Short supply of entry-level homes for sale in San Diego is frustrating buyers and pushing up prices at the bottom end.

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.

New FHA guidelines are source of confusion to San Diego condo buyers

In order for a condominium complex to obtain FHA approval, the complex must provide evidence that it complies with the current FHA guidelines.  In June 2009 FHA issued new guidelines that were to take effect October 1, 2009.  The new guidelines would have made thousands of previously FHA-approved condo complexes ineligible for FHA financing.  The already tight lending market was to become even tighter for borrowers purchasing condominiums with FHA insured loans.

Concern that the new stringent rules and would further cripple the fragile real estate market led Congress to push back the effective date of the new guidelines until November 2.  Under urging by the National Association of Realtors, the date was extended until December 7, 2009.  Now, after further consideration, FHA has again modified its new guidelines for FHA approved condominium complexes.

Yesterday, at the NAR’s annual convention in San Diego, FHA Housing Commissioner Dave Stevens  summarized the new FHA guidelines, which are intended to provide more lenience to address difficult market conditions.   To summarize:

• The spot approval process has now been extended until February 1, 2010.
• 50% of the units in a condo project must be owner occupied but FHA now allows excluding vacant and bank-owned real estate units in the calculation of owner-occupancy ratios.
• The number of units in a condo project that can be financed with FHA loans has been increased from 30% to 50%.
• Condo complexes with 15% of owners that are past due on association fees will not be allowed FHA approval.

What does this mean?  If you are a first time buyer and are considering purchasing a condominium, you have been given at least two more months to make a purchase.  This is good news for prospective buyers of San Diego condos who want to take advantage of the first-time home buyer tax credit before April 2010.  Although all condominium complexes will lose their FHA approval on December 7, extension of the “spot approval” process will still allow lenders to fund FHA loans on condo purchases through February 1, 2010.

After February 1, each individual condominium homeowner’s association (or a mortgage lender seeking to lend money on a condo purchases), will need to re-apply for FHA approval.  This will take time.  However, the new guidelines will eventually lead to FHA approval for thousands of condo complexes that would not have passed muster under the more restrictive guidelines.  Specifically, eliminating vacant and bank-owned properties from the owner-occupancy ratios is a major victory for condo complexes that have suffered high rates of foreclosure.

For prospective home buyers who do not have a 20% down payment, FHA insured loans have become the only viable option, allowing purchases with as little as 3.5% down.  Three years ago FHA loans were practically unheard of in San Diego.  Today FHA loans account for more than half of all mortgages on San Diego homes.  The low down payment requirement makes these loans particularly attractive to first-time home buyers, but FHA loans are available to finance any residential home mortgages up to $697,250.  Along with the home buyer tax credit and low interest rates, you couldn’t ask for a better opportunity.

$8,000 First Time Homebuyer Tax Credit has stimulated sales of homes in San Diego.

Home prices have turned a corner in the past six months. Instead of double-digit declines in property values, most housing markets have seen month-to-month increases since early summer. On an annualized basis, San Diego home values are now approaching positive territory in many neighborhoods for the first time since 2005. The increases aren’t large in percentage terms, but it is a huge psychological barrier for home buyers. No one wants to buy a home while values are dropping.

San Diego home buyers have been scrambling to get into escrow on a home purchase before the end of October, anticipating expiration of the tax credit on November 30, 2009. San Diego real estate professionals get the definite impression that demand from first-time home buyers could suddenly dry up on November 1 if the tax credit is not extended.

Although $8,000 is less than three percent of the median price of most San Diego homes, $8,000 is enough to cover closing costs for most purchases. The tax credit is seen as a chance to buy a home in San Diego with little or no money down. At today’s prices, the monthly payment on many homes in San Diego is just about on par with rental rates. So with no closing costs, first-time home buyers are able to justify buying instead of renting. Add $8,000 and the purchase becomes less appealing. It is like night and day for some people who currently rent.

