The San Diego County median home price hit $530,000 in May, breaking the nominal record set last month and increasing 8.2 percent in a year, real estate tracker CoreLogic reported. Lack of homes for sale and slowed home construction appear to be major forces in new peaks set over the past few months leading into the traditional busy summer buying season.
In real terms, May's numbers still are far off the peaks of the housing boom. When adjusted for inflation, the county nominal November 2005 peak of $517,500 equates to roughly $644,500 in 2016 dollars.
Alan Gin, economist at University of San Diego, said it is likely that nominal records will continue to be broken as the summer continues, especially with a strong economy and low unemployment rate. "Construction is still lagging badly. There's just not enough housing," Gin said. "High demand and low supply mean higher prices."
In May, there were 5,060 homes listed for sale in San Diego County, up by 279 from April but substantially below historic levels for the month, said the Greater San Diego Association of Realtors. There were 5,913 listings in May last year, 6,658 in 2015 and 7,029 in 2014.
As for overall unit sales, this year's number appears comparable to the levels reached during the last housing boom, at least at first glance: There were 4,138 home sales in May and 4,232 in November 2005.
The difference, Gin said, is that there were far more new homes being built in 2005. In May, 232 newly built homes sold. In November 2005, 1,251 new homes sold.
There are plenty of examples of buyers pushing prices up amid intense competition. A $329,000 condo with three bedrooms and two bathrooms in the Nestor neighborhood about 1 mile from the Mexican border had a sale pending in two days, said listing agent Jean Paul Schwarz.
The 1,224-square-foot unit in the Evergreen Condominiums drew 10 offers, with four higher than the asking price, in the two days it was on the market. The winning offer agreed to a 21-day escrow period for the nearly 40-year-old condo.
Schwarz said he's seeing buyers being more aggressive to get away from rising rents, and some want to take advantage of low mortgage interest rates, which averaged 3.9 percent Wednesday morning for a 30-year fixed-rate loan, said Mortgage News Daily. Rent had increased 8 percent in a year as of March, said MarketPointe Realty Advisors. "People are desperate to get into a house," Schwarz said.
While industry experts are optimistic home construction will pick up later in the year, San Diego County had the biggest drop in residential building in Southern California over the first three months of 2017. Residential building permits were down by 37 percent in the first quarter compared to the same time last year.
San Diego Mayor Kevin Faulconer unveiled a plan June 21 to spur home construction. It would streamline project approvals, reduce some regulations and start calculating developer fees not on the total number of units but on either square footage or the number of bedrooms and other measures. The plan must be approved by the City Council and could take years to significantly add to housing supply.
The region's median resale house price in May set a record of $590,000, with 2,636 single-family houses sales. The previous peak of $575,000 was set last month. The resale condo price was $390,000, with 1,270 sales, $10,000 short of the nominal peak set in April 2005.
Resale homes had the largest year-over-year price increase, with a 8.7 percent appreciation. Resale condos were up 4 percent and newly built homes down by 2.2 percent. The newly built home median price in May was $571,000, with 232 sales.
The number of absentee buyers, usually investors who don't intend to live in the homes they purchase, made up 19.2 percent of sales in April, down from 19.7 percent at the same time last year. In early 2013, more than 30 percent of sales went to absentee buyers.
For all of Southern California, the median home price was up 7.1 percent year-over-year, bringing the median to $492,000. The largest increase was in San Bernardino County, at 8.8 percent, to a median price of $310,000.
It was followed by San Diego County with the 8.2 percent increase; Riverside County with a 7.9 percent increase for a median of $356,000; Ventura County with a 7.1 percent increase for a median of $553,750; Los Angeles County with a 6.8 percent increase for a median of $560,500; and Orange County with a 6.7 percent increase for a median of $695,000.
Inventory of homes for sale is low nationwide because, in part, construction slowed during the housing market crash. San Diego County had the 13th-lowest inventory of any region in the second quarter of 2017, said Nationwide Economics, with enough listings available to support the present rate of sales for 1.64 months. Economists typically say five to six months supply makes for a healthy market for both buyers and sellers.
Nationwide said the Seattle region had the least homes for sale, 0.98 months of available inventory.
Regions with the lowest housing inventory
Source: Nationwide Economics