Our view: North County real estate strong and stabilizing

For the past several years, at dinner tables, water coolers, sidelines and cyberspace, North County's most popular conversation topic has been the real estate market. When the market was hot, there was a collective hyperventilation that blew up the housing bubble. When it started deflating, people despaired. As we look at the market today, things aren't as good as they once were, but they're not half bad.

Foreclosures

Perhaps no word unnerves middle-class Americans more than "foreclosure." And, indeed, the loss of a home is a financial and personal tragedy for the owner.

We've heard much in recent months about the record number of foreclosures in the county. But those numbers must be put in perspective. Earlier this month we reported that foreclosure filings on properties in San Diego County had climbed by 49 percent from February to March to 2,551. That figure represents one in every 408 households.

Scary as they seem at first glance, those numbers don't look so bad upon closer inspection. Of those 2,551 foreclosure filings, 1,998 were in default and 415 had been notified that their property would be sold for repayment. That leaves only 138 properties that were actually foreclosed on that month - or a little less than 0.025 percent of San Diego County's 600,000 single-family homes, condos and duplexes.

Subprime loans

Some analysts have also speculated that the collapse of the subprime home lending market threatens the overall health of the real estate market. While there are many people nationwide who are suffering now for taking out those loans, the subprime market itself has contracted dramatically - and that's a good thing.

Homeowners began turning to riskier subprime loans in earnest in 2005. Nearly three-quarters of all home loans made in the county that year were adjustable rate mortgages, which are often associated with the subprime lending market.

By December of that year, however, the Federal Reserve Board and other financial gatekeepers were warning lenders about questionable lending practices. At about the same time, news reports began to surface about skyrocketing mortgage defaults.

Since that 2005 watershed, at least 25 subprime lenders have gone belly up, put out a for sale sign or posted significant losses. That may shrink the pool of potential buyers in the short term, but it seems to be a much-needed correction that will lead to long-term stability.

Housing prices

Of course, for most homeowners, the only figure that counts is the resale price of their home. In North County, at least, there's good news here as well.

At $640,000, the median price of a single-family home in North County is up 2.4 percent from March 2006. That's only $10K off the all-time high set in June 2006.

Coastal communities are doing particularly well. Two standouts are Carlsbad, with year over year median price increases of 13 percent, and Encinitas, with increases of 34 percent in the same period. And high-end home prices, usually a benchmark of market health, are climbing in places like Rancho Santa Fe, where the median price for a home rose 12.5 percent.

So the housing market seems to be doing better. Interest rates remain low. As a result, at-risk homeowners won't have to worry as much when their adjustable mortgages go up. The fact that their houses are likely increasing in value will probably allow them to refinance their original loans, giving them a little breathing room. Despite the tightening of credit caused by the subprime collapse, housing prices in North County are holding up. That suggests that demand here remains relatively strong.

No one has a crystal ball, but the signs are auspicious. North County's housing market may not be as strong as it was, but it appears to be on the rebound.