Housing Affordability in San Diego
Friday, August 28th, 2009
The California Association of Realtors and the National Association of Home Builders/Wells Fargo both published reports on the status of housing affordability this past week. Roger Showley of the San Diego Union Tribune analyzed these reports. And, again, the reports show great news for San Diego residents!
The California Association of Realtors reports that 59% of the county residents could afford the median priced home in the second quarter of 2009. That is up from 46% for the same time period one year ago and dramatically up from the 27% figure calculated for 2007.
Affordability is determined by comparing the median home price in San Diego with the cost of financing its purchase for the household earning the median income in the county. For the 2Q09 period, the Realtors for that San Diego had a median price of $295,000 and a median household income of $52,550. Using prevailing interest rates and underwriting standards, the Realtors found that 59% of families could afford to buy a home in San Diego County.
The National Association of Home Builders found that in the second quarter of this year, 56% of the homes sold in San Diego County were affordable to households making the median income. The NAHB/Wells Fargo Housing Opportunity Index noted that this index number had dropped from 58.8% in the first quarter of 2009. The report went on to note that in the fourth quarter of 2005, the index stood at only 3.6%!
The index is compiled from information including the median price of new and resale homes, the area household median income, prevailing interest rates and underwriting standards. According to the NAHB, the median price in San Diego County was $285,000 and the median income was $74,900.
No matter which report you follow, the news is good for San Diego families today, but both reports do show housing prices going up. With the median income holding steady and lending factors, like interest rates and down payment requirements under pressure, it is likely that the affordability indexes will continue to drop. This means if you are considering entering the home ownership ranks, the time is now to investigate those possibilities to their fullest. As the economy continues to improve through the balance of this year and into 2010, pressure on home prices in San Diego will grow and opportunities to buy will likely decline.
Now is the time to be shopping for a new home!
This was a good post. I am new here but now I’ll visit often. Thank you for sharing this information.
NHB,
Thanks. I hope you will visit regularly.
Steve
Thanks for the information Steve – you mentioned home prices are rising – how much of an increase are we looking at. I hope it’s nothing too drastic.
Good news all around the nation. I was reading an Atlanta agent’s blog the other day – same situation there. He mentioned home prices went up $43,000 since Feb.
Do you think the high delinquency rates are going to impede a recovery?
Jayson,
Lots of good questions!
First, the increases in San Diego pricing are not large, but still important. We have seen eight continuous months of pricing improvement, from a bottom month of December 2008 to currently, August of 2009. Over that time period the median price for all sales in San Diego County has risen $45,000. But that factor is misleading, as the sales in December were highly weighted to the sub-$400,000 price range. The number of sales over $400,000 has been climbing, bringing the median price up. My reading of the numbers shows more like a 6% annualized increase, which is more in line with San Diego historical trends.
Second, price increases are happening in most areas of the Country, but still not all. Local conditions continue to control supply and demand equations. However, with mortgage rates at 5%, affordability continues a very strong showing, even with the recent price increases.
Third, delinquency rates are high, but so are work out rates. Last year, major mortgage holders were only helping 3-5% of the borrowers in the foreclosure process. Today, major mortgage holders are announcing rates of 30 – 35% of the borrowers are getting help and leaving the foreclosure process. This is a huge and important change. Likewise, mortgage holders are not “dumping” foreclosed product on the market, but rather, actively working to rent, upgrade and hold the foreclosed product. Then delivering the product to the market in an orderly fashion. In January of this year, over 55% of the home sales being made in San Diego County involved product in the foreclosure process. Today, less than 32% of the home sales being made are in the foreclosure process. That is a significant change!
Thanks for the questions,
Steve