Taking the temperature of the red-hot Uptown real estate market
Michael Good | House Calls
Never have so many people been so overwhelmed by so much confusing, confounding and contradictory information. I’m talking about the economic numbers we are bombarded with daily, which we apparently need in order to decide whether to go on living. Or, at least, go on spending.
Job reports, corporate earnings reports, stock-market indices – even the national mood – are all fodder for media measurement, analysis and teeth gnashing. Thank goodness they’ve stopped charting the undulations of pork belly futures. Finally, something we don’t have to worry about.
And then there’s the resale housing market. Prices are up everywhere, about 12 percent nationally. Locally, according to DataQuick, single-family home prices rose 19.2 percent from June 2012 to June 2013. In North Park, the price increase was even more dramatic: 27 percent. In Hillcrest: 23.5 percent.
But does that mean it’s okay to start feeling good about your house as an investment again?
Maybe. But your house isn’t worth anything unless a lending institution, or an appraiser, or a guy with a lot of cash says so.
“Appraisers have three boxes to check off on the standard forms: inclining market, stable market, declining market,” said Ron Rooney, an attorney and broker associate for Ascent’s North Park office. “Up to last year, an appraiser would have to check declining market.”
That meant that even if appraised value matched the sales price, banks wouldn’t lend. Things are easier now, Rooney said, because “appraisers aren’t checking that box anymore.”
Still, it’s hard to find a comp that matches what buyers are willing to pay. Sometimes, it’s just a matter of waiting until a nearby property sells and establishes a higher comparative price. Other times, it’s more complicated.
“Last month we sold a property in Carmel Valley,” Rooney said. “The best comp was $585,000. We listed it at $589-$629,000, and closed at $669,000. We had 17 offers in one week.”
But the bank’s appraisal was $50,000 below the sale price, so Rooney had to get creative. “The buyer had to wave the appraisal, and come up with an additional $50,000, out of pocket, to close the deal.” This kept the loan amount within the bank’s appraised value, and established a higher comp for the next house to come on the market.
This is part of the process driving up prices. So is a lack of inventory, because some homeowners are still underwater. But there’s another reason. Blame it on information overload.
“Some of the folks I’m working with may no longer be underwater, and they may be interested in selling, but they’re ambivalent,” Rooney said. “They are hoping to see further increases, so they can take some profits with them.”
But if they are planning to buy another, isn’t the price of that house also going up? And aren’t interest rates also rising? Isn’t it in their best interest to act now, rather than later?
Rooney laughed. “That’s an argument you can imagine me making. Intellectually, they understand. But understanding doesn’t always get them over the psychological barrier,” he said.
So Rooney said he continues to provide encouragement “in a very diplomatic and polite way.”
Charles Tiano, a Mission Hills broker with a background in flipping houses, sees another factor driving prices: pent up demand. “During the past six or seven years, people who would normally buy a house or move up, their plans were virtually put on hold. What we’re seeing now is a real dramatic entry into the marketplace. Six years of people getting their life together, starting their family, downsizing, making transitions: it’s all happening in one year.
“Since 2007, the market has been unbalanced. It had more sellers and fewer buyers. And the majority of buyers were investors. There were a number of savvy people who were able to take advantage of low prices and low interest rates.”
Tiano was one of those people. He bought a short sale in University Heights – the Darling House, a pink Victorian at the west end of Adams Avenue – that he’s been restoring. Tiano has an interior design degree from San Diego State University, and although he was in commercial real estate for 30 years, he’s been flipping houses and doing interior design work and project management for remodels since the recession started.
Recently, he’s been representing buyers and sellers for his brokerage, C Edward & Co. Tiano has seen a change in consumer confidence: no need to analyze the numbers.
“Homeowners are definitely loosening up. One trip though Home Depot and it’s obvious,” he said.
However, no one’s partying like it’s 1999.
“Consumers are more cautious,” he said. “The spending they do, they want to make sure they get a return on it. Not frivolous purchases, not big screen TVs. But investments in their homes, and that’s a big difference.”
The mini-boom means buyers are again getting priced out of the market, said Jaye MacAskill of Windermere in Mission Hills. As board president for Save Our Heritage Organisation, she knows her historic homes. People from around the country reach out to her when relocating to San Diego. They go into shock, however, when they see the prices.
“I have someone who wants to move out here next year. It was quite an eye opener for her to see how far $400,000 goes in San Diego,” she said. “Prices countywide are approaching $500,000. That shuts out a lot of first-time homebuyers. Mission Hills, Hillcrest, North Park—they’ve already been gentrified. It’s been a flippers paradise for the last 15 years, now very few older homes remain intact.”
MacAskill has some numbers of her own: “In 92103 there are 51 total listings. Of those, 37 were built before 1963. In 92104, of 43 total residences, 38 were built in 1963 or earlier,” she said.
That means if you’re looking for something with historic potential in Hillcrest, Mission Hills or North Park, there are only 75 candidates. Last month, 4,048 single-family homes sold in San Diego. That gives you an idea how rare historic homes are, and how few houses are on the market in the metro area. Rarity, location and pride of ownership have kept prices high in historic neighborhoods, despite the recession.
“The least expensive house in Mission Hills is listed at $669,000,” MacAskill said. “It’s 858 square feet on Witherby Street. That’s $780.77 a square foot.” In North Park, things aren’t much better. In West End, two blocks from the intersection of Upas and 30th streets, a 580-square-foot, one-bedroom bungalow on a 1,300-square-foot lot is listed at $369,000: $639 a square foot, and $80,000 more than it sold for a year and a half ago.
But all things considered, maybe that isn’t such a bad deal. After all, money isn’t everything. And a house isn’t just a number. It’s a home, provided you can get financing.