Compliments of
miguel nunez
SAN DIEGO COUNTY
Market Overview a monthly real estate report | September 2010
As the California housing market grows more
attractive, home buyers are more optimistic
than they were a year ago, according to the
latest survey by the California Association
of REALTORS®.
While in 2009, only 8% of home owners
believed their homes would go up in value over
the next year, that number has grown to 23%
in 2010.
Home buying conditions are ideal:
• Mortgage interest rates are at all-time lows
not seen since 1971. The benchmark 30-year,
fixed-rate conventional mortgage was 4.44%
by mid-August 2010.
• Affordability is excellent — nearly half
of home buyers can afford the median-
priced home in California and nearly 47%
can afford the median-priced home in
Southern California.
• Sellers are meeting market realities by lowering
the prices on nearly one-quarter of U.S.
homes listed for sale in June 2010, according
to Trulia.com. That’s up 9% from May 2010.
• Lower property values mean that owning
a home is now less expensive than renting
in almost every Southern California
community.
• Investors are stepping in and paying cash
for distressed properties, reducing the
number of foreclosures negatively impacting
neighborhood home values. Distressed
homes sell at as much as 15% less than non-
distressed homes.
Mortgage applications leapt on rock-bottom
rates, according to the Mortgage Bankers
Association, with demand for home refinancing
reaching its highest level in 15 months by
mid-August.
The return of the jumbo loan
According to Steve Cook, journalist and analyst
for Real Estate Economy Watch, high-end sales
picked up through the spring and early summer
of 2010. By mid-July, jumbo mortgage rates
858-481-1029 | miguel@nunezrealtors.com
www.nunezrealtors.com
reached five-year lows, welcome news to home
buyers and sellers.
“Only a year ago, jumbo loans were nearly
7%, and hard to get at that rate,” says Cook.
“Tougher lending standards that often included
down payments as high as 20% to 40% made
it hard for many buyers. Only a handful of
lenders were making jumbo loans that exceed
Fannie and Freddie’s conforming loan limits,
which currently vary by locale from $417,000
to $729,750.”
The average U.S. rate for a 30-year fixed jumbo
mortgage fell to 5.47% on June 29, the lowest
since 2005, when the real estate boom was
near its peak, says Cook. “Just a year ago, the
average rate on a 30-year jumbo mortgage was
6.86%,” he says.
A single percentage point has a huge impact
on demand at all price levels. “A home owner
with a 30-year fixed-rate $800,000 mortgage
at 6.86% pays $5,247 a month,” poses Cook.
“If he were to refinance at 5%, his monthly
payments would be reduced by $952. Suddenly
buyers can afford properties that were out
of their price range simply due to the drop
in rates.”
More lenders, like Wells Fargo, are aggressively
marketing jumbo loans. “While strict
underwriting guidelines are still there,
the lower rates on jumbo loans have opened
the luxury market back up again,” says
Mike Reza, president of HomeServices Lending,
an affiliate of Wells Fargo — California,
www.HSLCA.com.
Renovation loans now available
A home may not feel like home until you make
it your own. Even well-designed homes require
updates every few years.
The typical home sold in 2009 was built in
1991, according to data from the National
Association of REALTORS®, and most homes
— 80% to be exact — were built before 1980,
according to U.S. Census data.
DRE# 01220521
“From updating a kitchen or bath to adding a
room, renovation financing provides qualified
borrowers with the means to purchase or
refinance properties in need of improvement,”
says Mike Reza. “The borrower can choose
a fixed-rate or adjustable-rate loan, based
on the projected post-improved value of
the property.”
To qualify for a renovation loan, borrowers
must meet standard credit qualifications, just
as they would for any other loan. The provisos
for getting the loan are that the property must
qualify for the loan program, the total costs
must be supported by a bank appraisal, and the
after-completion appraised value must support
the home’s value and the new mortgage
amount, says Reza.
“Almost any kind of home improvement
can be financed with a renovation loan,
including new roof, HVAC, plumbing,
electrical, hazard abatement, and cosmetic
changes such as paint, siding, landscaping,
floors and appliances,” he notes.
The first consideration is the property itself
and whether its underlying value will support
the renovations you want to make. You’ll need
to talk to a lender with a renovation specialist
such as HomeServices Lending. He or
