San Diego Housing Market Continues to Rebound

While job growth is the traditional driver of new home demand, the San Diego market recovery has been spurred on by primarily a dwindling of inventory, coupled with a continuation of government sponsored low interest rates. Analysts believe unsold inventory levels will remain relatively low for at least the next 12 to 18 months giving job growth in San Diego County an opportunity to rebound completely over the next few years. The increase in jobs is expected to give “new legs” to the current inventory depleted market rebound – giving us at least a three to five year upcycle.

Like many of the past housing market upcycles, overheated demand for subdivision land in the traditional location hotbeds, such as North Coastal San Diego County, have begun to spill over into communities located further east and inland – where there is a slightly greater number of available properties for sale.

SAN MARCOS SHOWING STRONG GROWTH
Available subdivision land in North San Diego County communities, especially San Marcos, is experiencing a significant increase in demand from builders. While we saw residential subdivision land typically trading for around $200,000 a finished lot in early 2012, we are now seeing in the first quarter of 2013 lots going as high as $285,000 a finished lot.

The finished lot value for residential subdivision land in San Marcos has increased in excess of 40% over the last year!

The City of San Marcos is undergoing significant upgrades with an expanding university town with over 14,000 full time students now at California State University at San Marcos (compared to just 9,722 students in 2011), the recent opening of the new “high technology” public high scool, and the remodel of San Marcos High School. The $180 million remodel project was one of the largest high school construction projects in the State of California and now boasts higher test scores than some of the public high schools located within the prestigious school districts situated along North Coastal San Diego County (south of Oceanside). Planned development of the approximately 1,000-unit University District mixed-use master plan beginning in 2014 (to be located near the CSU Campus and 78 Freeway) and the new linear mixed-use development plans running several blocks east and west (parallel to San Marcos Boulevard and the upscale Discovery Hills single family neighborhoods), will transform much of San Marcos beyond its “poor man’s Carlsbad” traditional reputation.

AREAS TO KEEP AN EYE ON
With the present market momentum continuing its course in the near term and moving towards complete restoration of the residential real estate values lost in San Diego County during the recession, Team San Diego sees the next generation of residential subdivision land opportunities in North San Diego County also migrating up the 15 Freeway (north of Escondido) to communities such as Bonsall (with outstanding schools) and the unincorporated Pala Mesa area (with the widening of Highway 76 / Mission Road – serving as a four lane expressway connecting Interstate 5 with Interstate 15).

Source: Bob McFarland, Marketing Consultant, (858) 568-7428 ext. 12

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California Division: 2012 Year in Review

LAO-CA Infographic 2012 YIR

Source: Tom Reimers, President, (949) 852-8288 x28

San Diego County’s Land Market On Its Own High Speed Train

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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:

  • 1st Quarter 2012:   475 units sold
  • 2nd Quarter 2012:  680 units sold
  • 3rd Quarter 2012:   631 units sold
  • 4th Quarter 2012:   642 units sold

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.

4thQ Actively Selling Projects

 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

San Diego: How Banks Helped the Housing Market Get Back On Its Feet

“Shadow Inventory” was a dirty word for most of the past recession with respect to the housing market.  In general terms, it meant there was a large number of homes in foreclosure or soon to be foreclosed upon, which would flood the market and drive down home prices, and keep the housing market on its heels for years to come.  While no one will argue that the sheer volume of foreclosures nationwide and in Southern California is substantial, the threat of flooding the market has not materialized. 

 In San Diego County, as in most areas of Southern California, the Banks were smart and only released foreclosures to the marketplace in measured increments, so as to attract interest in inventory at reduced prices without flooding the market.  San Diego County foreclosures have recently been reported to be down 51% in comparison to a year ago.  As a result, investment groups interested in purchasing large quantities of lower priced foreclosure properties for the strong rental market have helped generate an overall market craving in San Diego County for relatively low-priced housing (generally posture below approximately $500,000).  Brokers active within marketplaces sporting significant volumes of housing priced below $500,000 report multiple offers for any available inventory, often driving up prices.  The average price of new and existing housing sold last month in San Diego County ($335,500), accounted for a 1.7% increase over the average price of homes sold in June of 2011.  The total sales volume in the resale market county-wide for single family detached homes through the first half of 2011 represents almost a 10% increase over the first six months of last year.

