The San Diego real estate market in the Fall 2009 continued to show early signs of recovery. The median price of houses sold in October 2009 increased 2.9% from the median price a year earlier. This was the first time since June 2006 that the median price increased over a 12-month period. The price appreciation seems nominal, but it truly represents 12 months of steady demand for homes, especially entry-level houses.
The past year been characterized by: 1) High demand and low supply of San Diego homes for sale in the “conforming” price range (under $697,500) 2) High supply and low demand for upper-end luxury homes priced over $1 Million; and 3) Relative equilibrium in the $700-$1 Million range. Entry-level home buyers are having difficulty finding houses to purchase. Mid-range buyers are finding room to negotiate. Luxury home buyers can have the pick of the litter.
Today, December 2, 2009 the San Diego MLS shows 2,113 houses priced at or below $500,000 in all of San Diego County. Include only houses with 3 bedrooms and the number drops to 1,708. Exclude age-restricted (retirement) communities and the number drops to 1,669. Looking for a 3+ bedroom, 2+ bathroom house with a modest minimum of 1,200 square feet of living area? The number drops to 1,440. Exclude some of the more remote areas of the county (Alpine, Boulevard, Campo, Descanso, Delzura, Guatay, Jacumba, Jamul, Mount Laguna, Pine Valley, Potrero, Tecate, Bonsall, Borego Springs, Fallbrook, Julian, Pala, Palomar Mountain, Pauma Valley, Ramona, Ranchita, Santa Ysabel, Valley Center, Warner Springs, Otay Mesa, and San Ysidro) and the number drops to 1,090.
Further narrow down the surrounding cities of Escondido, Oceanside, El Cajon, , and Vista, and what’s left is what most people start to think of as “San Diego”… and here the number drops to 640. Is South Bay not your style? Remove Bonita, Chula Vista, National City, Imperial Beach, Spring Valley, Lemon Grove, Logan Heights, Encanto, and Paradise Hills. The number drops all the way to 292 houses for sale.
The majority of these 3+ bedroom, 2+ bathroom houses priced under $500,000 are in downtown San Diego 92102, Linda Vista 92111, and East San Diego 92115 and 92105. 48 are in San Marcos, 26 in Santee, 27 in Mira Mesa, 27 in La Mesa. There is only 1 house in Encinitas, 1 in Cardiff, 7 in Carlsbad, 4 in Scripps Ranch, 8 in Rancho Penasquitos and 15 in Poway. That’s not a lot of selection if you are looking to live in one of the better school districts in San Diego. And no, there are still no houses for sale in Rancho Santa Fe, La Jolla, Del Mar, or Solana Beach priced under $500,000.
Now consider the “mid-range” San Diego, houses priced $500,000 to $1 Million. Many of these are houses that were valued at more than $1 Million just a few years ago. In my opinion, these mid-level homes currently present the best opportunities for intermediate-term upside gain. In contrast to the ultra-competitive bidding war environment for entry-level homes, buyers in this more upscale category are able to negotiate with the Sellers at a reasoned pace. Motivated home sellers are willing to accept lower prices, and are coming up with a range of incentives, including closing cost credits and pre-paid expenses, home furnishings, partial seller financing, and lease options.
Picking up where I left off above, compared to the 292 houses for sale in the under-$500,000 range, there are 812 San Diego houses for sale in the $500,000-$1 Million range. And where there were once no homes for sale in this price range, buyers are now finding options: 10 houses in La Jolla, 10 houses in Solana Beach, 50 houses in Camel Valley, and even 1 house in Del Mar and 1 house in Rancho Santa Fe priced under $1 Million.
And what about the luxury home market, priced over $1 Million? Right now there are hundreds of opportunities to negotiate for San Diego luxury homes. For example, currently there are 264 houses for sale in Rancho Santa Fe, or roughly 8% of all the homes in zip code 92067. In all of 2009 only 91 houses in 92067 closed escrow, an average of only about 8 houses sold per month. There are 18 Rancho Santa Fe houses in escrow right now, so the current pace is above the 2009 average. Luxury home buyers are coming back into the market to grab some very attractive deals. But the inventory of luxury homes for sale in San Diego is not likely to run low in the near future.