Southern California and San Diego, in particular, are enjoying rising housing values as people relocate to find jobs and housing from northern California in the absence of IT spending.
"San Diego continues to experience a sellers' market with strong price appreciation," says Realtor David McGhee. "However, the trend is for houses to stay on the market a bit longer. The average market time last month was 53 days, compared to 49 days in December and 44 days in November.
"The following were among the hottest neighborhoods in January: Lemon Grove, Santee, Spring Valley, Logan Heights, North Park, East San Diego, and San Ysidro," explains McGhee. "In each of those communties the average market time was below 30 days last month. While homes are on the market longer, owners are getting closer to full asking price. On average, owners got 97.82 percent of asking price last month, compared to 96.78 percent in November and December. In my opinion, the market is still being driven by low interest rates, a shortage of housing, and the desire of buyers to find someplace other than stocks to invest their money. I expect the market to settle down a bit this year. Homeowners will still see good appreciation, but probably not at the rates that we have seen over the last two years."
Says Realtor Paul Linehan, "The housing market outlook for 2003 depends fundamentally on interest rates and jobs, both of which depend in turn on the growth rate of the economy. The growth rate for the nation's Gross Domestic Product (GDP) in 2002 was an estimated 2.4 percent, a clear improvement over 2001. Much of that growth came at the end of the year. In 2003, GDP is expected to grow slightly faster at 2.6 percent, but this will fall short of the long-term growth potential of the economy, which is generally thought to be 3 percent. With a slight acceleration in the national economy and inflation in check, interest rates should edge up in 2003, but remain below 7 percent for much of the year. As for employment, a slightly improving economic climate will yield few new jobs, both at the state and national levels. Given these expectations for interest rates and jobs, the housing market in California will be hard-pressed to repeat the banner-year performance of 2002. With sales expected to reach 530,900 units, 2003 will be one of the best on record, despite a projected 5.2 percent decline from 2002. The median price will continue to climb to a new record in 2003, with a projected 9.5 percent increase to $345,900.
"Regionally, the Southern California housing market should show the most buoyancy in 2003," continues Linehan, "owing to the fact that its economy emerged from the recent economic downturn relatively unscathed and is poised to expand as the rest of the state and the U.S. experience economic growth. The Central Valley's economy also held up well in 2002, and has the greatest capacity of any region in the state for a housing-market expansion. As for the Bay Area, a resurgence in IT-related spending is needed to jumpstart that region’s economy and move its housing market forward."
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Published: February 12, 2003
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