2.3% local hike less than half of national increase; experts see rising interest rates as major cause
Resale home prices in the San Diego metro area increased the slowest in the nation in December, 2.3 percent in a year, said the S&P CoreLogic Case-Shiller report released Tuesday.
While prices are still going up, slightly beating inflation, it is a major reversal of fortunes in the 20-city index, considering San Diego prices were among the top four in the nation 13 months earlier.
The last time San Diego metro was in the bottom spot in the index was in October 1996, back when the index was 19 cities. It had never been in the bottom spot since it expanded to 20 cities in 2000.
The last time San Diego metro’s annual price increases were so slow was August 2012.
Annual nationwide price increases were 4.7 percent in December, with the biggest price gains in Las Vegas (11.4 percent), Phoenix (8 percent) and Atlanta (5.9 percent).
Experts say rising mortgage interest rates are much of the cause of the slowdown in high-priced markets. David Blitzer, managing director of the index, said a major factor could also be wage growth not keeping up with housing costs. He said wage gains were around 3.5 to 4 percent last year, still below the nationwide home price increase.
“There have been a few places with very sharp reversals,” Blitzer said. “I think a lot of times prices are just outpacing people’s ability to pay in a lot of places.”
The indices evaluate homes by more than just price, tracking repeat sales of identical single-family houses as they turn over through the years. Prices are adjusted for seasonal swings.
Other California cities also showed signs of a slowdown. Home prices were up 3.6 percent annually in San Francisco and 3.7 percent in Los Angeles.
Ralph McLaughlin, deputy chief economist for CoreLogic, said December had a few factors that likely influenced sales, such as a major stock sell-off, fear of rising interest rates and even the end of a contentious election season.
He said the biggest annual drops in the index were expensive cities on the West Coast — Seattle, San Francisco and San Diego — so at least San Diego was not alone in big changes.
However, since December, many of the things affecting the market have sorted themselves out. Interest rates have mostly stabilized; the partial government shutdown is over; and the stock market is doing better. McLaughlin said that doesn’t necessarily mean San Diego will be a top real estate market soon.
“I think it’s going to be a tough ride to bounce back,” he said. “The housing market moves very, very slow. To see any significant changes from month to month is unlikely. Part of what is happening in California, and San Diego County, homes are not necessarily that affordable for most (potential) homebuyers.”
The median home price of a resale single-family home in San Diego County in December was $595,000, dipping from the all-time high reached in June and July of $630,000. The interest rate for a fixed rate, 30-year loan was 4.6 percent at the end of December, said Mortgage News Daily. As of the start of this week, it was around 4.5 percent.
S&P CoreLogic Case-Shiller for Dec. 2018
Yearly increases by city
Las Vegas: 11.4%
Los Angeles: 3.7%
San Francisco: 3.6%
New York: 3.3%
Washington, D.C.: 2.7%
San Diego: 2.3%
San Diego Union-Tribune