NATION'S HOUSING    KENNETH HARNEY
Sales and prices are up in select 'micro' areas

August 12, 2007

WASHINGTON – Though real estate sales and prices are flat or down in dozens of metropolitan areas, micro-markets within them are performing very differently: Prices and sales are up this year over last, and plenty of buyers still want to move in.

Call them real estate oases – neighborhoods and ZIP codes that defy national and regional downturns, and remain in demand as long as the local economy keeps generating jobs and rising incomes. Housing analysts say they can be found in most major markets whose local economies display moderate to strong fundamentals.

As a group, oasis micro-markets share some key characteristics. They are often:

Close-in, established neighborhoods convenient to the urban center's employment and cultural attractions. They don't require residents to make long commutes, sit in traffic for hours or worry about gas prices.

Above median income – often well above – with home prices to match. Typically these are not entry-level, first-time buyer markets, nor do they have lots of new subdivision construction. Educational levels of residents exceed regional norms, local school systems are highly regarded, and crime rates generally are low.

Prime, not subprime, mortgage territories, with little to none of the negative neighborhood impacts of rising foreclosures caused by payment-shock loans going sour.

A few examples: In the Washington, D.C., metropolitan area, the ZIP codes 20815 (Bethesda-Chevy Chase, Md.) and 20015 (portions of Northwest D.C.) are avoiding most of the down-market trends in the larger metropolitan area that surrounds them. In the 20815 ZIP code, which borders the District of Columbia on the north, headlines about housing market distress don't capture what's happening on the ground.

Dollar volume of sales was up 22 percent from June 2006 versus June 2007, average selling prices were up 11.5 percent, and median selling prices were up 6 percent, according to multiple listing service data provided by veteran broker Dale Mattison of the Mattison Group at Long & Foster Realtors. The only hints of strain, he said, have been in total houses on the market – which were up by 9.7 percent – and average days on the market, which increased to 47 from last year's 33.

Just across the D.C. line, in the contiguous 20015 ZIP code area, average sale prices were up 6.6 percent and median prices up 3.5 percent during the 12-month period, though total dollar volume of sales was down 2.5 percent.

Contrast these two micro-markets' performances with the nation's capital as a whole, where dollar volume was down by more than 16 percent, the average sale price was down 6.8 percent, and the median price dropped by 3.5 percent.

Move to Florida: In the Miami-South Dade metropolitan area, a number of oases exist. Close-in communities such as Coral Gables are handling the downturn far better than more distant, lower-cost communities such as Homestead and Florida City, which have seen extensive new construction in recent years.

Maurice J. Veissi, owner of Veissi & Associates Realtors of Miami, tapped into MLS statistics and found that Coral Gables has seen average sales prices rise from $1.2 million in January to about $1.4 million as of June 30. In Homestead, the average sales price has remained relatively flat – around $320,000 – while prices in Florida City have declined on average. Inventories of unsold homes in the latter two areas exceed three years, according to Veissi.

“In my 38 years in real estate,” he said, “I have never seen a market where more expensive properties have stayed relatively healthy, while entry-level houses are the toughest to sell.”

Other metropolitan areas where similar patterns can be found include San Francisco, where highly regarded in-town neighborhoods such as Pacific Heights and the Marina continue to outperform the metropolitan area and the state as a whole, with nearly 8 percent median price gains for the first six months of the year, according to John Asdourian of McGuire Real Estate.

In the sprawling Los Angeles metro area, close-in “high-end neighborhoods are more robust at the moment than entry-level,” says Pat “Ziggy” Zicarelli, CEO of Style Realty of Tarzana. Moderate-priced and distant communities – especially those where large numbers of buyers used creative financing to purchase more than they could afford – “are really struggling” and experiencing declines in prices, sometimes in the double digits for the first six months of the year.

The bottom line here? Real estate value patterns and sales performances are uniquely localized – right down to ZIP codes, neighborhoods and even individual streets. In the current national correction phase following the unprecedented boom years of 2001-2005, even adjacent micro-markets may be performing very differently.

Smart buyers and sellers know that, and adjust their strategies – on pricing, timing and bargaining – with a micro perspective, no matter what the metropolitan headlines may be.

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Kenneth R. Harney is a nationally syndicated real estate columnist with the Washington Post Writers Group. His e-mail address is kenharney@earthlink.net.
© Washington Post Writers Group

 

Housing prices in county hold their ground

June sales volume is lowest since 1997

Despite concerns over a mushrooming number of foreclosures and a continued steep decline in sales, San Diego County’s housing prices still ended the first half of the year on surprisingly stable ground, statistics from DataQuick Information Systems reveal. Last month’s median price for all homes, including condominiums, stood at $495,500, down nearly 2 percent from a year earlier, but up by $3,500 compared with May, DataQuick reported.

However, sales activity remained anemic, with the total number down nearly 23 percent last month compared with June 2006 as skittish buyers took their time deciding when to jump into the slumping market. At 3,510 sales last month, it was the slowest June since 1997 and the 36th consecutive month of year-over-year declines in sales volume. While the median home price last month was off more than 4 percent from its peak of $517,000 in November 2005, San Diego County may well have dodged the sharp declines that some real estate forecasters had been predicting, DataQuick analyst John Karevoll said. “The big issue here is that with the slowdown, you would have expected prices to come down much more than they have, and it’s very likely now that most of the decline off the peak for San Diego has already occurred,” he said. Released yesterday, June’s data provided a convenient check-in point on the market’s performance this year.

