San Diego County Market Trends Update

The Coastal Counties of Southern California (including San Diego County), continue to garner attention as on the fast track to a near-term market recovery in the housing market.

The word on the street today in the real estate industry (locally and on Wall Street) is that San Diego County is suffering from a supply shortage of new construction rental housing.

A robust supply of capital appears to be anxiously awaiting the opportunity to finance the development of new multi-family housing in “A” and “B” locations throughout the County. Given the perceived shortage of new construction rentals, nine multi-family projects totaling over 2,600 units are currently in the planning pipeline.

Vacancy rates among new rental townhouse properties that are built and designed with for-sale housing features in the County are close to 100% occupancy, likely due to the ownership of housing design and upgraded features (direct access to two-car enclosed garages etc.), attracting the many foreclosure and short sale “refugees,” or casualties from the “Great Recession.”

The majority of vacant multi-family properties are currently offered in the range of $50,000 to $100,000 per door, depending upon the strength of location.

SAN DIEGO S-CURVE: In the new construction for-sale housing sector, the “San Diego S-Curve Submarket” has dominated new home sales in the County for the last 12 months.

The S-Curve Submarket can be described geographically as: Beginning with the Carmel Valley (Pacific Highlands Ranch, Carmel Country Highlands etc.), moving east along Highway 56; and then north through the Torrey Highlands/Westview High School area along Camino Del Sur up to and including the Del Sur Ranch, and then east through the 4S Ranch and Camino Del Norte Road.

New home communities located within the S-Curve submarket attract many of the white collar executives and engineers who are employed in the biotech and high-tech firms such as Qualcomm, Sony, Hewlett Packard, etc.  These consumers place a heavy premium on the stellar public schools serving this submarket.  They also find access to this area convenient through Interstates 5 and 15, and Highway 56.  The majority of subdivision land within this submarket accommodating new single family detached housing has been equivalent to values ranging between approximately $300,000 and $500,000 per finished lot, depending upon location and lot size.

North San Diego County: In North County large scale residential development remains to be developed in master plans within Del Sur Ranch, the West Robertson Ranch, and Pardee’s land holdings in the Pacific Highlands Ranch Area (east Carmel Valley). A number of sizeable land plays located within the North County perimeter submarkets (Bonsall, Escondido, Valley Center, Fallbrook, Pala Mesa, and the I-15 Corridor between Riverside and San Diego Counties) are awaiting a demand push for the relative large supply of lots and homes in the region.

East San Diego County: In East County, the Fanita Ranch in Santee has yet to be developed.  A steady supply of small bite-sized infill land opportunities are emerging.

South San Diego County: The South Bay is the “800-pound gorilla in the room” because it has thousands of residential units remaining to be developed within existing and proposed master planned communities in the East Chula Vista area and Otay Mesa area.  The Baldwins and extended family, McMillin Communities, and Home Fed are a few of the builders/developers with skin in the game.  In addition, the area between East Chula Vista and the Mexican border (Otay Mesa, Brown Field etc.) has the potential for a large volume of new housing development within the next five years given the revised zoning currently being considered by local government.

With the pending housing market recovery, the development of a vibrant downtown San Diego housing market will be in reach again, once the dust settles concerning local government redevelopment.

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

RED LIGHT: CA Foreclosures, GREEN LIGHT: Sacramento Arena

California Attorney General Kamala Harris has called on federal mortgage giants Fannie Mae and Freddie Mac to place a “good-faith pause” on all foreclosure sales in the state following the multi-state settlement with the nation’s largest banks over mortgage abuses. The nationwide settlement calls for more than $12 billion in relief for struggling California homeowners in the form of principal reductions and short-sales. Read more: California AG calls for Fannie Mae and Freddie Mac to halt foreclosures

Does this “good-faith pause” help the housing industry?  Will delaying the foreclosure process on thousands of homes prolong the time until the housing market recovers by creating an even bigger backlog of shadow inventory, potentially resulting in continued home price depreciation?  Interesting…   

Sacramento Arena Update:  The City of Sacramento, the NBA and the Sacramento Kings’ organization have come to a tentative agreement to build a new arena in the Sacramento Railyards development, with the potential of keeping the Kings in Sacramento for next 30 years.  This is welcome news for the Sacramento region, especially if the owners of the Railyards develop the area surrounding the proposed new arena. 

If the stars align and a financing plan takes shape, the new arena will be completed the end of 2014.  The development and construction of the entertainment site will provide a host of new jobs, both temporary and permanent.  The project will revive Downtown Sacramento and bring some much-needed life and dollars to the City.

Further, the Kings’ ownership and the City of Sacramento will need to sell the existing Power Balance Pavillion and surrounding property.  The sale should spur new re-development in the Natomas area, which will include a mix of residential, commercial and retail uses.  Given the site’s central location in Natomas and its development history, the property’s sale should garner national attention and interest from developers.

Maloofs pledge to contribute $75 million upfront for new downtown arena

VIDEO: Does Arena Deal Have Council Votes?

VIDEO: Kings owners, Sacramento, NBA reach arena deal

Source: Ryan Long, Senior Marketing Consultant, (916) 784-3329 ext. 16

The American Dream… Renting in the Central Valley?

As the Central Valley land and homebuilding market continues to slog through foreclosures, short sales, and tepid new home sales, many potential homebuyers are waiting out the current real estate cycle until real signs of economic growth emerge.  

  • According to Affiliated Appraisers, the median sale price of a single family home in Kern County rose 0.8% to $132,000 from September to October this year, but decreased by 2.2% year over year.
  • The number of foreclosures dropped 9.9% from September to October of this year, and is down 36.1% since October 2010.
  • October saw 522 closed homes sales (new and resale) throughout the County, down 11.4% for the month and off 7.1% for the year.
  • Properties owned by lenders account for 40.5% of all sales compared with a national average of 30.1%.

Due to the lack of confidence in the economy and homebuilding market, many would-be homebuyers are now turning to renting instead of buying.  According to RealFacts, many potential buyers with good credit who can afford to purchase a home now are electing to wait on the sidelines, and rent an apartment or townhome for a while instead.

Indicative of demand, average monthly rent in Kern County rose 2.8% in the third quarter 2011. The County had the 16th highest rent of 24 metropolitan statistical areas in California.  Its 98% occupancy rate earned it the State’s No. 4 spot on occupancy.  Over the last 3 quarters, rent for two-bedroom townhomes in Kern County increased by 10.7% compared to the previous three quarters.

Kern County is following a pattern typical of inland communities and other tertiary markets… They tend to be the first to collapse and the last to recover.

Source: Jason Hepp, Senior Marketing Consultant, (661) 702-9080 x14