Friday, March 20, 2009

Update on San Diego County new housing market

I recently finished updating a San Diego Market Monitor for Hanley Wood Market Intelligence, which is now available online here or by emailing clafemina@hanleywood.com.

Want to see an entire sample of a Market Monitor report? Click here.

Following is an abridged summary from the beginning of the updated report:

The good news for San Diego is that the existing home market is continuing to rebound, with sales increasing as homes become more affordable. The bad news is that the market for new homes continues to trend in the opposite direction, with sales declining as affordability dips back into the single digits based on the few units that sold during the final quarter of 2008. The primary reason for this disconnect is the level of foreclosures, which rose by another 23% during the third quarter of 2008 (the most recent data available) to 6,453 units.

The annualized rate of existing home sales rose by nearly 16% to approach 30,000 units during the fourth quarter, just 17% below the long-term average noted since 1988. Of course the reason for the rebound was a 12% decline in the median price to under $300,000 – a level not seen since the middle of 2002.

Although the current recession – deemed the worst since the end of World War II – was officially declared as having started in late 2007, since San Diego’s housing market started slowing earlier than that, it could rebound earlier than other parts of the country; in fact, many economists consider San Diego to be a bellwether for the entire state
Still, due to its past reliance on the housing market and consumer spending, the earliest rebound will not take place until at least late 2009 or early 2010.

Nonetheless, the strengths that have made San Diego County strong -- such as a great climate, steady defense contracts and deep connections to technology and the biosciences -- will continue to provide long-term, albeit delayed, advantages.
In the short to medium term, however, the substantial fiscal crisis hitting the state government – which some experts think might result in a declaration of bankruptcy -- will undoubtedly have an impact on all regions throughout California including higher taxes, reduced services, or both...

For year end 2009, we expect the San Diego new home market to record a median detached sales price of $644,500, or a 12% decline from the $732,440 estimated for the end of 2008. The median per square foot value of detached homes is expected to finish the year at $200, down 12% from $227 at the end of 2008. Finally, local builders are projected sell 2,450 new homes in 2009, representing a decline of 84% from the annualized peak of over 15,000 sales in the third quarter of 2004.

Want to buy the entire 103-page report? Click here to order or contact Regional Director Catherine LaFemina at clafemina@hanleywood.com.

I'll also be down in San Diego on April 14th for the next Beacon Economics San Diego Forecast Conference, for which Hanley Wood is a sponsor. Want to register for that or find out more? Click here.

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