Q: Will San Diego County median home prices rise in 2012? Where will the median stand by year’s end?
By: Dr. Lynn Reaser
Yes. Several forces should drive a modest price in home prices this year. Job growth has picked up and the unemployment rate is slowly subsiding. Mortgage rates should remain near historic lows. Affordability has improved markedly thanks to the drop in both home prices and interest rates. The rise in apartment rents has also made ownership a more attractive option. The overhang of foreclosed homes, particularly in the inland areas, and high standards for loan qualification will still limit the overall rise to about 3%, taking the median price to $325,000 by year-end.
The issue is still how can the houses be paid for. If you take $325,000 that would require a household income of around S110,000 that could be expected to continue – I am not sure there are that many people with this income that would want to buy a median house. There is also the issue of getting a loan. The optimism that supported the previous bubble is no where to be seen except maybe with some real estate agents – certainly not with the banks or investors where it matters.