How Much is Your Home Worth?


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The typical homeowner in San Diego has been put through the wringer in the last decade. First the prices went up—so satisfyingly up—in 1989 and 1990. Then they went into freefall for five years. Many owners sold at big losses; others held properties, confident things would change.

Well, they’ve changed. Realtors are crowing. They’re telling us homes are selling at figures that astound even the optimists. Values are back to ’90 levels—and then some. Among the 53 housing markets covered by the Economic Research Bureau of the San Diego Chamber of Commerce, 30 recorded double-digit gains between October 1997 and October 1998.

The Kensington area reported an amazing 40.4 percent increase. The median single-family house in Del Mar is selling for $560,000; in La Jolla, $652,500; and in Rancho Santa Fe, figures are off the chart. Things couldn’t look rosier.

La Jolla 
1995: $757,000
1999:  $1,195,000
Mission Bay condo 
1986:  $252,000 
1998:  $345,000
College area, East San Diego
1938: $7,500
1998: $209,000
La Jolla
1991: $1,900,000
1999: $2,395,000

But look again. This phenomenal rise in values, unfortunately, is uneven. Not all localities have even reached ’90 levels, much less surpassed them. And even those that have are reporting some surprising glitches. For instance, recent figures have shown slower growth in Del Mar and Solana Beach so far in 1999 than in 1998. The explanation might be that ’98 saw such an explosion that the same rate of growth would be unlikely. It’s a little early in the year to know; the peak selling season may be yet to come.

Downtown is so tight on inventory, especially condos (and most of downtown residential is condos), figures are hard to come by. But there will be so many new condos available in the downtown area in about 18 months, says Ingrid Galchenko of McMillin Realty in the South Bay, there’ll be plenty of competition then.

In far north Vista, real-estate agent Scott Drake of ReMax Buena Vista reports, prices are not going up as quickly as last year. After being down so long, prices escalated at a wild pace in the middle of ’98. Now they’re rising steadily, but not as dramatically.

In a recent analysis, Linda Vista, of all places, showed the greatest gain in sales activity in the single-family-home market. Why? Because it’s home to a growing cadre of Asian homeowners, many of whom grew up there and are returning to remodel homes in the old neighborhood. Oh, to be a real-estate agent in Linda Vista.

 
Median home prices for a typical single-family detached house in 
various areas, end of 1998:
Rancho Santa Fe $1,625,000
La Jolla 652,500
Solana Beach 510,000
Coronado 496,000
Jamul 450,000
Carmel Valley 430,000
Sorrento Valley 378,000
Downtown 343,000
University City 323,000
Scripps Ranch 312,000
Hillcrest 299,000
Ocean Beach 297,000
Carlsbad 294,000 
Bonita 278,000
Rancho Peñasquitas 262,000
Rancho Bernardo 258,000
Source: Acxium/Dataquick Information Systems
 
How do we compare to other cities? San Diego housing costs are 55 percent above the national average. Our overall cost of living puts us seventh highest among 323 cities surveyed—6 percent higher than Los Angeles. The rate of our housing-price increases has accelerated with each passing year since 1996.

East County is showing signs of prosperity. And we’re not necessarily talking affordable, “meat-and-potatoes” houses in the $200,000s. In Alpine, some custom homes are priced in the millions. Blossom Valley (which is actually in El Cajon) and Alpine (with new and old ranches) took a hit in the early ’90s. “Some people took losses,” says Sandra Brown, a Prudential broker in the Mission Valley office. “There are $500,000 houses that I sold for $400,000, but now they’re back at $500,000. These, of course, are on 2-acre lots. And my clients want to avoid the commute on I-5 and I-15. I can put people into houses in East County where they get so much more for their money than by going north.”

Still, North County is where the action is. Peggy Chodorow, who sells high-end homes along the coast for the Willis Allen Company, noticed a bubble in May to July of last year. “People were buying at any price,” she says. “Pacific Beach, Del Mar, La Jolla—business was booming. There were multiple offers on every house. Then came a lull in November. Prices were the same, but it took 60 to 90 days to sell. December was better, and January picked up.

“But we’re way beyond ’89 and ’90. We think we’ve jumped 30 percent in the last year. The typical La Jolla house—2,600 square feet, quarter-acre, two-car garage, four bedrooms, two and a half baths—has jumped from $500,000 in ’89 to $800,000. Pacific Beach is not quite as high because the houses are older and the neighborhoods more varied,” Chodorow says. “Sometimes you’re next to a bunch of rentals. But I’d say $400,000 to $450,000 now for Pacific Beach. Del Mar is $600,000 to $800,000. Carmel Valley —houses that have sat for several years at $400,000 to $800,000—are selling quickly. University City—$300,000 to $500,000.”

La Jolla 
1997: $2,150,000
1999: $3,400,000
Chula Vista
1997: $255,000
1998: $299,999
Kensington
1948: $10,000
1998: $317,500
Mission Bay
condo
1985: $325,000
1999: $629,000

Anthony Furlano, Century 21 broker in Coronado, claims Coronado never had a downturn because so many houses there are second and third homes. Besides, prices were up 17 percent in 1998. He separates Coronado into three communities: the Shores (with 1,500 condos in 10 towers, and only eight condos for sale), the village (with 22 single-family homes for sale where they usually have 80) and the Cays (with 21 for sale where inventory is usually about 60).

But Furlano sells the location. “We have our own mayor, our own police,” he says. “Do you know that less than 20 percent of the homes in Coronado have air conditioning?” (Because it’s so close to the water.) He traces the price of a home in Star Circle he sold three times during the last decade: $795,000 in ’89; $1,250,000 in ’91; $1,800,000 in ’94. “And if I were to sell it again, the price would be $2,300,000,” he says. (It just came on the market at $2,950,000.)

