What's Ahead for San Diego Home Prices?

California remains ahead of the nation in market recovery with many first-time home buyers entering the market due to affordable home prices, low mortgage rates, and first-time home buyer tax credits from the state and federal governments. However, credit still is tight and unemployment remains high, which could hinder a full market recovery until 2011.

Some Points to Remember:
-Home sales in California hit bottom more than two years, and the median home price of an existing, single-family home reached its trough in February, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). In November, the state’s median home price rose in year-to-year comparisons for the first time since August 2007.
-C.A.R.’s closely watched "2010 California Housing Market Forecast,” projects that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009.
-Some economists are forecasting another surge of foreclosures in 2010. However, C.A.R.’s economists expect that foreclosures will remain flat this year compared with 2009. In 2008, many lenders flooded the market with foreclosures, and as a result, the state’s median price declined by historic levels. By comparison, in 2009, lenders listed properties for sale at a more measured pace, which helped moderate another home price decline.
-Government efforts to maintain a low interest rate environment have stabilized the market. However, a mortgage analyst at a financial publishing company predicts that rates likely will rise to 5.5 percent by mid-2010 and close the year at 5.75 percent to 6 percent.

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MSNBC.com: Housing Headed for a Double Dip?

A recent real estate report indicates that consumers may be taking their time house hunting this winter, which some economists believe could lead to a “double dip” in home prices. A recent report from the NATIONAL ASSOCIATION OF REALTORS® (NAR) showed that its pending home sales index declined 16 percent in November to a reading of 96, the first decline after nine consecutive months of gains.

Some key points to remember:
-NAR’s Pending Home Sales Index (PHSI) is a barometer of future sales. Typically, there is a one- to two-month lag between the signing of a sales contract and the close of escrow. Although government incentives, low interest rates, and affordable home prices have lured many buyers, especially first-timers, to the market, historically sales decline during the winter months and begin to rise in the spring.

-Because of the government’s efforts to stimulate the housing market, some economists believe that housing prices will decline once the incentives come to an end. However, the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) closely watched "2010 California Housing Market Forecast,” projected that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009.

-According to C.A.R.’s Vice President and Chief Economist Leslie Appleton-Young, unlike the rest of the nation, home sales in California already bottomed out more than two years ago, and the median home price reached its trough in February 2009.

-Although home buyers should not focus solely on future home price appreciation, according to data collected by C.A.R. over the last 40 years, homeowners who purchase and live in their home for at least five years, have averaged an annual rate of return of nearly 12 percent

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Median San Diego Home Price Up 48% since 2000

For all the talk of the housing bust, San Diego County’s median price ended the decade up 48.4 percent from 2000.

If in January 2000 you bought a home at the median price of $219,000 and went to sleep like Rip Van Winkle, you awoke at the end of 2009 to see your home worth $325,000.

This means that many longtime homeowners are still sitting on big gains even after seeing the market skyrocket to a peak of $517,500 in November 2005 before plummeting.

Take the Krumweide family in University City. The family bought a 2,800-square-foot home for $432,000 in June 2000, took out a small amount of equity for home repairs when they refinanced and now could sell the house for about $850,000, according to their neighbor and original real estate agent, Ann Throckmorton.

“We’re just relieved we stayed with our guns, stayed with our heads,” Molly Krumweide said.
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San Diego is Nation's Third Fastest Recovering Housing Market

San Diego County ranked as the nation’s third-fastest-recovering housing market in October, though the increase in prices is slowing here and elsewhere, according to the closely watched Standard & Poor’s/Case-Shiller Home Price Index.

Data released yesterday showed San Diego’s index up 0.4 percent from September — the sixth straight monthly boost — and up 1.1 percent on a seasonally adjusted basis. Phoenix was up the most at 1.3 percent, followed by San Francisco, up 1.2 percent.

The index, which is based on comparing resales of the same properties and was set at 100 as of January 2000, stood at 155.37 for San Diego, meaning homes are selling for 55 percent more than they did at the start of the decade. Only Los Angeles and Washington had higher index numbers than San Diego’s, at 168.43 and 179.71, respectively, among the 20 metro areas Case-Shiller monitors.

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San Diego Home Prices Doing Better than Other Cities

San Diego County home prices have fallen less than than all but two other metropolitan areas over the past year, according to the closely watched Standard & Poor’s Case-Shiller Home Price Index for October that was released Tuesday.

That’s an improvement from fifth or sixth place in the last few months.

San Diego prices were down 2.4 percent from a year earlier, with only Denver and Dallas down less, 0.1 percent and 0.6 percent respectively. San Diego home prices rose 0.4 percent from September to October, behind Phoenix’s 1.3 percent and San Francisco’s 1.2 percent boost.
The national index for 20 metro areas stood at 146.58, unchanged from September and down 7.3 percent from October 2008. The index, set at 100 in January 2000 for all areas, is based on paired-sales data of single-family resale homes.

Index Chairman David Blitzer took note of San Diego’s improvement, noting it had seen six consecutive months of improvement, compared with San Francisco’s seven and five each for Los Angeles and Phoenix.

Renting to Students is Good Business

Off-campus student rental housing is surviving the recession nicely, say landlords who rent apartments and rooms to students near campuses all over the country.

"I wouldn't say it's recession-proof, but it's recession-resistant," says Jim Arbury, an executive with the National Multi-Housing Council, a Washington, D.C.-based trade group for the apartment industry. "It's still one of the bright spots in the housing market."

For instance, Brad Hastings, whose company Walk2Campus rents 400 units in South Carolina, has about a 94 percent occupancy rate.Hastings says it’s not a business for everyone because it’s management-intensive. "You have a customer base who, possibly for the first time, are living out on their own. There's a certain amount of hand-holding, teaching of life lessons.”

Source: Inman News, Mary Umberger (12/30/2009)

Loan Modifications Can Hurt Your Credit

According to a recent report. applying for a mortgage modification and being in a months-long trial period can devastate a home owner’s credit score.

Under the government plan, troubled borrowers can have their mortgage payments reduced to 31 percent of their pre-tax income. They are first put in a trial modification for several months to test whether they can meet the requirements of the new mortgage.

Borrowers who were previously current on their mortgages will see their FICO scores fall about 100 points while they are in the trial period, according to the Treasury Department. Borrowers who were previously late or missed payments will see their scores fall more, the government says.

The longer a borrower is in the trial period, the greater the impact on their credit scores, Once the modification is approved, the borrowers’ mortgage credit status will be listed as current and that should improve their scores, the Mortgage Bankers Association explains.Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive, borrowers report.

Source: CNNMoney.com, Tami Luhby (12/28/2009)