Today Treasury Secretary Geithner and Housing Secretary Donovan said that the Obama administration wants to see the tax credit extended for a “limited period.” An extension through April 2010 has maximum support. However, Senator Max Baucus has proposed an amendment to keep the full $8,000 tax deduction through April, then gradually phase it out by $2,000 per quarter through the end of 2010.

The Baucus amendment makes a lot of sense. With a sudden elimination of the tax credit, many home buyers will simply decide that they’ve missed their opportunity to buy. A sudden drop in demand could easily turn the modest real estate price appreciation into further declines. A gradual phase-out would soften the impact and continue to entice some first-time buyers who would otherwise continue to rent.

The Senate has also proposed a $6,500 homebuyer tax credit to existing home owners who have lived in their homes for at least 5 years. There is less need for this additional provision. $6,500 is not likely to entice current owners to sell homes in San Diego, either to move up or to downsize. Home sellers traditionally have equity in their homes when they sell. If they have equity they will use it as a downpayment on their next home. If there is no equity, then the home seller will be in short sale or foreclosure. People who go through short sales and foreclosures have damaged credit, so they are not able to turn around and buy another home. If the point is to stimulate home purchases, then any tax credits extended beyond first-time home buyers should be available to anyone who purchases a home, regardless of whether they have recently owned a home.

Overall, the Senate has the right idea. Unlike TARP, the homebuyer tax credit has made a noticeable difference. Let’s hope for smooth passage.

Even with property values down, many sellers are finally deciding that it is a good time to sell their San Diego homes. We’ve definitely seen prices in many San Diego neighborhoods rise over the past seven to nine months, particularly for single-family detached houses priced in the “conforming” price range up to $697,500.

There is always a demand for ocean-view and bay-view homes in San Diego.  Clairemont and Bay Park have the only regular inventory of view homes that are priced under $700,000.  Comparable homes for sale in La Jolla are priced twice that high.  Plus, inventories of homes for sale in Clairemont and Bay Park are low, with demand generally exceeding supply.

Many of the home owners in this area have owned their homes for many years, so not everyone is upside down on their mortgages.  There is equity in many older homes.  Many older home owners need to sell regardless of timing.  Others are wondering whether rising values justify postponing the decision to sell.

There has been a rush by prospective buyers to take advantage of the $8,000 first-time home buyer tax credit that is set to expire at the end of November.  But more than the tax credit expiration, I think it location and the conforming FHA loan limit that is driving sales.  Only another across-the-board retraction, or substantial tightening of FHA loan guidelines, is likely to pull down the prices of entry-level homes in central coastal San Diego.  But on the other hand, without an increase in the FHA loan limits or general loosening of mortgage lending by private banks, we’ll probably be staring at a $700,000 ceiling for the foreseeable future.

Mission Bay View Home For Sale In San Diego

Overview Maps Photos Features Description Neighborhood Market Stats IDX Search

$699,900 Single Family Home For Sale Main Features 4 Bedrooms 2 Bathrooms Interior: 1930 sqft Lot: 5,800 sqft Location 3029 Driscoll San Diego, CA 92117

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Geoffrey Schiering San Diego Real Estate Professionals at RE/MAX Associates (619) 200-7612 homes@sdrealtypros.com http://www.sdrealtypros.com Listed by: RE/MAX Associates

Our recent listings Mission Bay View Home For Sale In San Diego Foreclosure House In Central Coastal San Diego Clairemont House For Sale – Great Price But NOT REO Foreclosure! Affordable San Diego Homes For Sale In Clairemont 92117 Luxury Homes For Sale In Carmel Valley, San Diego 92130. Top School District.

