San Diego County home prices have hit the highest level in five years, as distressed sales continue to fall and mortgage rates are still near record lows.
The median price of a home sold in April rose to $400,000, up 21 percent from the same time a year ago, reported San Diego-based real estate monitor DataQuick on Tuesday.
Last month’s median price matched the median in April 2008, and the all-time peak was $517,500 in November 2005. Sales, which remain brisk, rose 7 percent from a year ago to 3,792.
The county has seen double-digit annual increases for the past eight months, prompting some concerns of a lead-up to another housing bubble.
Michael Lea, a real estate economist at San Diego State University, believes those fears are overblown. Continued hikes in home prices are due largely to a shift from a distressed market, which brought consumers heavily discounted deals, to a more traditional market. Short sales — deals that let borrowers sell their homes for less than what they owe — are also declining.
Properties that were lost to foreclosure in the past year and resold in April made up 10 percent of total home resales, the lowest share in six years, DataQuick numbers show. They peaked at 55 percent in January 2009. The median price at that time was $280,000.
“The market has seen a significant decline in the number of lower-priced transactions, in part because foreclosures and short sales are petering out,” Lea said.
As the supply of lower-priced homes dwindles, more San Diego homebuyers are moving up in price range. That also has caused the countywide median price to shoot up.
About a third of residential transactions sold for $500,000 or more in April, the highest share for any month in five years, according to DataQuick figures. A year ago, that share was 23 percent.
That significant jump is due to overall price appreciation during the past 12 months and “just more activity in the move-up market with the improving economy,” said DataQuick analyst Andrew LePage.
“It’s a big change in psychology … in just a year,” he added.
Lower-than-normal supply continues to play a role in countywide prices firming up.
The number of homes on the market has steadily risen in the past four months but remains about 31 percent lower than a year ago, based on numbers from the Greater San Diego Association of Realtors. Fewer homes on the market means increased competition among buyers, everyone from first-time buyers to investors. Stories of bidding wars continue to surface.
Low mortgage rates, which have made homeownership more affordable, keep driving housing demand, said Lea, the economist at SDSU’s Corky McMillin Center for Real Estate.
Fixed rates rose for the first time in six weeks but remain near historic lows. The 30-year fixed is averaging 3.42 percent, while the 15-year fixed rate is averaging 2.61 percent, based on Freddie Mac numbers.
The Federal Reserve has continued to buy mortgage-backed securities to boost the overall economy. Fed Chairman Ben Bernanke said the stimulus plan should keep both long-term interest rates and mortgage rates down, allowing more people to buy homes and refinance their home loans.
Norm Miller, professor at University of San Diego’s Burnham-Moores Center for Real Estate, said the plan has worked so far. But if it goes on for too many years and double-digit price hikes persist, those conditions could be unsustainable and a real estate bubble could form, he said.
For now, another bubble can be avoided if homebuyers continue to buy what they can afford and underwriting standards for mortgages continue to be strict, Miller said. A key difference between the housing climate now and during the lead-up to the real estate crash is that lenders aren’t issuing subprime or second mortgages, which got a lot of homeowners into trouble.
“People buying homes today have more equity,” Miller added. “That was the whole problem in 2006-2007, people were buying homes without much equity and refinancing. “The next cycle will likely be less severe than this one was.”