Housing market cools; prices drop, sales slow
By: BRADLEY J. FIKES - Staff Writer | ∞
NORTH COUNTY ---- The autumn chill in the housing market is stronger than usual, according to the latest report from the North San Diego County Association of Realtors.
Not only have the number of North County sales and the median price for detached homes dropped from September to October ---- which is usual ---- but the numbers of sales are lower year-to-year, said Robert Brown, a professor of economics at Cal State San Marcos who compiles the North San Diego County HomeDex, a monthly index of housing prices, for the North County Times.
"This looks like a sustained price adjustment," Brown said. "If you take the price decrease with the lower number of sold units, it seems to me to be a little more than just seasonal adjustment."
In October, there were 853 detached home sales in North County down from 960 in October of last year and 926 in September of this year, Brown said.
The detached median price dropped to $600,000 in October from $620,000 in September this year, but was 3.4 percent higher than October 2004, when the median was $580,000. The median is the point where half the prices are lower, half are higher.
For condos and other attached homes, the story was slightly different. The median price rose to $392,000 in October, from $383,500 in September and $380,000 in October 2004. However, year-over-year sales still decreased, from 371 in October 2004 to 299 this October ---- a 19 percent drop year over year.
Longer time to sell
Homes are taking longer to sell, said Dennis Smith, a Realtor with Taylor Place Real Estate in Carlsbad who specializes in coastal North County.
"Market time has gone up quite a bit," Smith said. A year ago, the average time to sell a detached home in coastal North County was 44 days; it was 52 days in September and 57 so far in November, he said. Smith used the time to market numbers from the Multiple Listing Service.
Also, the gap narrowed between prices in North County and the rest of San Diego County. North County's median detached price was $52,000 greater than the median of $548,000 in the rest of the county. In September, the price was $67,500 more than the median of $552,500 for the rest of the county.
"I am seeing a little bit more inventory," Smith said. "For the most part, prices are going up over a year ago, but the number of sales are decreasing."
The increase is dramatic when measured since March 2003, the low point of inventory in recent years, Smith said. In that month, fewer than 3,000 homes of all kinds were for sale on the Multiple Listing Service throughout the county, Smith said. As of Monday, more than 15,000 homes were on the MLS, he said.
With more homes on the market, buyers don't have that urgent pressure to buy that they had not so long ago, so they feel free to take longer to buy, Smith said.
In North County, 1,511 detached homes were listed on the service a year ago, said Irv Erdos, a Realtor with ERA Property Movers in Escondido. As of Monday, that number had zoomed to 5,624. For attached homes, the corresponding numbers are 490 and 1,511 homes, Erdos said.
In Oceanside, 563 detached homes were for sale on the service a year ago, Erdos said, compared to 2,476 now. For attached homes in the coastal city, 114 were for sale a year ago; now the number is 250.
And in Escondido, 187 detached homes were shown on the listing service a year ago, compared to 600 homes today. For attached homes, 41 were offered a year ago, compared to 208 now.
Southern California slowdown
The housing market slowdown is taking place throughout Southern California, said Lew Feldman, a real estate and public finance partner at the law firm of Pillsbury Winthrop Shaw Pittman LLP in Los Angeles. Feldman said the slowdown won't become a collapse, because new buyers from overseas are poised to enter markets such as San Diego's.
"We haven't seen the full onslaught of what's going to happen," Feldman said. "The Chinese have $700 billion of our paper right now. When they cash it in, they're going to buy real estate and they want to buy coastal communities."
That anticipation of rising demand has brought speculators onto the condo market, Feldman said. Speculators typically seek quick gains, as opposed to buying for intrinsic value as investors do.
In San Diego County, Feldman said said, 40 percent of condos are bought by speculators. That's worrisome, he said, because speculator-driven markets, not governed by long-term considerations, can fall quickly.
In condo purchases in particular, Feldman said, some speculators look at a purchase as an "option": they are willing to default on the purchase if the value drops; if the value rises, they'll "flip" it to another buyer for a quick profit.
However, Feldman said mortgage lenders are being "fairly conservative," so the likelihood of a crash, which he defined as a drop in value of at least 15 percent, is unlikely.
Contact staff writer Bradley J. Fikes at bfikes@nctimes.com or (760) 739-6641.
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Marc C. wrote on Nov 15, 2005 11:36 AM:"The Chinese have $700 billion of our paper right now..." There's always someone to say something like that to help re-inflate the bubble. Let's face it. The good days are long gone. A major correction is in the works and it's going to cause severe financial hardship to those who didn't think about what they were investing into. There is no such thing as "easy money". Only experts who study something day in and day out and make sound educated decisions can make money in a certain market, others are just gamblers taking a chance.
