Solid growth for San Diego housing market

Real estate in San Diego is a hot commodity, and the most recent housing numbers only add fuel to the fire. The most recent Standard & Poor's/Case-Shiller Home Price Index was recently released, and indicated substantial gains for home prices in San Diego. The index is a national marker of housing-market recovery that has a two month lag because it tracks repeat sales as well.

Home prices rise
The index revealed that in September, home prices in San Diego County rose by 4.1 percent over last year. In a recent article to the San Diego Union-Tribune, real estate journalist Lily Leung revealed that this is the biggest year-over-year gain that San Diego has seen for any month over the past two years. The last time that the county saw a comparable significant year-over-year increase was in September 2010, when there was a 5 percent gain in home prices.

The index also indicated that San Diego County experienced a 1.4 percent gain over October 2012's figures, making it the eighth month in a row where prices either remained flat or increased. According to an article in The Wall Street Journal, the S&P/Case-Shiller 20-city composite collectively showed an increase of 3 percent over September of last year, which is the largest annual growth observed in the index since July 2010.

San Diego is at the top for home price gains over the prior month, sharing the lead with Las Vegas. The report is seen to indicate a strengthening national housing market, but it also finds gains in new construction, home-builder sentiment and existing-home sales.

"Overall, the tone of this report was quite encouraging and the steady pick-up in prices underscores the narrative of improving U.S. housing market fundamentals," wrote Millan Mulraine, a macro strategist at TD Securities, in a research note, according to the news source. "This is largely consistent with the better tone in other housing market indicators, such as home sales, building activity and home builders' confidence, which have all risen to cycle highs in recent months."

Homebuying activity in San Diego
Leung detailed in the Union Tribune that San Diego's consistent gains in home prices are particularly notable as homebuying typically slows down during the fall season. Contrary to the norm, sales in San Diego County increased by nearly 13 percent from September to October. Low inventory continues to be a concern as demand remains strong, especially among first-time buyers and investors.

"Potential buyers in certain ZIP codes are fighting for a limited supply of homes, sparked by fewer foreclosures and a high share of underwater homeowners who can't put their homes on the market," Norm Miller, real estate professor at the University of San Diego's Burnham-Moores Center for Real Estate, told the news source. "The distress keeps declining. We're seeing higher median prices because of that. That's good. We're going to see some modest price appreciation. But there are still a lot of underwater people who are not coming into the market."

While supply of available homes for sale is restricted, Miller did note that there is a slowly growing inventory in the entry-level market of the $200,000 to $299,999 range, which he views as an encouraging sign. The source reported that in this range, the available supply is at four months, which puts it in the normal to strong category.

"Some people are testing the market and are coming back," Miller said. "You will continue to see that in the next few months."