See more San Diego, CA real estate for sale

Comparable Statistics (Past Three Months Within 1/2 Mile of 3029 Driscoll)

	Subject Property	High	Low	Median	Average
Sq Footage	1,930	2,032	1,566	1,780	1,789
Sale Price	$48,000.00	$706,000.00	$460,000.00	$630,000.00	$596,833.33
Price/Sq Footage	$24.87	$391.57	$226.38	$344.74	$336.88

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	Address	City State Zip	Recording Date	Sale Price	Price Per Sq Ft	Lot Sq Ft	Building Sq Ft	Bedrooms	Total Baths
1.	4229 Huerfano Ave	San Diego CA 92117	07/30/2009	$650,000	$391.57	8,000	1,660	4	2
2.	3125 Driscoll Dr	San Diego CA 92117	09/09/2009	$706,000	$365.80	14,500	1,930	4	3
3.	3021 Conner Way	San Diego CA 92117	10/05/2009	$645,000	$391.38	6,000	1,648	3	2
4.	4071 Avati Dr	San Diego CA 92117	08/04/2009	$505,000	$322.48	6,400	1,566	3	3
5.	4524 La Crosse Ave	San Diego CA 92117	10/09/2009	$460,000	$226.38	6,100	2,032	6	3
6.	3078 Jutland Ct	San Diego CA 92117	09/10/2009	$615,000	$323.68	9,700	1,900	4	4

Median prices of San Diego homes show San Diego houses heading up and San Diego condos still down.

The DataQuick report and numbers were not published in the Union Tribune, so I went to investigate. Unfortunately, no such quarterly report is posted on the MDA DataQuick website. The median sales prices of resale houses and condos, new homes, and all San Diego homes combined are published as the “San Diego Union Tribune Zip Code Chart.” There is also a report dated October 13, 2009 which is entitled “Southern California home sales inch up; median price steady.” Those are the figures that I will consider here.

First, according to the chart of median San Diego home prices by zip code, the median resale price of a detached single-family house increased in four out of five regions in San Diego County. Between September 2008 and September 2009, Central San Diego was up 4.3% (to $386,000), East County up 0.6% (to $316,750), North County Inland up 2.7% (to $380,000), and North County Coastal up 11.5% (to $485,000). Only South Bay remains in the red, with the median price of detached single-family houses down and average of 11% (to $316,000) from September 2008.

In Central San Diego, the median price of La Jolla homes sold in September 2009 jumped 21.7% from a year earlier, to $1,525,000. The median price of Coronado homes also increased substantially, up 17.6% to $1,610,000. The biggest increase along the North County coast was Cardiff by the Sea, where the median house price increased 38.9% from a year earlier, to $722,500. Del Mar homes also got a boost, up 11.6% to $1,350,000. Looking at those numbers, it would be tempting to call a bottom to San Diego luxury homes. However, in North County Inland, Rancho Santa Fe real estate is lagging. There were only 6 Rancho Santa Fe homes that closed escrow in September 2009, and the median price of $1,550,000 was down a whopping 43.6% from a year earlier.

Condominium sales tell an entirely different story. From September 2008 to September 2009, the median price of condos fell in all five regions of San Diego County. And, whereas houses in South Bay registered the largest price declines, the median price of condos in South Bay held steadier than the price of condos in any other region. Central San Diego condos were down 9.3% (to $245,000), East County down 21.2% (to $130,000), North County Inland down 8.2% (to $202,000), North County Coastal down 10.6% (to $316,500), and South Bay down just 1.6% (to $180,000).

New home sales represented only about 10% of the sales in each region. The median price of new homes is down for the year in four out of five San Diego regions. There seems to be little doubt that new home sales continue to be sluggish. Builder incentives may even be understating the level of price declines, as many builder incentives, upgrades, and closing cost credits are not reflected in the final sales prices.