John D wrote on Nov 15, 2005 4:14 PM:Now, I have to admit. I sat and read that bit about 5 times before I dared to laugh. If this man really believes this, he has got to be one of the most disconnected individuals from International Finance. First off, the Chinese GOVERNMENT have bought our paper, not individual owners. Does he really think that the government will trade Mortgage Backed Securities for our North County inventory? China is playing an international game of hide the trade surplus in US backed securities, not individual mortgages. If they failed to do so, they would have a stronger Yuan by raising demand for their own currency, effectively making DVD players 50% more expensive due to the exchange difference. They keep us buying their cheap stuff so some day they can grow a middle class that will buy their own stuff and they can wean themselves off of us. Our trade deficit is the reason Chinese own any paper in the US; and it's what has kept our interest rates abysmally low and created Greenspan's conundrum and Bernanke's savings glut. To think that the chinese government would want to trade in liquid government backed and GSE-backed securities for residential real estate is truly one of the stupidest things I have heard since the bubble began. It's a leap that no rational or logical thinking person could do. If we had a Comment of the Bubble Award it would have to go to Mr. Feldman. Thank you for making our day.
Claudia wrote on Nov 15, 2005 10:59 PM:A good portion of that $700 billion the Chinese have is owned by the Chinese central bank. I can't see the central bank rushing over here to buy single family homes and individual condos.
Paul M. wrote on Nov 16, 2005 3:57 AM:A delusional market that will be in for a rude awakening over the next 18-24 month period. A 15% drop constitutes a crash? That will look like a mere blip on the radar screen. Expect a 50-70% drop by 08. Sorry, but did you honestly think that the average home was really worth this kind of money? The days of cheap money are rapidly coming to an end, and to those that looked upon their homes as ATMs are going to be in scramble mode.
Mark wrote on Nov 16, 2005 6:38 AM:If the Chinese sell 700 billion worth of US treasuries interest rates will sky rocket. I can't see how that will be good for price. In any event, why would they waste good money on property in Oceanside? It may have changed some, but ten years ago it was horrible.
Brian wrote on Nov 16, 2005 6:57 AM:..."Mortgage lenders are being 'fairly conservative,'..." You've got to be joking. Wait, this is a comment from a "real estate and public finance partner." Could this possibly be someone who has a vested interest in sustaining high prices, and thus unwilling to be truthful on the subject?
Joe P. wrote on Nov 16, 2005 7:48 AM:These writers and real estate agents are not accepting the truth... there is a HUGE bubble in San Diego. They probably have their own stake in property, so they don't want to admit/accept it. Prices are going to drop 30% by the end of 2006, mark my words.
Philip wrote on Nov 16, 2005 8:27 AM:With an ever-increasing portfolio of dollar-denominated debt, it's inevitable that much of that will eventually be diversified into other asset classes. More likely downtown office buildings and major U.S. corporations, though. As for mortgage lenders being "fairly conservative," thank you for giving me a good laugh.
James wrote on Nov 16, 2005 9:29 AM:If the Chinese cash out of bonds to buy hard assets, so will the rest of the world. Then the inflationist policies of the US Govt/Fed over the last 10 years will come home to roost in a big way! (that's right 10 years - the CPI may have been tame but look at an M3 chart and you'll see what I mean) How exactly will soaring interest rates, rampant inflation, and the biggest recession/depression since the 30s, help the housing market? If you need a hedge, look at precious metals. The Chinese will buy those too.
Brad wrote on Nov 16, 2005 11:22 AM:I'm so tired of dealing with this real estate thing. Why should I pay someone $50,000 more for something they put nothing down on and scraped by to make their interest-only loan payments for a year? One would like to answer "Because they took a risk, and risks can be rewarded" - but we also hear that "real estate never goes down in price" so therefore it is not risk at all... Which do YOU believe?
Roscoe wrote on Nov 16, 2005 4:09 PM: "For the most part, prices are going up over a year ago, but the number of sales are decreasing." Well that is understandable. Five times as many houses are available to buyers, yet the sellers are still raising prices. Sure, I buy that.
Jack wrote on Nov 16, 2005 7:15 PM:The housing market is slowing down because its been flooded with investers as well as risky financing options. People that cant afford homes are buying them. The feds as usual are reacting to a problem after the fact instead of reacting to warning signs. They cause the problem by lowering rates to a ridiculas percent then hiking rates to a ridiculas percent. The result will be a drastic price drop just as proportional to the drastic run up in prices.
V-Pels wrote on Nov 23, 2005 11:33 PM:The argument about people from overseas coming into save the day is the stupidest I have heard so far. We are going down fast and it will get very, very nasty.
Tim wrote on Jan 2, 2006 6:51 PM:It's called denial... By the end of the year, it will be called desperation.
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