San Diego County Home Prices Fell in 2006; Future Uncertain
San Diego County houme prices turned negative last year for the first time since 1995, the San Diego Union-Tribune reported yesterday.
Industry analysts said, however, that a further decline this year may not occur if mortgage rates stabilize, the local economy remains strong and buyers regain their confidence.
The overall median price of a home in San Diego County last year slipped 0.8 percent, to $490,000, down from 2005’s $494,000.
The annual decline was the first since a 1.8 percent drop from 1994-1995, when the median stood at $166,000.
But the downturn was not uniform, as some communities posted appreciation for the year, while other segments of the Southern California housing market showed steep declines, and it did not show up in all types of housing. The market ended the year with a median price of $483,000 for all homes, off 6.4 percent from December 2005.
James Hamilton, an economist at the University of California-San Diego, said things might get worse if home prices decline further and consumer confidence falters.
“We’re in the midst of a pretty significant housing downturn and it’s begun to slow the rest of the economy,” he said. “I don’t think San Diego is going to be immune from what I see as a national slowing.”
But Hamilton did not think such a worst-case scenario is likely.
“I think there’s some indication, as far as home sales are concerned, that the worst may be behind us,” he said.
In Los Angeles County, the news was different. There, the median home price rose 8.5 percent in 2006, while sales fell 16.8 percent. In December, prices stood at a record $522,000. Los Angeles County home prices last year surpassed San Diego County’s for the first time since 1994.
Even though overall prices for resale houses, representing half the San Diego-area market, were up slightly last year, by 0.9 percent, the changes ranged from a gain of 10.2 percent in Poway to a decline of 8.9 percent in Rancho San Diego, based on areas having 75 or more transactions.
Imperial Beach turned in one of the biggest single-family-resale price declines - down 6 percent, to $487,000 - a situation Cheryl Schaumburg of One Source Realty blamed partly on media coverage of the housing market slowdown.
Shaun Anderson, 29, said he discovered a buyers’ market when he shopped for a home in Poway. After months of house-hunting, he bought a two-bedroom, $330,000 condo in November, priced $30,000 below recent comparable sales.
“Things were way too expensive for me before,” he said. “I have looked on and off for about the last year. I just moved in. It is fantastic. It’s pride of ownership. It is an appreciating asset. If I had to do it over again I certainly would.”
Meanwhile, the market provided only heartache for first-time buyer Andy Sobel. He faces foreclosure on a one-bedroom condo he bought for $240,000 two years ago in Rolando.
Sobel took out both a first and second mortgage with adjustable rates to make the purchase, and once the monthly payments started adjusting upward and the value of his condo fell, he said he had no choice but to stop making his payments.
He’s now in the foreclosure process and while his condo is up for sale at a much reduced price - as low as $165,000 - he’s had little interest.
“I was a naive buyer, I’ll admit, but no one should have given me this California mortgage loan,” said Sobel. “I make very little working for a nonprofit.
Interest rates, a key factor in home buying, rose last year and currently stand at 6.21 percent for a 30-year, fixed rate California home loan.
Experts predict those favorable borrowing conditions will continue in the immediate future. David Berson, chief economist for Fannie Mae, expects mortgage rates will stay fairly low in 2007.
“It depends on inflation and economic growth and what the Fed (Federal Reserve board) does,” Berson said. “If rates went up a lot, there could be significant problems.”
In recent years, buyers and California mortgage lenders have turned en masse to adjustable-rate mortgages (ARMs), to keep pace with rising prices. Because such loans normally begin with low “teaser” rates and adjust upward after several years, they carry higher risks of default.