Unlike our Sacramento politicians’ boondoggle, San Diego’s land market has been picking up steam faster than a bullet train over the last few months. According to reliable reports, over 2,400 new residential units were sold last year in San Diego County:
It is also important to note that approximately one third of the actively selling new home developments in 2012 consisted of condominiums or townhomes. We expect that percentage to dramatically rise in the near term as monthly rental rates in many parts of the county now exceed monthly mortgage payments (i.e., P.I.T.I. and association dues), available at new construction condominium and townhouse communities.
Job Creation on the Rise
Evidence that this market momentum is growing can be seen in the sales volume reported for the traditionally slow 4th Quarter holiday season where sales exceeded the previous quarter and there was approximately a 30% increase in comparison to the 4th Quarter of 2011 (i.e., 494 sales reported in the 4th Quarter of 2011 versus 642 sales accounted for in the 4th Quarter of 2012).
Absorption Rates Expected to Increase
Although the average rate of absorptions of actively selling developments is still in the 2.0 sales a month range, a rapid decline in available new home supply is expected to boost absorption rates on remaining projects in the near term. For example, there were 113 actively selling new home developments in San Diego County during the 4th Quarter of 2011. At the end of 2012, there were only 73 actively selling projects – that’s a 55% decline. Approximately 60 projects sold out over the course of 2012, while only approximately 20 new projects entered the market during the same period of time. Among the remaining new home developments in the County, approximately 2,233 units are left to either enter the market or currently remain unsold. This equates to approximately an 11 month supply based upon a continuation of new home sales at a minimum of last year’s rate (i.e., approximately 2,428 annual sales reflecting a recovery beginning in the 2nd Quarter of 2012). This bodes well for the health of the market going forward given 2012 sales did not pick up steam until the 2nd Quarter. Thus 2013 sales are expected to exceed last year’s total. Historically, approximately a 12 month supply of unsold inventory (units offered for sale and remaining unsold), is considered approaching a supply/demand balance.
Many housing analysts refer to the housing market rebound in San DiegoCounty and the nation as a “jobless recovery.” While there is no question that the combination of a dwindling inventory and historically low interest rates have jump started the market, job creation in San Diego County over the last year has increased notably (approximately 29,000 annual net new jobs by year’s end in 2012 as estimated by Point Loma University Economist Lynn Reaser). This is a major factor which has largely flown under the radar due to the publicity related to a declining but relatively high unemployment rate (8.4%).
The Land Advisors Organization Team in San Diego is actively sourcing new land development and home building opportunities. Call us today before this train is out of sight!
Source: Bob McFarland, Marketing Consultant, (858) 568-7428 ext. 12