she will tell you how to get started, and
what documentation you’ll need to get a quick
loan approval.
Before you go any further, you’ll need to
complete all inspections of the home, including
structural, termite, or septic, if applicable.
These should help you determine the scope of
the work you need to do.
If you are getting a HUD-affiliated loan, such
as the FHA 203K home improvement program,
your renovation specialist will introduce you to
a HUD-approved consultant who will help you
assess your needs. The consultant will go over
your inspection reports and meet you at your
property to inspect it and assist you with ideas
and cost estimates. He or she will itemize the
prospective renovations and improvements
into a “work write-up,” a document you can
use as your renovation guide when you hire
your contractors.
You should interview several contractors
before hiring anyone. Get recommendations
from friends and relatives, and ask for
references. Also request copies of the
contractor’s license and insurance, which
is required in most states. All contractor
documentation should be given to your
renovation specialist.
Your contractor or contractors must provide
a detailed estimate and scope of the work
to be done, including materials and costs.
“That way you, the contractor, the appraiser,
the HUD consultant and the lender all have
the same expectations based on this final
work write-up,” advises Reza.
The lender will send an appraiser to see if
the property will support the cost of the
renovations compared to the value of similar,
nearby properties. Once approved, your
loan can proceed to closing and the funds
will be disbursed according to the terms
of your contract. Draws are paid to your
contractors by an assigned draw specialist
when the draw inspection is complete. All
work must start within 30 days of closing
and must be completed within six to nine
months, if renovations are over $50,000.
Once all work is completed, the draw
specialist will give you a letter of completion
to sign and return for the release of final
funds. In some cases, the lender may require
a final inspection by the appraiser to insure
that all proposed work has been done and
provide a completion certificate.
“If you are buying or selling an older home,
a renovation loan can help you add value to
the property that will be enjoyed for years
to come,” says Reza. For more information,
contact Mike Reza: mortgage@prusocal.com.
Reverse mortgages, seniors 62 and
older benefit
Another effect of the four-year housing
recession is the gain in popularity of reverse
mortgages. Older home owners who want
to tap their home’s equity safely are more
protected under today’s stricter guidelines.
Conventional reverse mortgages are only
available to home owners age 62 or older, who
occupy the home as a principal residence,
and who either own their home outright
or have substantial equity in the property.
Creditworthiness and monthly income are
not factors, but home owners are expected
to pay hazard insurance and property taxes
and to maintain the property.
Reverse mortgages work in an ingenious way,
and they can be a blessing to home owners
who want to stay in their homes. With a
conventional loan, principal and interest
are included in the monthly payment. With
a reverse mortgage, interest is added to the
loan balance each month as no monthly
payments are required.
Approximately 90% of reverse mortgages
are FHA-insured Home Equity Conversion
Mortgages (HECM). The HECM
guarantees that the FHA will meet the
lender’s obligations to the borrower, limits
loan origination costs, and ensures full
repayment of the loan to the lender up to
the maximum claim amount.
“Reverse mortgages are based on the
home’s current value, borrower’s age and
existing interest rates,” explains Dr. James
Gaines, research economist for the Real
Estate Center at Texas A&M University.
“Borrowers can choose to receive loan
proceeds in a single lump sum payment or
as periodic predetermined payments, a line
of credit, or both.”
According to Dr. Gaines, reverse mortgages
have advantages and other considerations
that should be reviewed carefully by
borrowers. In fact, the FHA insists that
home owners be counseled to make sure
they understand the transaction before they
are allowed to sign for the loan.
Advantages of a reverse mortgage
• No fixed due date
• No repayment required as long as the
home remains the principal residence of
the borrower
• Nonrecourse loan – the amount can never
exceed the selling price
• Borrowers hold title to property
• Loan proceeds not taxable
• Flexible options for receiving loan
proceeds
Considerations in choosing a reverse
mortgage
• Loan-to-value ratios typically yield only
