7.3% increase May to May, but trend faces pressures on affordability, borrowing
San Diego County home prices in May increased 7.3 percent in a year, higher than the nationwide average, according to S&P CoreLogic Case-Shiller Indices released Tuesday.
All regions in the 20-city index experienced price increases, with San Diego having the sixth biggest increase (tied with Phoenix). Seattle had the biggest gain at 13.6 percent.
The nationwide average was a 6.4 percent increase, with western cities accounting for largest gains.
Among California cities, San Diego home prices showed the smallest increase. Los Angeles saw prices go up 7.6 percent in a year and San Francisco experienced a 10.9 percent gain.
David Blitzer, managing director of the index, wrote in the report that nationwide sales had decreased for three months in a row. He said it appeared continuing price increases were affecting other housing statistics.
“Affordability — a measure based on income, mortgage rates and home prices — has gotten consistently worse over the last 18 months,” Blitzer wrote. “All these indicators suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.”
Mortgage rates have increased steadily all year. At the start of the year, the rate for a 30-year fixed rate loan was around 4 percent, said Mortgage News Daily , but was up to 4.73 percent Tuesday morning.
Zillow senior economist Aaron Terrazas wrote in an email that the report showed that the housing market was showing contradictory signals that the tide of rising prices could begin to turn.
A few of the factors he said that make it hard to tell what is next for the market: Rent growth has stabilized, which could make potential buyers less desperate to get into a home; inventory is still historically low, but has increased in recent months; and housing starts are down, a sign that construction is too costly for builders or that builders anticipate less demand for buyers.
However, Terrazas said that a lack of homes for sale is still a large factor that will affect everyone looking to buy.
“Home price growth is likely to slow somewhat going forward, but the truth is that little has changed for home buyers in the market today,” he wrote. “Competition is fierce, prices are rising and selection is limited.”
The indices evaluate home prices by more than just price, tracking sales of similar single-family houses as they turn over through the years. Prices are adjusted for seasonal swings. The San Diego median price in May for a resale single-family home was $619,500, said CoreLogic.
While rising prices are good for homeowners, the San Diego Regional Chamber of Commerce has continued to lament what increases could mean for the region’s workforce.
“When employees are priced out of San Diego and are forced to look to areas outside the region where housing is more affordable, our employers, regional workforce and economy all suffer,” wrote Sean Karafin, the chamber’s vice president of public policy and economic research.
San Diego Union-Tribune