I cringe when I read the newspaper or hear a report on the TV or radio that gives a median home price or average house price for San Diego County. This is a large and diverse area. San Diego home sales differ between neighborhoods almost as much as the San Diego terrains and microclimates. When we talk about San Diego weather, it can be cool and cloudy at the beach but hot and sunny just a few miles inland. On a few January days, you might be playing golf without a jacket and then later that evening drive up to enjoy a few snowflakes on Mt Laguna.
The same holds true in the San Diego real estate market with the different types of San Diego homes. Inventory is low and moving quickly in some areas and price levels, but still languishing in others.
So what are the hot areas of the San Diego real estate market? Where are the sales still slow? Over the next few days, I’ll update you on activity in several neighborhoods.
Rancho Penasquitos Houses (zip code 92129)
In June 2009, the number of houses sold in Rancho Penasquitos was up 10% from June 2008. That’s not saying much, because only 33 Rancho Penasquitos homes sold in June 2009; which was just 3 more than in June 2008.
The newspapers frequently report based on “median price.” The median price of homes is not a particularly useful number, because median simply means there was an equal number that sold above the median price and below the median price. The median price of homes in Rancho Penasquitos was $548,000 in June 2009. That’s 21.7% below the median reached at the top of the market in June 2005, and just 4.3% lower than the median in June 2008. But in May 2009 the median price in Rancho Penasquitos had spiked to $640,000 from just $520,000 in April 2009. So it takes a deeper analysis to get a feel for what’s going on in the San Diego real estate market.
The median number of days on market for the June 2009 Rancho Penasquitos home sales was just 15 days, which is less than half the time that it took to sell a house in Rancho Penasquitos in June 2008. When evaluating market times the median number of days on market is more instructive than the average market time because short sales linger on the market during the bank approval process. Banks are incredibly slow to respond to short sale applications, with an average response time of 6 months or more. So the median of 15 days means that at least half of the Rancho Penasquitos homes sold in less than 2 weeks. That’s hardly any time at all when it comes to real estate sales.
The “market turnover” figure tells a similar story. In June 2009, 40 homes were listed for sale in PQ. As of today (July 14) 18 of the June listings are already under contract. There currently are 47 active listings of houses in zip code 92129. So, in other words, based upon the June sales volume, there is currently a 1.4 month supply of homes for sale in Rancho Penasquitos. The typical rule of thumb is that anything less than 2 months of inventory is a seller’s market. A 6-month supply of homes is considered to be a “normal” market in equilibrium.
There are an additional 30 house listings in “contingent” status in 92129. A “Contingent” listing is a bank-owned foreclosure (REO) or short sale property that has one or more offers awaiting approval from the bank. The sale is therefore contingent upon bank approval (Pending Bank Approval). Even adding the 30 Contingent Listings to the 47 active listings, there is still only a 2.1 month supply of homes for sale in Rancho Penasquitos.
Overbidding: Many homes sold in PQ during the month of June, particularly those priced under $550,000, received multiple offers. 10 of the 16 houses that were listed below $550,000 sold at or above asking price.
Mortgage Financing: According to the MLS statistics, four-fifths of the homes that sold in PQ during June 2009 were financed with conventional mortgages. Conventional mortgage loan guidelines require a 20% down payment, so the overwhelming majority of Rancho Penasquitos home owners are putting around $100,000 down on their purchases. This bodes well for future stability of the neighborhood. The remaining one-fifth of these Rancho Penasquitos home purchases were financed with FHA or VA loans. There were no all-cash purchases that closed escrow in 92129 during June 2009.
These numbers (along with subjective assessments by Rancho Penasquitos Realtors) indicate that Rancho Penasquitos is likely to see sustained price increases in the coming months. This assumes that there won’t be a major influx of new listings to boost supply beyond demand, and also assumes that interest rates stay at the current low levels (low 5% range for 30-year fixed mortgages).