk that interest rates will skyrocket as they did in the early 1980s, when the Fed cranked up rates to tame high inflation. Indeed, Bernanke has warned that inflation is too low.
“I would tell people not to panic on interest rates; they aren’t going to be going up very much,” said Christopher Thornberg, founding partner of Beacon Economics in Los Angeles. “We have a world that is awash with capital, and not much demand for it for a variety of reasons.”
Bernanke has said the Fed will effectively be stimulating the economy until it stops buying bonds completely and begins to raise short-term interest rates, probably not before 2015 or beyond.
His successor, Janet Yellen, shares that view. Both are worried about inflation, which slumped to 0.7 percent in October, well below a 2.5 percent target.
Meanwhile, academics are debating whether the bond purchases have influenced interest rates all that much. A recent paper by Fed economists found a modest effect. Others say the policy has driven market psychology, pointing to this summer’s jump in rates.
Most experts agree that, to the extent the Fed can gracefully end its market manipulation, rising rates would be a healthy sign of an improving economy. If more people have jobs and wages grow, that would help both buyers and sellers in the housing market.
But alas, this classic equation is not nearly so simple in San Diego.
Much of the recent jump in the median price owes to fewer sales of foreclosures, said Leslie Appleton-Young, chief economist of the California Association of Realtors.
A wave of foreclosures after 2008 put thousands of homes on the market at rock-bottom prices. Most were scooped up by investors who rented them out, contributing to a shortage of homes for sale.
In 2012, as prices rose in response, investors began selling their houses, creating a quick surge in values that lifted the median.
Meanwhile, construction of new homes almost vanished in the county, exacerbating tight supplies.
Permits fell from 18,314 in 2003 to 2,990 in 2009, according to the Construction Industry Research Board. At 6,419 last year, the figure was still well below the average annual 10,000 to 12,000 new homes required to keep up with household formation. And most of those units were apartments, not homes for sale.
In the depths of the recession, builders had few buyers and trouble getting financing for new developments. Lending has returned for some, especially publicly held builders.
Now the chief obstacle is land costs, a product of zoning restrictions and high fees imposed by local governments trying to replace revenues after the state-mandated end of redevelopment agencies.
This double-whammy of shortage has tilted the advantage to cash buyers and against first-time homeowners who represent the first rung of the housing ladder.
Investors have retreated as prices increased, but in 2013 most sales went to affluent or foreign buyers, Appleton-Young said.
She said tight supplies may keep prices rising this year; her forecast is for the stateside median to rise 6 percent.
Thornberg also predicts rising prices, even as he warns that the shortage poses a serious threat.
“If you think about the California economy, and what is holding back growth right now, it has to do with a high number of people leaving the state because housing is unaffordable,” he said.
In previous market cycles, an uptick in mortgage rates has caused a spurt of sales activity, as potential buyers jump off the fence to lock in low rates.
This time such demand might not materialize.
During the 2008 financial crisis, lenders cut risk by requiring higher credit scores and larger down payments. Now banks have rebuilt reserves and returned to profitability, yet tight lending lingers.
Uncertainty explains part of the holdup, as federal regulators crafted responses to the crisis, which was caused in part by reckless lending.
But early this month regulators released the new rules — which raise fees and expose lenders to lawsuits for many of the jumbo or adjustable-rate loans common in high-cost areas such as California.
So even if interest rates stay tame for years, borrowers face higher costs and fewer loan options.
“That kind of heavy government regulation is not good, no matter what anyone says,” said Mehran Aram, president of mortgage broker The Aramco Group in Carlsbad. “The market has been quite good in regulating itself in recent years.”
Aram said that the “pulse” loans of the mid-2000s, in which practically anybody with a pulse could get a loan, are long gone.
Yet experts on both ends of the regulatory spectrum say the pendulum has swung too far and hurt many otherwise qualified borrowers.
This presents economic risks of its own, because housing isn’t just any local industry.
A home sale ripples through sectors ranging from construction to retail, finance and appliance manufacturing.
Today this vital market is full of builders who can’t get a project going and buyers who can’t get loans or find anything to buy, while wage earners leave town seeking lower costs.
Uncertainty about higher interest rates is just the latest obstacle.
Dan McSwain / UT San Diego / January 18, 2014
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