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Prices stabilizing

As San Diego housing dynamic changes, unaffordability still remains

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Even as realtors, homebuilders and economists predict either a stabilization or small increase in the prices of homes in San Diego County this year, affordability will continue to be a topic of discussion as interest rates rise.

According to a recent MarketPointe Realty Advisors San Diego survey, the average new detached home price at the end of 2005 was $846,759, which is $576,000 more than the national average. The cost of detached housing is such that it is increasingly rare to see a new detached home priced below $600,000.

Detached home prices have fueled activity in the attached market, particularly in condominium conversions. However, the average price of a new attached home in the county was more than $415,000 at the end of 2005. And condo conversions, which some think are the solution to the affordability problem, averaged nearly $330,000.

The California Association of Realtors recently stated the percentage of households in California able to afford a median-priced home stood at 14 percent in December 2005, compared with 19 percent for the same period a year ago. In San Diego, only 9 percent can afford a median-priced home in December, a 2 percent decrease compared with the previous year.

"Housing affordability in the state remains at record lows, which also is impacting the robust sales trend we experienced throughout much of 2005," said Leslie Appleton-Young, CAR vice president and chief economist.

The minimum household income needed to purchase a median-priced home at $548,430, which was unchanged from November to December, was $134,200, based on an average effective mortgage interest rate of 6.33 percent and assuming a 20 percent down payment. However, San Diego's median priced home was $603,680, which would require a household income of approximately $150,000.

According to the San Diego Association of Governments (SANDAG), as of January 2005 the county's median household income was $64,273 -- half of what CAR stated is needed to afford a median-priced home in the state.

Combine this with MarketPointe's statistics, which indicate one out of four new-home shoppers is either single or a single parent with children, and it's easy to see how homeownership is out of reach for many in the county.

According to the California Employment Development Department, nearly 70 percent of county households earn less than $124,999; although the unemployment rate remains a low 3.6 percent in December, some of the largest increases in employment over the past year have been in the leisure, hospitality and food service industries, which historically are low-paying.

When looking at downtown San Diego alone, the Center for Policy Initiatives (CPI) said in a recent report, "The majority of jobs downtown pay under $15 an hour," yet the annual household income needed to purchase the median-priced home in that area is more than $150,000. CPI also stated that the median hourly wage of service workers in downtown is $8.50 an hour.

With a majority of jobs paying under $15, it appears that renting, although more expensive downtown than elsewhere in the county, is the housing solution for those who wish to work and live there.

Outside of San Diego, as is the case in Santa Cruz, some city residents have responded to unaffordable housing in their area by collecting signatures for a ballot initiative that would allow the city to adopt its own minimum wage, which would be $9.25 an hour, $2.50 more than the state requires.

However, as bleak as the affordability situation appears to be, there are still some seeking to remedy the problem. According to CPI, 21 percent of newly developed units downtown in 2006 will be affordable; thus, there is an effort to aid those seeking affordable housing in the downtown market.

On a statewide level, the Department of Housing and Community Development announced that nearly $182 million in Proposition 46 funds, including $19 million in San Diego, will be distributed among 28 counties to provide housing opportunities for more than 3,100 families and neediest residents.

Of the $19 million, more than $17.8 million will be used to create affordable apartment homes through the Multifamily Housing Program and its Supportive Housing Component. The other $1.2 million will come from funds from CalHome, which awards local governments and nonprofit organizations to promote homeownership opportunities for first-time homebuyers through the acquisition of new or resale homes.

Respond: Should government interfere with the housing market? Send your thoughts to soundingboard@sddt.com

Send your comments, thoughts or suggestions to erik.pisor@sddt.com

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