The Housing Bubble

A report from the Press Democrat in California. “As summer turns to fall, housing prices appear to be coming down in Sonoma County just in time for harvest. The median price of homes currently listed in Sonoma County is around $655,200. That is down 6% from the last June’s record high of $700,000. According to the Press Democrat’s monthly housing report prepared by Pacific Union International senior vice president Rick Laws, July home sales fell to their lowest level for the month in nine years with only 401 homes sold.”

“The market appears to be opening up a bit more with more homes available at mid-market prices. From brand-new single-family homes to refurbished multi-family estates, we are seeing more listings with more to offer. Properties with pools or remodeled kitchens, are beginning to reappear at prices under $600,000.”

The Sacramento Bee. “Home prices rose in July for most of the Sacramento region’s neighborhoods, but an increasing number of them posted small price gains or declines amid a general stagnation in the housing market. Of the neighborhoods that had 10 or more resale home sales, 50 areas saw increases in the median sales price compared to the same month in 2017. Fourteen saw declines, and seven saw modest increases of less than 4 percent, according to new data from CoreLogic. Two had no change.”

“The median sales price for all homes in Sacramento County in July was $360,000, a 5 percent increase compared to July 2017. But there was was a 1 percent dip from June’s median of $362,000. Sales are flat also. The largest decline in the median sales price for neighborhoods with more than 10 homes sold was in Truckee’s 96161, where prices dropped 24 percent. The median sales price was $912,500, down from $1.2 million in July 2017.”

The Times of San Diego. “Sales of single-family homes and attached properties in San Diego dropped in August compared to both the previous month and August 2017, according to the San Diego Association of Realtors. Realtors sold 1,902 single-family homes in August, an 8.1 percent decrease from the 2,070 sold in July. Sales of condominiums and townhomes dropped from 1,044 to 971 from July to August, a 7 percent decline.”

“Year-over-year declines in home sales were even higher for both single- family homes and attached properties. The number of single-family listings sold fell from 2,325 to 1,902, an 18.2 percent decrease, and the condo and townhome listings sold fell from 1,174 to 971, a 17.3 percent decline.”

“‘Despite some lackluster numbers in our region’s resale housing, the overall economy is performing well,’ SDAR President Steve Fraioli said. ‘We particularly want potential buyers to know that the supply of homes on the market has grown nearly 20 percent from a year ago.’”

The Union Tribune. “Competition for renters in newly apartment-heavy downtown San Diego is getting fierce with one complex entering new tenants into a contest to win a $10,000 European vacation. Alexan ALX in East Village opened at the start of the year and has some of the most amenities of any new apartment building — such as a saltwater pool on the 18th floor and a hidden speakeasy for residents — but it also is surrounded by a flurry of new apartments.”

“The vacancy rate for Alexan ALX is around 27 percent, high for San Diego but common for a new building. Its average asking rent is around $2,930 a month, said real estate tracker CoStar. That’s not very far off from surrounding buildings.”

“The rental offer is the latest in a trend of more concessions and rent reductions downtown among the surge of new luxury apartments that have opened in the past three years. Offers are especially noticeable in East Village with large complexes — Alexan ALX, Park 12, Pinnacle on the Park and Shift — all within blocks of each other.”

“‘I think they have to offer concessions,’ said CoStar senior market analyst Joshua Ohl. ‘There’s tons of supply coming online. It’s the only way they can compete to get renters.’”

“At the end of the second quarter, 21.3 percent of apartment communities in downtown San Diego were offering concessions, up from 18 percent at the same time in 2016, CoStar said. Nearly 16 percent were offering one month free rent, up from 9 percent at the same time in 2016.

“Alexan ALX leasing manager Gergana Semerdjieva said she thinks the 313-unit Alexan ALX has the best amenities downtown, but that doesn’t change the fact they are in the middle of an apartment boom. Shift, a 368-unit complex known for its orange tower, recently opened up across the street. Just a short walk away is the newly opened Park 12 with 718 units, the most of any apartment complex in San Diego history, and a second Pinnancle on the Park building will bring the complex’s total to 955 apartments.”

“The vacancy rate for apartments in downtown San Diego is around 16 percent, much higher than the 3.8 percent number for the entire county. Rent is also higher, with an average asking rent of $2,452 per month compared to $1,786 for the county. Mark Goldman, finance and real estate lecturer at San Diego State University, said many of the apartment complexes could be overshooting the mark with asking rents because incomes in San Diego have not kept pace with rent increases. Also, the monthly price in many of the luxury units is comparable (or higher) to a monthly mortgage payment so he said some potential renters may just decide to buy.”

“Some promotions have ended at downtown complexes but there are still reductions to be had. The Rey, a 478-unit apartment in Cortez Hill opened at the beginning of 2017 and had a one month free rent deal until recently. While it might have ended the deal, it lowered rent prices two weeks ago. Average asking rent was up to $2,736 a month in 2017 but now is closer to $2,380. Pinnacle on the Park in East Village, 483 units and the tallest residential tower in San Diego, is still offering up to two months free rent on select units nearly three years after opening. The average asking rent is $2,612, down from $2,972 in 2015.”

“Shift recently reduced rental rates and is offering up to two months free rent on some units. Average asking rent is 2,832 is a month, down from $3,133 at its height in 2017. It allows rent terms of six months, offering a shorter term than most year-long leases in the city.”

From News Channel 3. “A realtor’s sign sits at a home in Palm Springs ready to be sold. Homeowner Steve Reeves and his partner are looking for a much smaller space. ‘My partner and I are both in our 70s. We both have medical problems and that’s why were looking to downsize,’ he said.”

“Selling their two bedroom, two bathroom house though has been slow however. Since putting it up on the market in June, Reeves thinks the weather is playing a role. ‘You might be wasting your time, because when it 115 degrees outside, no one’s going to come looking for a house,’ he said.”

“Reeves say four interested buyers have looked at the house, including one from the Bay Area not deterred by the approximately $560,000 price tag. ‘As soon as they say San Francisco, I think money, with the way prices are up in San Francisco,’ he said. Reeves believes once the weather cools down and the tourism season picks up, interest will rise in his home. ‘I know the Canadians have really invested a lot of money down here in the desert, so if they want to look at my house, they’re more than welcome too,’ he said.”