Buyers get their choice; builders have shut down new starts
- North County Times, From Valley Center to Del Mar, buyers can be picky. It's their market. Most cities in North County carry hundreds of home listings for sale while barely a dozen sell each month.
Even some of North County's traditionally strongest housing markets are struggling with a wealth of sellers and a dearth of buyers, according to a North County Times analysis of multiple listing data for the last three months and sales data for the last three years from the North San Diego County Association of Realtors. The multiple listing data were provided by Sandicor, a service used by real estate agents to list properties for sale.
For instance, in Carlsbad's 92008 ZIP code, the area closest to Oceanside, has weathered the housing downturn in terms of median price for all homes, where half sell for more and half for less, actually increasing during 2007 from 2006, according to a monthly Realtors report.
But considering the ratio of recent sales numbers to active listings, it would take about 18 months to sell all the listed houses.
By contrast, in Oceanside's 92057 ZIP code, located principally north of Highway 78 and east of Interstate 5, San Diego's foreclosure capital, would take 10 months to move all homes, the newspaper's analysis showed.
The larger the ratio, known as inventory, the more months it takes to sell. That puts more pressure on sellers to reduce prices.
"Anytime you're over six months (of inventory), the market's considered a little bit soft; and any time you're over 12 months, you're going to see some significant price adjustment," said Norm Miller, a real estate professor with the University of San Diego. "It's basically a buyer's market; they can negotiate more aggressively."
Inventory numbers vary wildly across North County from a high of 26 months in Valley Center to a low of six months in Carmel Valley and Rancho Penasquitos, according to a three-month average of for-sale numbers provided by Sandicor this week.
Huge inventories have forced several builders to stop development in San Diego and look outside of the state, said builders in interviews over the last two weeks.
"Why would anyone build right now?" said Mark Connal, sales director for Michael Crews Development, a builder based in Escondido.
Home builders have responded to the glut of listings by practically shutting down construction. Countywide, they took out just 146 permits for new homes during February, down 53 percent from a year ago, and the lowest number since 1992, according to data released Wednesday by the Construction Industry Research Board, an industry group based in Burbank.
Beyond posting the lowest number in 16 years, the 146 permits issued last month pale in comparison with the 1,012 permits taken out in February 2001.
"I'm surprised they pulled that many," Connal said. "Until inventory comes back down, nobody's going to build."
Connal said he thought that fire victims rebuilding their homes were responsible for a significant portion of the permits issued -- meaning actual new development is probably negligible.
Communities that have seen some of the steepest price depreciation and biggest drops in sales are in North County's rural regions. Other than Valley Center's leading inventory number, Ramona carries 16 months and Fallbrook has 20 months of inventory.
Meanwhile, only two homes have sold in Bonsall over the last three months.
The problem there is that owners are attached to custom-built homes and unwilling to reduce prices, said Fallbrook real estate agent Mark Fabela.
"People are still unrealistic, and they're still marketing their house at the high end," said Fabela, an agent with Coldwell Banker. "Until it comes down to reasonable pricing, we're going to see that high inventory."
Beyond Carlsbad's 92008 ZIP code, several historically strong markets across North County are burdened with large inventories.
Rancho Santa Fe, the most expensive city by median price in North County, lists 21 months of inventory. Solana Beach, which also has high median prices that have not seen significant price depreciation, is trying to wade through 13 months of listings.
In these higher-end markets, which boast median prices of more than $1 million or more, well-heeled sellers are able to wait on the market to recover rather than sell at a discount, real estate agents said.
"Would you think (high inventory) would get people to drop the price? Yes, but I see more and more people just take (the home) off the market," said Anne-marie Boyer, a real estate agent based in Rancho Penasquitos. "They just sit on it and figure, 'If I don't get what I want, I'll just keep it.' "
Some cities represent what housing analysts call "pockets of strength," where inventory is low and sellers can hold firm on their pricing.
But the pockets tend to be highly localized. For example, Carmel Valley carries only six months of inventory, but neighboring Del Mar posts an inventory of 14 months.
Some analysts say five to seven months represent a healthy market for San Diego.
For all of North County, the average inventory of the last three months is 12.5 months.
Despite the high inventory, some agents see the market stabilizing this year.
"There's a large pent-up demand," said Dennis Smith, a Carlsbad real estate agent. "People are holding off until they believe we're close to a bottom. Once they get that feeling, we're going to see sales jump."
Not all real estate agents agree.
Sue Landis, a real estate agent in Carlsbad, says she does not see the home price depreciation -- the North County median has dropped 16 percent over the last year -- ending until 2009.
"Prices are not going to go up this year," Landis said. "This is not a market for unmotivated sellers. ... If it's overpriced, it'll just sit there."
