Experts say the Uptown real estate market is calming down, but things appear different
By Michael Good | HouseCalls
Is it just me, or has the local real estate market gone completely crazy in the last few months? The asking price for a three-bedroom bungalow in the West End neighborhood of North Park has recently crossed the $900,000 mark.
That’s right, $900,000. For a three-bedroom bungalow. In North Park. The former middle-class neighborhood that was once famous for its abundance of churches is now famous for its proliferation of craft-beer pubs — and skyrocketing real estate prices.
For the sober-minded, $900,000 is a staggering number because, well, it’s practically a million. Practically a million bucks for a house that sold for $150,000 20 years ago, and cost about $3,000 when first built.
At first glance, or even second glance, there seems to be a disconnect here. The 2015 median house price in North Park, according to a February 15, 2016 feature in the Union/Tribune, was $450,000. North Park, the story noted, is among the 18 ZIP codes in San Diego that have returned to their pre-recession median home price. But $450,000 is a far cry from $900,000. In fact, asking twice the median price — and getting it — seems the very definition of “irrational exuberance.” So is the market slightly unhinged?
I put the question to several local real estate experts, including Ron Rooney, who was the listing agent for a three-bedroom bungalow on 28th Street that sold for $925,000 in December. It should be noted that I caught Rooney in an airport in Puerto Vallarta, Mexico waiting to board a plane — not the best place to talk real estate.
“I’m still seeing prices trending up and still seeing multiple offers in our area,” he said, trying to overcome the cacophony around him. “In the past month, the properties we’ve put out offers on have had multiple offers. The market is pretty robust.”
But is it too robust?
“I think … some initial listing prices may be higher than warranted. But we’ve just been seeing very steady, stable appreciation — not like what we were seeing before the bubble in 2008. It feels comfortable to me.”
I asked him about a particular listing in the neighborhood that exceeded the $900,000 mark. Ever judicious (a character trait probably left over from his days as a lawyer), Rooney refused to address any specific active listing — but he was willing to talk in generalities.
“In general, I think what happens is agents look at price per square foot on other properties and try to do a dollar-per-square-foot comparison. And it doesn’t always translate. You might be able to find comps to support that kind of pricing. But they’re not comparable properties,” he said.
Rooney brings up the example of the David Dryden Craftsman on 28th Street he just sold. When determining the value of a house of the same size in the neighborhood, he said, “an appraiser might look at that as a comp. But buyers wouldn’t look at it as a comp.” He explains there are too many other variables involved with vintage homes. It’s not only about the numbers. For the homebuyer, there are other factors — esthetic, personal, emotional, historic.
Not surprisingly, the other real estate agents I talked to were reluctant to say that $900,000 was too much to pay for a bungalow. And no one was willing to put the word “crazy” and “home prices” in the same sentence, particularly when talking to the media. Fortunately, however, through the wonders of the Internet, I was able to verify that there is indeed something wacky going on with prices in the West End.
Here are the numbers (you’ll notice a rapidly rising price-per-square-foot): In May 2015, an 1,804-square-foot house in the 3500 block of Utah Street sold for $851,000, or $472 a square foot. In August, a 1,372-square-foot house in the 3500 block of 29th Street sold for $750,000, or $547 a square foot. In September, an historic house in the same block sold for $950,000, or $541 a square foot. In December, a 1,530-square-foot house in the 3500 block of 28th Street sold for $925,000, or $604 a square foot. Finally, in January 2016, a 1,272-square-foot house in the 3700 block of 28th Street sold for $790,000, or $621 a square foot.
So, from May 2015 to January 2016, prices per square foot in this four-block area rose 31 percent, from $472 to $621. And the heat in this micro-neighborhood isn’t a complete aberration. According to Trulia, the median price of a three-bedroom house in North Park went up 21.8 percent in 2015. Contrast that to all of San Diego, where the median price was only up 6.9 percent. (Predictions are for an even smaller increase this year.)
Although some buyers are getting priced out of the market — the percentage of renters in the 50 largest U.S. metro areas rose from 36.1 percent in 2006 to 41.1 percent in 2014 — there are still plenty willing to pay above asking price for an historic home in Uptown San Diego. The downside to that is, at that price, fewer preservation-minded people can afford to buy and restore a vintage house. When you’re paying close to a million dollars, a home becomes more of an investment, and there’s more incentive to remodel it as such: thinking in terms of square footage, number of bathrooms, a recently remodeled kitchen — all those things that HGTV tells us will increase the selling price of a house.
For the West End, what had once been a funky, fringe neighborhood for urban pioneers willing to turn a blighted area into a bungalow heaven has now become a magnet for flippers and wealthy investors. Young people, even successful young people, are not able to buy in as easily as they once could. According to Trulia, older millennials, ages 26 through 34, are buying fewer homes than their age counterparts 10 years ago. Lawrence Yun, chief economist for National Association of Realtors, blames student debt for the drop in homeownership for this age group. In 2005, student debt totaled $600 billion. Today that number has risen to $1.3 trillion.
This situation has caught the attention of preservations. Jaye MacAskill, president of the board for Save Our Heritage Organisation (SOHO), San Diego’s preservation group, is also a real estate agent for Bennion & Devill Homes in Mission Hills. She doesn’t hesitate when asked if she thinks prices have gone crazy in Uptown San Diego. “Yes,” she said. Even in Rolando, in the College Area, where she sold a house a year ago for $335,000, prices are increasing rapidly. “Three weeks ago a similar house sold for $479,000.” For those keeping score, that’s a 42 percent increase.
MacAskill recommends looking further afield than Mission Hills, Kensington, North Park and South Park. She just sold an extremely well preserved Craftsman in the historic part of Escondido for $425,000. “La Mesa is still high, but look at Lemon Grove. National City is half the price of Uptown,” she said.
“Hopefully people will continue to see historic as cool. And people will keep bringing back all the historic neighborhoods. Barrio Logan has beautiful houses. Preserving old houses always required a pioneering spirit. In the past there were people who had vision and energy and an appreciation of old houses, and a lot of those people went on to found and support SOHO. It seems younger people are again interested in vintage homes. Maybe the tide will swing back.”
As for affordability in North Park, that ship may have already sailed.
—Contact Michael Good at firstname.lastname@example.org.