Looking at the final tally of all sales of San Diego homes, the median prices of all homes sold in four out of five regions of San Diego County are just about flat (between 0.2% increase and 1.5% decrease), and South Bay is still in double-digits, down 11.2% from September 2008. But, as always, the median prices don’t tell the whole story. It seems clear that the low inventory of San Diego houses for sale has created upward pressure on prices. But despite the relatively low inventory, San Diego condos continue to experience price reductions. This suggests that the old adage “the value is in the land” is holding true in the current economic environment. And finally, more San Diego luxury homes are selling, so the upper end is seeing median price increases in some neighborhoods, such as La Jolla and Coronado. But there is still a lot of inventory at the upper end, so your San Diego real estate professionals aren’t willing to call a bottom in that sector.

There have been a lot of recent reports that the numbers of foreclosures are rising in the top tiers of the real estate market. This seems to be true in San Diego, where the number of San Diego luxury homes for sale has been increasing steadily over recent months. Banks continue to have restrictive lending standards for jumbo loan home mortgages. The result has been slackness in demand for upscale homes. In the meantime, job losses and the general downturn of the economy has made many past buyers of luxury homes want, or need, out.

San Diego luxury homes struggling. Foreclosure properties in Carmel Valley, La Jolla, Del Mar, and Rancho Santa Fe getting more common.

The combination of decreased demand and increased supply has been putting downward pressure on the prices of San Diego luxury homes. As a result, as many as one in four San Diego home owners may be upside down on their mortgages, owing more on their mortgages than their homes are worth.

The initial adjustment of San Diego home prices had been in the entry-level home market. First-time buyers and investors had driven the bottom rung of San Diego real estate prices above $500,000 for detached single-family houses. When prices stopped rising, the fragile balance of easy financing for under-qualified buyers was disrupted. Demand dried up, inventories of homes for sale grew, and entry-level house prices fell quickly in San Diego. By the time prices fell 30% to 50% off their highs, easy credit had returned for “conforming” loans (under $697,500 in San Diego County), and buyers jumped in to buy at the reduced prices. Inventories shrank and soon demand exceeded supply. Now there has been upward pressure on the prices of entry-level San Diego homes for most of 2009.

The story has been different for the San Diego luxury homes market. Many home buyers in this category had purchased their homes with large down payments, rolling over equity gains from earlier sales of San Diego real estate. And as a general rule, luxury home buyers are traditionally in better financial shape than first-time home buyers or any buyers of entry level homes. So when the economy turned, the luxury home owners were largely better prepared for riding out the storm. But rainy day funds are beginning to dry up, and the old fallback of taking home equity loans for emergency situations is simply not available, especially for self-employed people or those who have seen their house values drop near or below their mortgage balances. Again, falling home prices combined with lack of availability of jumbo loans is the big problem.

According to Zillow, luxury homes (the top third of the housing index) are beginning to outnumber the bottom one-third of houses in foreclosure nationwide. That is being illustrated by the types of loans that are now going sour. More than 58% of foreclosures that began in the second quarter of 2009 were prime loans (as opposed to sub-prime loans), up from 44% at the same time last year. Prime loans were determined by the borrower’s credit scores and documentation. However, there are a lot of prime loans that are “interest-only” and adjustable-rate, so the prime loans that go bad are often the same sorts of junky loans that got entry-level home buyers into trouble.  More upscale San Diego foreclosure properties are on the way.

Of course, where there are losers there will also be winners. Right now San Diego home buyers are taking advantage of the increased inventory and downward pressure on prices of homes for sale in Carmel Valley, Del Mar, La Jolla, and Rancho Santa Fe. Right now there are sixty four-bedroom houses for sale in Carmel Valley. Just a few years ago there were no four-bedroom houses in Carmel Valley priced under $1.3Million, so prices are down at least 30% from their highs.

Just as it did in the entry-level homes market, the San Diego luxury homes market will also recover as soon as jumbo loans become more generally available. Inventories will drop and prices will again rise. Just ask anyone who is presently chasing the limited inventory of entry-level homes for sale in San Diego. It’s much more fun and rewarding to buy a home when there aren’t hundreds of people competing for the same property.