The demand for single family homes in San Diego remains, but potential homebuyers will be pushed into multifamily units or leave the area as prices continue to rise, a panel of local experts said Thursday.
The North San Diego County Association of Realtors hosted its Conversations event with panelists Nathan Moeder, principal at The London Group; Alan Pentico, executive director of the San Diego County Apartment Association; Borre Winckel, president and CEO of the Building Industry Association of San Diego County; Drew Collins, Pacific division manager of Wells Fargo Home Mortgage; and Robert Brown, economics professor at California State University San Marcos.
High prices are due to “lots of people chasing fewer homes,” Winckel said. His main concern is that San Diego is stuck in a production log with no more than 2,000 to 3,000 single-family detached units for six consecutive years.
“We cannot add more housing because the pipeline is constrained,” Winckel said, referring to the difficulty of getting projects approved and the lack of buildable land.
Moeder said he agrees that permits are down and “unfortunately we’re going to hear the same story line year after year after year. [We have] to accept it for what it is — we’re not going to get back to high levels of building.”
He said it’s too expensive to deliver housing due to the cost of land, stormwater, construction and labor – which pushes up prices and results in too little housing for San Diego’s needs. He said the county needs from 10,000 to 12,000 units per year to accommodate growth.
“There’s going to be a tremendous amount of pressure in the next couple years on housing prices — there’s just not enough inventory,” Moeder said.
North County inventory was down 25 percent from 2012 to 2013, Brown said. The median price of a single-family home in North County increased 20 percent from 2012 to 2013. The median price per square foot increased 19 percent, and sales increased just 1 percent.
The total sales volume increased 19 percent during that time period, and North County experienced a similar increase in sales volume from 2011 to 2012. However, that increase was due to an increase in sales, whereas the increase from 2012 to 2013 was because of higher prices, Brown said.
Moeder said he asks his college students to picture where they’ll be living when they’re 40 years old, and all of them say single-family homes.
SANDAG predicts there to be another 300,000 homes and another 1 million people by 2050 — but Moeder said he doesn’t believe it.
“Where are they going? Where’s the land that we’re going to be able to develop?” Moeder asked.
Of those 300,000 expected units, 83 percent are multifamily.
“The assumption is we will force people into multi-family housing,” Moeder said. “I agree to a certain extent that that will happen because that will be the only option in San Diego. But I think it’s a challenge for San Diego because housing will be more expensive and I think people will choose to leave San Diego for other options.”
Winckel said he expects a “healthy return” of outflow from San Diego to the Inland Empire.
“I expect that there will be quite a bit of activity in Temecula, Murrieta, Lake Elsinore and Perris due to people being priced out of the market here in San Diego,” Winckel said, adding that couples have to come up with an “insane amount” of money in order to buy.
Collins said the desire for Americans to be homeowners is “still alive and very vibrant.” In response to a survey, more than 90 percent of respondents said they are still interested in homeownership.
“I would echo the thoughts up here on concerns about inventory going forward,” Collins said. “Because on top of the shortage of inventory and continued desire for homeownership as a dream, we have had, for the past four to five years, probably half a million families that didn’t form because of economic conditions that will now begin to form. And one of the things … they’ll be interested in doing is becoming homeowners.”
Collins said new regulations require creditors to make loans only to people who have the ability to repay — a “simple idea” that serves as a system process to indicate if a homebuyer can succeed as a homeowner.
“It’s not about homeownership, it’s about sustainable homeownership – getting someone in a home and making sure they can handle it; making sure they can handle it when they’ve got to replace a roof or water heater or something like that,” Collins said.
The decision to buy or rent hinges upon quality of life, Pentico said.
“If I can pay for a mortgage, but then I’m going to have to give up cable and Internet and everything else to do it. … More people want to live, not just survive where they’re living,” Pentico said.
The county is going to start to see different products on the market that didn’t make sense before, Pentico said. Three-bedroom units were popular during the recession as people moved in together to save money. Now, lots with 20 units are getting a new sizing structure for 50 to 60 micro-units that are a few hundred square feet each.
“It’s changed the way we look at things and how multifamily is put together,” Pentico said. “We’re going to see more and more multifamily, more and more mixed use, more and more community development.”
He referred to a project in Mira Mesa that has a bowling alley among its features. “It is its own environment,” Pentico said.
He said this is the third year in a row with about 2,500 new units in the pipeline, and multifamily rental rates are up about 2 to 3 percent per year.
Moeder said he believes the economy is 100 percent recovered and it’s time to accept what’s happening in the marketplace. He said the economy won’t return to the heyday of 2006 when money was cheap, it was easy to do business and job growth was abundant.
“It’s time that we just step back and accept it, for this is what it is. This is as good as it’s going to get in terms of home prices, interest rates and how the market has recovered. … It will be a slow expansion just as it has been a slow recovery,” Moeder said.