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Thursday, Mar 28, 2024
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Housing Home prices continue setting records



Rental Rates Climb as Vacancies Plummet; Few Solutions Seen

For first-time homebuyers and even those looking to move up, the sticker shock continues.

Last month, the median price for new and resold single-family detached homes in San Diego hit $271,000, up 17 percent from last June, according to DataQuick Information Systems.

The escalating real estate market may provide some solace to existing homeowners, but for those trying to purchase their first home, the experience can be a rude awakening.

“The prices blow most first-time buyers right out of the single-family home market. They’ve had to resign themselves to looking at condos, and smaller condos at that,” said Candy Hogan, a veteran realtor with Coldwell Banker & Associates Realty in San Diego.

Hogan said many first-time buyers expect to buy something for under $200,000 when those properties simply don’t exist.

“They have to be educated about what the market is right now,” she said. “I try telling them that this is the first home they are buying; it’s not necessarily their last.”

Indeed, even those looking at moving up from a condo to a single-family detached home, or a larger home, the prices have increased to the point that many have opted to stay where they are.

“We’re in a housing crisis, and it’s been getting worse for the last three years,” said Steve Doyle, president of the Building Industry Association of San Diego County.

Home prices continue to rise because demand remains high, and the amount of housing stock has not kept pace with the region’s growth. It’s a simple economic formula: High demand coupled with reduced supply equals higher prices, Doyle said.


A Tough Market

Along with the higher prices, fewer households can afford to buy a home in San Diego. According to the latest report from the California Association of Realtors, 24 percent of the county’s households have the income to afford a median-priced house. That figure was among the lowest in the state, and second-lowest in Southern California, exceeded only by Orange County where only 23 percent of households can afford a median-priced house.

Even with the slowing economy, home values show few signs of declining because people continue moving here. Also, the building industry can’t produce sufficient housing to meet the increased demand.

Not long ago, the ratio of new houses built to new jobs created was about four-to-one, said Doyle.

While the ratio been reduced to about two jobs for each new home recently, the area is dealing with a huge backlog of demand stemming from those years when housing development was minimal.

The economics of the market is squeezing out many average working families who cannot find a house in their price range in this area and are buying new houses in Temecula and other parts of Riverside County, Doyle said.

“They’re having to move farther away, which means longer commutes which means more traffic on our freeways. It’s a vicious circle that gets worse and worse.”


Few Obvious Solutions

While the building industry, government officials and environmental groups all recognize the ongoing housing crisis, little has been done about it, said one longtime real estate analyst.

“There’s a lot of talk but when the pedal hits the metal, they don’t do anything,” said Alan Nevin, director of economic research for MarketPoint Realty Advisors.

Contributing reasons to the dwindling supply of affordable housing are escalating construction costs, particularly in development fees assessed by local governments, and a general aversion to allowing high-density construction, Nevin said.

Most cities have the same development fees on $500,000 homes as they do on $200,000 homes, so naturally builders have concentrated on serving the upper end of the market, he said.

In addition, community planning groups in the county representing existing residents generally rebuff any attempt to change zoning laws that would permit increasing the number of housing units in particular parcels, Nevin said.

Except for Downtown San Diego, where there has been a spate of new high-rise condo construction, there has been little effort to provide incentives to develop affordable new housing, he said.


Condo Conundrum

A huge impediment to producing new condominiums for entry-level homebuyers is the presence of large number of construction defect lawsuits, Doyle said.

Condos, known as attached housing, once made up between 50 to 55 percent of the local market. Today, it’s only about 30 percent; much of that is the high-rise luxury units prevalent in Downtown, he said.

“Attached housing was the usual entry point for many first time buyers, but they’ve taken that step out of the loop. Without that product the only alternative is to rent or move out of the county,” he said.

Again, the lack of new building in the rental market and concomitant growth has caused the worst rental crunch in San Diego’s history, say industry officials.

Vacancy rates for the county have been below 2 percent for the past two years, and average rents have skyrocketed, forcing many to double up and share units. That situation, in turn, leads to deteriorating neighborhoods with increased numbers of residents using facilities designed for fewer people.

The solution to address the housing crisis requires all interested parties, developers, environmentalists, and government officials, coming together to create a workable plan, said Rick Hoffman, president of the San Diego Association of Realtors.

Hoffman has met with San Diego Mayor Dick Murphy’s staff and said he’s encouraged that Murphy is aware of the issue and is intent on implementing policies that encourage building more affordable housing.

The concept of smart growth development calls for increasing densities in areas closer to transit hubs and putting more services closer to the residential areas. In the meantime, developers are dealing with the current legal structure and passing on their costs to the cost of the house.

“The land costs so much and the time to get the plans approved is so long, when new units are built, they are generally well above what most people can afford,” Hoffman said. “There’s something wrong with the process.”

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