To many, this is explained by supply and demand. An upswing in both population and employment has caused housing to fall short of supply. But low interest rates have helped mitigate some of the increases in price. The Federal Reserve lowered interest rates three times in 1998, helping to keep mortgage rates low. An edgy stock market has kept the local economy from overheating. John Karevoll, an analyst at Acxium/Dataquick, noticed that in the San Francisco region’s Silicon Valley, where income (in the form of stock options) was tied to company performance, a drop in stock value caused some high-end buyers to put off homebuying decisions. Whether that will happen here, we don’t know.

So much for high-priced homes. What about the meat-and-potatoes houses? “If I were a Realtor, I’d be a happy camper in the mid-market,” says Karevoll.

C.J. Johnston, owner/agent of Realty Executives with offices in Bonita, deals in houses that sell at an average of $197,000. She tells us the hot area of the South Bay is what she calls “1984-plus,” the area north of L Street and east of I-805 where many of the houses were built since 1984. It’s a mixed area with old and new homes.

“All the growth is taking place there,” Johnston says. She just sold a house for $300,000 that two years ago went for $255,000—and sold it in four days. “New homes or newer resales are the hottest,” she says, “with Rancho del Rey, EastLake, EastLake Greens and now the first phase of Otay Ranch.” The new developments are competing with the fine old homes in Bonita. Brand-new four-bedroom homes in McMillin’s Long Canyon in Rancho del Rey sell at between $170,000 and $240,000—and many buyers will choose new houses over the vicissitudes of older homes.

“The difference between now and ’89,” explains Karevoll, “is that ’89 was an ill-advised frenzy. People were making stupid purchasing decisions. Prices may be at their peaks right now, but current levels are not out of line with the underlying economic market. People aren’t overextending. Mortgage payments are 25 percent lower than in 1990. And lenders are willing. The banks have a greater ability to gauge their clients correctly. Certain groups were excluded 10 years ago. Now lenders have better information to gauge the risk. It’s called the sub-prime market—and it’s a big new category in world finance.”

“Mortgages are faceless nowadays,” says Alan Nevin, analyst with Market Profiles. “We no longer have Great American Bank or Home Federal. The lender never sets eyes on the borrower. So what I look like is irrelevant. The only thing the lender is interested in is whether I’m a good credit risk.” This results in a wide-open market for mortgages, with much more availability.

Dan Gatto, CPA with Gatto & Pope, reminds us that in 1998, the tax laws were changed, and anyone who has lived in a home for two years out of the last five may sell with capital gains forgiveness up to $250,000—$500,000 for a couple. “Not many people are aware of this,” he says. “It’s the government’s effort to simplify things. They don’t often give us anything free.”

With all these advantages—easier mortgage money, tax-free gains, low inventory countywide—prices have hit a new peak, and homes move at a speed that leaves observers breathless. ReMax broker Mark Hoppe reports selling a downtown condo in two days.

“Inventory all around is small,” says Mona Steen, who specializes in waterfront properties on the bay for Coldwell Banker in La Jolla, “and whatever is coming out is costly.” She cites one Pacific Beach condo at Sail Bay that sold in 1985 at $325,000 and in 1998 at $645,000—almost double.

 

Single-Family Home Prices (in thousands)
  10/83 10/88 10/93 10/98
Carlsbad 129.0 175.0 195.0 250.0 
Chula Vista 100.0 150.0 180.0 170.0
Clairemont 91.0 138.0 175.0 190.0
Del Mar 250.0 375.0 400.0 560.0
El Cajon (west) 125.0 159.0 190.0 227.0
Escondido (medium) 78.0 110.0 120.0 130.0
Kensington 150.0 250.0 254.0 330.0
La Jolla (medium) 165.0 275.0 330.0 425.0
La Jolla (luxury) 435.0 575.0 710.0 820.0
La Mesa 90.0 126.0 154.0 172.0
Mira Mesa 103.0 145.0 166.0 190.0
Ocean Beach 120.0 200.0 255.0 265.0
Oceanside (west) 77.0 120.0 160.0 200.0
Pacific Beach 126.0 245.0 232.0 310.0
Point Loma 147.0 250.0 315.0 325.0
Poway (medium) 92.0 130.0 157.5 161.0
Rancho San Diego 127.5 160.0 190.0 215.0
Santee 96.0 130.0 178.0 177.0
Scripps Ranch 143.0 200.0 247.0 265.0
The average San Diego County single-family house reached $250,000 in October 1998. (The former high of $233,700 was reached in 1990.) But a new home—a four-bedroom, two-story 2,500-square-foot house —averaged $310,000 countywide in the last quarter of 1998. “In the last two years,” says Nevin, “this was up from $255,000. That’s an increase of 25 percent.”

North County experienced the highest price gains in 1998. City beach areas were next, followed by the central city. East County showed a modest advancement, with the South Bay not far behind. Carmel Valley, Kearny Mesa, La Jolla, Pacific Beach and Rancho Bernardo had strong gains by number of transactions—but by sales dollars, Rancho Santa Fe, La Jolla and Del Mar topped all records.

So whether you’re holding property in one of the hot areas (and you’ll know if you are) or in one of the to-come, building-slowly areas, the message is still good. San Diego is on a roll. Take a look at some of the photos on these pages and you’ll realize you’ve lived in an area of great expansion for some time. This is just one of those pleasant blips.

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