For the six months, the county’s median home price was down 4.3 percent, at $485,000, according to DataQuick. The median represents the midpoint of all sales, with half above and half below that figure. “As perceptions change and buyers understand that what they’re buying will keep its value or go up, you should see between now and the end of the year the number of sales tick up off this floor level,” Karevoll said. “The big IF there is what happens in the broader economy. The big one there is mortgage interest rates.”

Last week, the 30-year fixed-rate mortgage averaged 6.73 percent, based on an average lender fee of 0.4 point, according to Freddie Mac, the government-sponsored mortgage company. That was up from the week before when it averaged 6.63 percent. Last year at this time, the 30-year mortgage rate was nearly the same as now, averaging 6.74 percent. Economist Edward Leamer, director of the UCLA Anderson Forecast, agreed that a continued flat or slightly declining market is the more likely scenario than a prolonged, sharp drop in housing prices.

“My advice for a buyer is now’s the time to shop carefully when there’s no pressure, and pick a place you really want to live in,” he said. “Don’t think in terms of flipping,” he said. “The continuing news may be disturbing but there’s not going to be a dramatic drop in the value of a home.” In the single-family resale market, which accounted for more than half of all sales last month, the median price varied little from a year ago, hitting $565,000, or $2,000 less than the median last June, according to DataQuick. Still, few neighborhoods in the county have escaped the market’s downturn.

During the first half of the year, 13 of 91 ZIP codes posted an increase in prices compared with a year earlier, based on 50 or more sales. And seven communities had single-family resale prices hit their all-time peak in that same time frame, Karevoll found. Two of the five ZIP codes with the highest appreciation for resale homes this year were in the county’s north coastal area. Those included Cardiff and southeast Carlsbad. Also among the top ZIP codes were western Escondido, Rancho Santa Fe and El Cajon. “A lot more buyers are looking at what they see as the superior areas and leaving behind areas that aren’t as good in their mind,” said real estate broker Jim Klinge, who specializes in North County coastal properties. “Oceanside is really struggling, there are a lot of houses for sale, hardly any selling, but in Carlsbad, the buyers who are looking in North County coastal want to hold out and buy there first even though it costs more because they view those as better properties.”

Agent Jennifer Locke, also a specialist in North County, says the properties selling the fastest are those with qualities such as a good view, a large lot or appealing upgrades. That was the case, she said, with a Solana Beach home she sold last week that had a nearly full-price offer the day after the open house for brokers. Its large lot and view of nearby hills quickly drew interested buyers, she said.

The San Diego Association of Realtors said the average number of days a resale home spent on the market was 66, compared with 60 a year earlier. Competing in the mix of properties on the market is an increasing number of homes taken back by lenders when owners who bought their homes with risky adjustable rate loans were unable to make their payments when the rates reset.

The spike in foreclosure activity that began last year has dramatically increased the number of distressed homes on the market. Agents who specialize in selling homes reclaimed by lenders report a brisk sales pace that hasn’t been seen since the housing recession of the mid-1990s. “That was our heyday,” said Rose Avedisian, who sells real-estate-owned, or REO, properties in East County. “Back then, we carried 60 or 70 properties at any one time. It is closely approaching that now.”

Home-search Web site ZipRealty reports that about 4 percent of homes now for sale in San Diego County are owned by lenders, up from less than 1 percent a year ago. Lenders are motivated because they “want to sell rather quickly,” said San Diego agent Marc Carpenter, an REO specialist. “The longer they hold onto the property the more money they lose.” Union Bank of California senior economist Keitaro Matsuda, though, said that concerns about foreclosures dragging down overall home prices may be misplaced. So far “prices don’t seem to be affected all that much.”

DataQuick has yet to tally June foreclosures, but analyst Andrew LePage says there’s no evidence yet that the surge is ending. A record 532 dwellings were taken back by lenders or sold at auction in May, a slight rise over April, DataQuick reported. County foreclosures for the first five months of the year totaled 2,240 compared with 336 for the same period in 2006. The 91977 ZIP code, which includes La Presa and Spring Valley, has one the region’s highest concentrations of foreclosures.

There, the homes range from abandoned dwellings filled with trash to high-end view properties. On Clamath Street north of Jamacha Boulevard, three adjacent single-story houses are undergoing distress sales. Two have been reclaimed by lenders. One is being offered as a “short sale,” in which the lender has agreed to accept less than a full mortgage repayment. Such clusters are unusual, and they can hurt neighborhoods, said Avedisian, who represents one of the properties. “People begin to wonder if there is something inherently wrong.” Rodney McHone, a father of four who bought his Oceanside home three years ago for $609,000, has put the four-bedroom house up for sale, hoping he can get $475,000 for it in a short sale. He says he knows there’s no guarantee his lender will let him stave off foreclosure by accepting a lesser price, but McHone says he has little choice as he faces mortgage payments that could soon balloon to more than $5,000 a month. “This was my wife’s dream house,” said McHone, who is trying to work his way back up from a substantial pay cut in his job as a sales manager for a fitness company. “I’m not going to walk into a foreclosure. I worked too hard to build up my credit. I’m not going to let no house screw up my family.”