San Diego is poised for double digit increases in housing prices again. It may not happen in 2011 but will certainly happen before 2014 and look for more than a 50% increases in housing costs over the next 3 to 4 years.

Why so much optimism?  Many reasons, no building is going on in San Diego, yet the population keeps increasing. People are still moving to this fine city in droves and the military plans only expansion in the area which already is one of the largest military communities in the world.

Many of the wealthier Mexicans are moving in to San Diego County to get away from the drugs and violence taking over their communities.

Oh and San Diego is a huge college town and will continue to be.  College towns always fare well during recessions. Biotech a major source of stability and is expanding and the small amount of manufacturing is stable and will remain. It is mostly defense oriented.  San Diego has a huge convention and visitor business that will continue to grow.

But…..there are no residential units being built and none in the foreseeable future.  With Pendleton to the north, the Ocean west, Desert east and Mexico to the south, San Diego County will need to build up much more than out.

Currently, it cost more to build the units in San Diego County than they can be sold for. So the builders have all left and we’re not sure when they will return.

It is true that as the prices increase, many of those who wanted to sell over the last few years will put their units on the market, but that won’t support the huge demand. As people pay the higher prices, the inventory will be gobbled up and there will be further upward pressure on price.

Right now in San Diego County there is a 3 month supply of inventory to meet current demand. Six months inventory is a balanced market so we are already starving for units to sell.

The moral of the story is, buy anything now!  The interest rates are at the lowest in our lifetimes. The prices are still at amazingly low levels.

Call me and even with this low inventory, we’ll find something that will work for you.

It was expected, but not this bad. All of the experts were prepared for a drop once the homebuyer tax credit lapsed at the end of April, but no one expected it to be close to a shocking decrease. According to the National Association of Realtors (NAR), pending home sales fell a whopping 30% in May. Their index, which measures signed sales contracts but not closed sales, plunged to 77.6 from 110.9 in April. 

 It’s even off 15.9% from a year ago when the nation was barely emerging from the recession. Stats show it was  the biggest monthly decline ever and the index is at its lowest level since NAR began tracking it in 2001.

Lawrence Yun, NAR’s chief economist downplayed the damage a bit. According to him, customers rushed into deals to claim the credit, borrowing from May sales. Once the economic recovery comes into full swing, housing markets will heat up. Those conditions include much lower home prices and extremely favorable mortgage interest rates. The question is when — or if — the job market will ever bounce back. “We’re not creating jobs,” said Larson. “The housing problems now are being driven by broad economic problems. 

On a different issue,  RealtyTrac released a report that foreclosure sales took up 31% of all home sales in the US through the first quarter of 2010. According to the report, there were 88,000 pre-foreclosure sales, often short sales, in the first quarter, for an average discount from retail home prices of 14.7%. By comparison, REO discounts in the US averaged 34%. This really has changed much in the last 2 quarters.  Besides all of the added costs, the amount of recovery is even a more compelling reason for banks to want to allow the short sales instead of pushing to foreclosure.

The data basically just shows that there is still time to buy. Interest rates are still cooperating so go looking at some new homes or some investment property over the 4th of July weekend.

I hope everyone has a happy and most importantly a safe holiday!

More soon!

Alan