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Home prices rise, local builders optimistic

By Roger Showley
UT STAFFWRITER

The median home price in San Diego County rose slightly to $290,000 last month, MDA DataQuick reported yesterday, offering the latest indication that prices might have bottomed out.

It was the third consecutive month that the median has remained unchanged or risen, after falling for 18 of the 19 previous months. The median was up from $285,000 in both February and March and a recent low of $280,000 in January.

Borre Winckel, chief executive at the San Diego County Building Industry Association, said builders believe the local market has reached the bottom. They report more visitors to sales offices and expect to sell out of virtually all standing inventory of completed single-family homes next month.

"The optimism is justified in that we don't believe it's going to get worse from here," Winckel said. "The big question for our industry is how long will we be looking at virtually no change in the situation we find ourselves in today."

Even with the upturn, the median is 44 percent below the peak of $517,500 in November 2005 and is back to where it was in early 2002. The April median was down 27.5 percent from a year earlier.

Many observers are reluctant to declare an end to the slump because economic factors could send prices down again. DataQuick analyst Andrew LePage pointed to rising unemployment, continuing foreclosures and a difficult climate for getting loans.

"I think the data will be choppy for a while because of all the counter currents," LePage said.

Sales volume was up 11.8 percent from March -- a reflection of the usual April upswing. Year-over-year, the increase was 20.1 percent, the 10th consecutive month of year-over-year sales increases.

Winckel said builders are hoping the market will get a further boost from a proposal to increase a fund for the state's $10,000 new-home tax credit from $100 million to $300 million. But they worry that such an increase would be unlikely if the voters reject the budget-related measures on today's special election ballot.

Peter Dennehy, senior vice president at Sullivan Group Real Estate Advisors, said he reads all the factors as "signs of life" in the home-buying business and not a "false bottom."

"It's not a one-month fluke," Dennehy said. "It's consistent from what we're hearing from the field."

DataQuick also reported that the proportion of former foreclosures being sold dropped to 47.3 percent of all resales, compared with the record 55 percent in January.

Analysts said this would be a positive sign of an improving market except for the concern about a backlog of foreclosures that banks did not begin moving on until the recent end of an informal moratorium.

"The number of foreclosures slowed down and will pick up again because of the record number of notices of default," said Rick Winkler, broker and owner of Market Realty.

Active listings down

Another significant figure is the number of active listings, reported at 13,354 yesterday by the San Diego Association of Realtors. That was down about 500 homes from the same time in April and off 27.1 percent from year-ago levels.

If homes continue selling at the current rate, the inventory would be gone in about four months. An inventory of three to four months is considered indicative of a normal market, in which supply and demand are roughly in balance.

But with so many distressed homes for sale and few move-up and high-end properties available, many analysts wonder if sellers might move to list their properties at the first sign of stability and push the inventory up once again.

"We haven't seen a huge increase in listing activity as we would normally see by May," said David Cabot, executive vice president of Prudential California Realty.

When he attended a midyear review of the housing market last week in Washington, Cabot said, Southern California was singled out as the most likely region to bottom out and recover first because it was the first to enter the housing slump.

"If we haven't hit bottom, we will be there next week," he said, paraphrasing the prognosticators.

Winkler, the broker, said next spring rather than next week is when he expects an upturn.

"I'd be out there buying if I didn't think there were too many other shoes to drop," Winkler said.

That was also the concern expressed by DataQuick's LePage in cautioning against any premature jubilation that the housing slump is over.

"The key is it's stability we're looking for, not a rebound," he said, and that is most likely in neighborhoods such as eastern Chula Vista that have been hit hardest by foreclosures and plummeting prices.

Rising confidence

In another sign of optimism, the National Association of Home Builders yesterday reported rising confidence among members that sales will improve in the next six months.

Builder confidence rose 2 points to 16 on the 100-point Housing Market Index, issued by the homebuilders group and Wells Fargo Bank. For Western states, the index rose from 8 to 12.

But both index levels are far below the 50-point mark, the dividing line between optimism and pessimism.

Ross Starr, an economist at the University of California San Diego, said even if housing seems to be stabilizing, real estate and construction are not likely to pull the local economy out of recession.

"The construction industry will not be the leading sector bringing us out of the recession because of the immense excess inventory out there," he said, citing downtown condominiums in particular.

What is happening, he said, is that "strong" ownership is taking over from the "weak" in the sense that distressed property is getting into the hands of owners with solid incomes and healthy financial balance sheets.

"This is a great time to be a buyer, especially a well-financed buyer," he said.

Online: For more on San Diego County home prices and sales for April, go to uniontrib.com/more/homesales

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