Any discussion of a region’s economy would be incomplete without taking a look at its housing market. Housing is not only a major generator of jobs and demand for goods and services, but it also helps define an area’s quality of life and economic viability. And the condition of the housing market itself is the most important indicator of consumer confidence, given that a home is typically the largest single purchase a consumer will make.
Brimming consumer confidence has not been an apt descriptor in the economy of recent years. Nowhere have consumers been more nervous than the for-sale housing market, where high unemployment and shrinking home values have jammed too much product involuntarily onto a market already plagued by weak demand.
Home prices throughout San Diego County are down just under 40 percent from what they were in 2005, and Fannie Mae now forecasts homes sales, under non-distressed conditions, will fall another 3 percent in 2012. Add in distressed sales, the prices could fall as much as 6 to 7 percent overall.
In North San Diego County, arguably the region’s most diverse housing market, prices for detached homes are down 13 percent from what they were a year ago, according to the November HomeDex report from the North San Diego County Association of Realtors. Attached-home prices remain pretty steady, compared to November a year ago.
The number of detached homes listed for sale, however, decreased by nearly 8 percent from November 2010 to last month while the number of such homes sold jumped a little more than 9 percent in the same period.
However, it’s taking longer to sell homes in North County this year than last. In November, the median days-on-market for detached homes in North County rose to 65 days, compared to 55 days a year ago. Of course, the extent to which sellers are being realistic in setting prices for their properties is as much as any other factor in how long it takes to sell a home.
In crisis, there is always opportunity — in this case for ready, willing and able buyers. Lower home prices, of course, mean lower payments. For example, the monthly payment, including principal, interest, property taxes and insurance for the median-priced detached home in North County decreased by $342 — nearly 15 percent — from a year ago and almost $100 in the 30-day period between October and November of this year.
Increased affordability is another positive result of the market downturn in an area long considered out of reach for most buyers. Using conservative monthly income parameters and a 20 percent down payment requirement, 37 percent of households countywide could afford North County’s median-priced home last month — up substantially from the 29 percent of county households that could afford a North County home a year ago. In a regional perspective, 46 percent of the region’s households could afford the median-priced homes elsewhere in the county — up 6 percent from the 40 percent who could do so a year ago.
Parenthetically, it was a Vista neighborhood that won the highest affordability rating last month, with 60 percent of the county’s households able to afford the $245,000 median-priced home.
Home sales data don’t tell the whole story, though. Continuing high unemployment, the prospect of higher taxes and other costs are factors that play heavily on the housing market in North County and elsewhere. A recent Fannie Mae report noted that mortgage interest rates have remained around 4 percent for several months, and the Federal Reserve has promised not to raise interest rates until 2013. Such information, though, hasn’t dispelled fears on the part of consumers who are worried about their jobs. And there’s no sense of urgency to buy now, given the prospect that low rates will remain low for some time.
But the prospect of finding themselves out of a job isn’t the only force discouraging prospective home buyers. Americans are concerned about tax cuts going away, to be replaced by a new wave of federal tax increases, amounting to as much as $750 billion in new taxes over the next two years. Add to that the looming possibility of higher state taxes and gas prices.
These factors, of course, are well beyond the means of any individual region to solve.
What all of this means, though, is that North County has to compete more keenly for a bigger piece of a smaller economic pie. That includes taking steps to provide as vibrant housing market as possible. Questions that come to mind right away include: Is there a region-wide approach to attract quality employers? Realize that companies typically look first at a region as a whole before settling on a community.
Is there a diverse range of affordably priced quality housing that will preclude employees from having to commute from more affordable neighborhoods in Riverside County and elsewhere? North County is still pricey, given that only 37 percent of the county’s households can afford to buy a home there.
What are the needs for regional amenities and infrastructure that can be coordinated and brought to pass by an interjurisdictional approach? Cities and other agencies need to collaborate more on resources that only a joint effort can accomplish, including a regional approach to housing. That starts with creating a regional vision and commitment to work together.
Not a bad New Year’s resolution.
Daniels, principal consultant of Dick Daniels Public Relations, has been a public relations practitioner for 34 years and was an Escondido city councilman from 2006 to 2010.