65% to 80% of the home’s present value.
• Upon death the loan is considered due
and payable, which requires the sale of the
home or refinancing the home.
• The loan becomes due and payable if the
borrower fails to remain in the home for
12 months, pay taxes or maintain the
home.
• Terms and conditions of reverse mortgages
may be difficult to understand; borrowers
are required to attend a HUD-approved
counseling session.
Using a reverse mortgage to buy a new
home
The reverse mortgage industry was developed
to enable seniors age 62 and above to stay in
their homes and utilize mortgage proceeds
to supplement their income. But not all
seniors want to remain in their current
home.
“Some seniors want to downsize, or trade
their two-stories for one level, or live in a
home with barrier-free Universal Design
that makes it easier to reach cabinets, turn
doorknobs, use a wheelchair, and more,”
says Kevin Kaltenbach, reverse mortgage
supervisor for HomeServices Lending,
LLC. “Others may want to relocate closer
to family, or enjoy the activities of a senior
community.”
Now thanks to the FHA’s reverse mortgage
for purchase program, seniors can use the
advantages of a traditional reverse mortgage
to buy a new home.
Kaltenbach explains, “Like FHA
conventional reverse mortgages, the reverse
mortgage for purchase program allows
seniors to buy a new home with no credit
or income requirements, and no monthly
payments for as long as they occupy the
home as their primary residence, maintain
the home, pay property taxes, and so on.
“How it works is that borrowers either
sell their current home to fund a down
payment, or keep their current home as a
rental investment if they have enough cash to “For an aging population that is living longer With over 3,400 sales associates in
put toward the new home purchase,” he says. and likely to outlive savings or outspend Social 58 offices across Southern California and
Security and other retirement funds, reverse
The down payment can only come from the sale the Central Coast, Prudential California
mortgages for purchase can be a legitimate
of the current home, the sale of other assets, or option,” says Kaltenbach. To learn more, Realty is the name to trust when buying
savings. The borrowers may not use cash from contact Kevin Kaltenbach at mortgage@ or selling a home. Our agents close more
credit cards, bridge loans, seller financing or prusocal.com. than $12 billion in sales volume and well
seller contributions to closing costs.
Advice for buyers: Now is the time to take over 16,000 transactions each year. We
The total of the down payment plus the advantage of near-record low mortgage rates — also provide every aspect of domestic and
proceeds from the reverse mortgage must be you can’t lock in a rate until you have a signed international relocation to corporations
enough to pay for the new home. The sale contract. However, you can get preapproved
of the current home and the purchase of around the world. As one of the top five
for a loan.This positions you like a “cash
the new home can be completed in a single buyer,” one whose offer sellers are likely to brokerages in the nation and the largest
transaction. accept over others. Already having financing affiliate in the Prudential Real Estate
underway is a big advantage in negotiations. international network, we have the
Homes eligible for purchase include single-
With home prices still well below peaks, and resources and connections to protect your
family homes, HUD-approved condominiums,
interest rates at record lows, you will be in a
planned unit developments, two- to four-unit interests and make sure your experience
strong position to get the home you want.
properties, and manufactured homes built
is a successful one.
after June 15, 1976. Reverse mortgages to Advice for sellers: Many buyers may need
purchase may not be used on co-ops, second to close quickly to take advantage of terrific Prudential California Realty is proud to
homes, boarding houses, bed and breakfasts, mortgage interest rates. Delays in the sales be a member of HomeServices of America
or homes on leased land. transaction for any reason could cause their Inc., a Berkshire Hathaway affiliate.
rates to go up. You can assure a quick sale by
Borrowers must occupy the home as their
complying with all requests for inspections, For more information, visit
primary residence within 60 days of the
disclosures, and repairs well in advance of the
closing date. If they are purchasing new or www.prudentialcal.com.
closing date.
ongoing construction, the construction must
be complete and a certificate of occupancy
must be issued prior to the loan application.