 

The market recovery for low-priced housing, coupled with long-standing reduced interest rates, is very slowly beginning to work itself up the price ladder of housing throughout San Diego County.   For example, in higher priced submarkets such as the North County Coastal Area, rates of absorption for new home developments have grown from an average of one sale per month per project last year, to approximately two sales per month in 2012. 

 Although generation of new jobs in San Diego County is headed in the right direction, the slow pace of employment growth has been the major force preventing a rapid recovery in the housing market.  With the potential cut back in government defense spending in San Diego County next year, the pace of job growth is not expected to pick up in the very near term.  However, continued low levels of housing inventory (the number of homes listed for sale at the end of the 1st Quarter of 2012 fell to its lowest level in nearly three years), government maintenance of low interest rates, and continued growth in demand for rental housing is expected to continue to fuel the housing market recovery, but at a continued gradual rate of growth.  Most economic forecasters are predicting housing appreciation in San Diego County in the near term to range between approximately 2% and 3% annually.  The moderate pace of market recovery may be a blessing in disguise; as a more gradual velocity in recovery will give the market its legs for more sustained growth; in contrast to the rapid inflation run-ups of past market cycles which eventually lead to faster boom to bust corrections. 

 Down the road, this bona fide housing recovery at the bottom of the “food chain” so to speak, will likely be looked upon as the flash point which signaled the beginning of the market recovery in the housing market in San Diego County.

 Source: Bob McFarland, Marketing Consultant, (858) 568-7428 ext. 12

LAO Strengthens San Diego Coverage with addition of Residential Land Development Expert

Land Advisors Organization, the Nation’s largest residential land brokerage and advisory firm, has hired Robert S. McFarland, M.I.R.M. as a Marketing Consultant, adding to its unique depth of residential land industry experts.

Bob McFarland

Mr. McFarland is teaming up with Land Advisors’ Marketing Consultant David Landes, specializing in residential land sales in the San Diego County submarket.

“I am thrilled with the opportunity to join Land Advisors,” commented Mr. McFarland. “The firm is the best in the business, and offers land sellers and land buyers the most thorough market insight and knowledge.”

With over 30 years of experience evaluating real estate development as an appraiser, homebuilder marketing executive, and consultant, Mr. McFarland is an expert real estate development consultant.

Mr. McFarland is a long-time resident of San Diego County and will work out of the firm’s San Diego office. Mr. McFarland can be reached at (760) 207-6871, and at bmcfarland@landadvisors.com.

Click here to see full press release

Strike a Pose. Condos are Back in Vogue in San Diego County

After seeing a huge boom in urban condominium development in the early to mid-2000’s, followed by a few years of hibernation, several suburban multi-family condominium projects are finally emerging in the marketplace, and several more are planned for actual development.  The combination of affordability and ideal infill locations is putting condominiums back on the radar screen for possible new home buyers.

Nearly every local builder has a current project in the works, either attached or detached product types.

  • Carlsbad is a hotspot for new home projects.  Shea Homes, Taylor Morrison, CityVentures and Brookfield Homes all have new communities breaking ground in the coming months, and D.R. Horton (53 Melrose), KB Home (Avellino) and Brookfield (Sago at the Foothills) are building out existing projects in this city.
  • San Marcos is also seeing an uptick of activity.  Colrich is starting to market their new project (Solaire) in the Old Creek master plan, and Lennar is building out Belmont at the top of San Elijo Hills.
  • Farther south, Davidson Communities is breaking ground on their new detached condominium site, (Arista) at The Crosby.
  • Shea Homes is also making news in Mission Valley with its new communities in the Civita master plan.

The communities of Otay Ranch and Olympic Pointe in Chula Vista will supply the San Diego South Bay with new product in the near term.

Future projects in North County, Mid County and South Bay currently in the planning stages ensure that condominiums will continue to supply lower priced homes throughout the region.

Source: David Landes, Marketing Consultant, (858) 568-7428