May 22, 2014: Metrostudy’s 1Q14 survey of the San Diego housing market reveals a lot of mixed messages, with both positive and negative signals for future growth. Total Closings for 1Q14 decreased 34% from 4Q13 as homebuyers faced low inventories of new homes. At the same time, 1Q14 new home starts were 1,818, up 200% from 4Q13 and up 130% from 1Q13. The Annual Starts rate was 3,799 units; up 40% compared to the 12 months ending in March 2013.
Starts by County indicate that the San Diego/Imperial new home market accounts for 30% of the entire Southern California new home total starts. When San Diego/Imperial is added to the other I-15 adjacent counties we find the I-15 Corridor maintains a 48 % share of new home activity in Southern California.
“The San Diego economy is an incredible opportunity for the housing industry,” said Steve Johnson, Regional Director of Metrostudy’s San Diego Market. “The diversity of our drivers to growth is the envy of many counties to the north. Prosperity, however, must be matched with the opportunity for home ownership for the talented young people attracted to jobs in technology, biological sciences and other well paying career fields. The problem is San Diego does not have enough developable dirt in the right locations to fuel future population growth.”
The median resale price in San Diego County was $410k in 1Q14, up 14% from 1Q13. The 1Q14 New Home price was $523k, up 9% from 1Q13’s $476k. There presently are approximately only 2.14 months of supply in the resale markets and only a 6.9 Months of Supply in the new detached market and 30 months of supply in the new attached home market.
We are seeing the highest starts volume in the $399k-$549k range; the second most significant price point is $699k-$849k mostly influenced by north county single family product. There are now 1,159 attached and 2,838 detached Vacant Developed Lots in San Diego/Imperial representing a combined 12.6 months of supply.
“The county is planning well with mixed-use communities in many locations but inevitably we need to house some of the future professionals in adjacent markets to the north or south,” said Johnson. “Now would be the time to plan for more public transportation in coordination with adjacent counties to facilitate the movement of people. We have spent too many years building only 2,500 new homes per year and just hoping the market will somehow correct itself. Homebuilders need dirt and we need to find away to make it easier to rezone, reuse and entitle what we can or the jobs will follow housing.”
The San Diego/Imperial new homes market detached total housing inventory remains at a low level with only 911 new homes in the construction process or finished vacant. There were only 2,529 detached homes started in the last 4 quarters throughout the two county market area. The attached product with 2,286 units in total inventory represents 30 months of supply; 506 were finished and vacant, resulting in 6.8 months of supply of finished homes. High Rise product contributed to the huge jump in inventory with most located in the Central submarket.
Homebuyers are facing lots of competition from investors in this market. Absentee buyers using cash or a mortgage represented 27.4 % of all Southland transactions, down from 31.2% a year ago and far above the ten year average of 18.7%. In addition 6.4% of homes sold are foreclosure resales and 7.7% of homes sold are short sale transactions. Investors are purchasing these homes with cash purchases representing 29.1 % of all transactions compared to the 10 year average of 16.5 %.
For information contact: steve johnson @ 951.848.3100
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
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