San Diego’s Home Affordability on the Rise

A recent report from the National Association of Home Builders revealed that almost 45% of homes sold in the last quarter of 2008 in San Diego County were affordable to families earning the county’s median income of just over $72 thousand. The highest such number San Diego has ever reached was in the 1st quarter of ‘94 at just over 48% during the last recession. The new number is up from the 3rd quarter number, slightly below 39%, and a vast improvement over the fourth quarter of 2007, when only 14% of homes sold were affordable. The affordability index is also up across the nation to almost 63%, compared to 56% in the 3rd quarter and almost 47% at the end of last year. An expert commented that the rise in affordability can be attributed to dropping home prices as well as mortgage rates falling. The index makes the assumption that buyers put ten percent down and set aside 28% of net income for insurance, interest, principal, and taxes.

In addition, home prices have continued to drop in the Southern California area. The median price for homes sold in the area currently stands at 250k, an almost 40% drop from January’s median of 415k. San Diego County’s median home price stood at 280k in January, the 1st time in 7 years it has been under 300k, and an almost 35% drop from the same time last year. Experts attribute the trend to increased numbers of foreclosed homes in the area. 55% of all homes sold in the county in January were foreclosed homes.

Home sales are up in the area almost 53% from a year ago, totaling 15,227 homes sold. The 2,459 homes sold in San Diego county represent an almost 35% increase from this time in 2007. As noted by many builders, buyers are benefiting greatly from interest rates dropping. Freddie Mac’s weekly survey reported that the average 30 year fixed rate loan had an interest rate of 5.04%, down from last week’s 5.16% and last year’s 6.04.

Despite falling prices and an encouraging trend in affordability, San Diego still ranks as the 26th least affordable of 222 metro areas ranked by the NAHB. The least affordable market is New York where under 14% of homes sold are affordable to one earning the area’s median income of 63k.

The La Jolla real estate market has remained fairly stable. The median price for a home in La Jolla is about on par with last years numbers. La Jolla condos have also remained fairly consistent in terms of median price and number of units sold.