SAN DIEGO COUNTY

San Diego County is enjoying a heated seller’s market in homes priced under $1 million. Like other areas of
Southern California, supply builds once homes price above conforming and conforming jumbo ranges. While upscale
and unique homes aren’t expected to sell at the same pace as more affordable homes, inventory levels of one or
two years’ supply are typical. Once supply approaches or surpasses the two-year level, the market is considered
stagnant, so homes priced $1 million to $3 million are definitely in a buyer’s market, and inventories of homes priced
higher are stagnant.

Listings Sold by Calendar Quarter

All residential properties in SANDICOR MLS
9 quarters List Price Range (Less than $1 million) through June 30, 2010
All Properties - Listings Sold by Calendar Quarter
9 Quarters through June 30, 2010
Average Sale Price (Thousands) Homes Sold

$450 15,000
Avg Sale Price Listings Sold Units
$400
The heated seller’s market in homes under $1 million has
12,000
encouraged an 11% gain in prices, but sales volume has
$350

$300 9,193
slowed only slightly due to the momentum.
9,082 8,900 8,895
8,413 8,271 9,000
$250 7,399 7,187 7,089

$200
6,000
$388 $358 $320 $336 $340 $337 $351
$150 $298 $316

$100
3,000

$50
1-year avg. price trend: Up 11 % 1-year sales trend: Down 2.1 %
2-year avg. price trend: Down 9.6 % 2-year sales trend: Up 20.2 %

$0 0
2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4 2010/1 2010/2

Based on data supplied by SANDICOR Multiple Listing Service and its member Associations of REALTORS, who are not responsible for its accuracy.
Analysis dates are April 1, 2008 through June 30, 2010. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.
 Inventory in Months’ Supply – August 2, 2010
Detached properties in SANDICOR MLS

Detached Properties - Inventory in Months

Under $300K 2.1

Detached homes priced under $399K are selling as fast
$300K - $399K 2.7
as they can close. The remaining market is well-balanced
$400K - $499K 3.7
in favor of buyers and sellers. Only when homes are
$500K - $599K 4.5
priced $900K and above does the market turn in favor of
$600K - $699K 4.9 buyers.
$700K - $799K 5.8
$800K - $899K 6.8
$900K and over 13.1

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

Inventory in Months’ Supply – August 2, 2010

Attached properties in SANDICOR MLS
Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Attached Properties - Inventory in Months

Under $300K 2.6

Attached homes are also selling well, with a healthy
$300K - $399K 3.6
balanced market for homes priced under $699K. Only
$400K - $499K 4.7
homes priced $900K and above are in a sluggish buyer’s
$500K - $599K 6.6 market.
$600K - $699K 7.6
$700K - $799K 11.1
$800K - $899K 9.5
$900K and over 20.2

0.0 5.0 10.0 15.0 20.0 25.0

Pricing Reality – August 2, 2010
List prices per square foot by MLS status
Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.
Detached properties in SANDICOR MLS

Detached Properties - Pricing Reality for Sellers, per square foot

Sellers should carefully consider current buyer
demand when pricing their home for sale.

Active $389
The chasm between active detached listings’ price per
When list prices per square foot of Backup
and Pending status properties are below that
of Active properties, sellers should ask for

square foot and those of solds is vast, further illustrating

pricing counsel from their Agent.

the greater activity in the more affordable price points.

Pending $245

Sold $251

$0 $100 $200 $300 $400 $500

Pricing Reality – August 2, 2010
List prices per square foot by MLS status
Attached properties in SANDICOR MLS
Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

Attached Properties - Pricing Reality for Sellers, per square foot

Sellers should carefully consider current buyer
demand when pricing their home for sale.

Active $369
Attached homes are also selling significantly faster in the
When list prices per square foot of Backup
and Pending status properties are below that
of Active properties, sellers should ask for

more affordable price points, judging by the gap between

pricing counsel from their Agent.

active listings’ price per square foot and solds.

Pending $231

Sold $239

$0 $100 $200 $300 $400 $500

Copyright © 2010, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.
 Monthly Listings Taken and Absorbed
Detached properties in SANDICOR MLS
12 months through July, 2010

Detached Properties - Monthly Listings Taken and Absorbed

12 Months through July 2010
4,000 3,000
New Listings Listings Absorbed
3,352 3,310
Since the first of the year, sellers have flooded the market
3,122
3,070
2,955 with new detached home listings, while absorption rates
3,000
2,515
2,000 appear to be flattening. Sellers should carefully consider
2,055 2,072 2,134
2,340
inventory levels and competing homes when pricing their
2,000
1,782
1,590
homes for sale.
1,000
1,000

0 0
2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03 2010/04 2010/05 2010/06 2010/07

New Listings 2055 2072 2134 1782 1590 2340 2515 3070 3122 2955 3352 3310
Listings Absorbed Monthly
2028 2096Listings
2014 Taken
1626 1504and Absorbed
1672 1904 2232 2454 1876 2018 1992

Attached properties in SANDICOR MLS

12 months through July, 2010

Attached Properties - Monthly Listings Taken and Absorbed

12 Months through July 2010
1,800 1,400
New Listings Listings Absorbed
1,518 1,543
1,500
1,507 1,517 1,200 While sellers added inventory in 2010, absorption rates
1,376
1,335
1,000
were able to keep up. However, sellers should note that
1,201
1,200
1,053 1,079 1,058 absorption rates appear to be flattening, so they should
800
900
937
871 carefully consider inventory levels and competing homes
600 before pricing their home for sale.
600
400

300
200

0 0
2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 2010/03 2010/04 2010/05 2010/06 2010/07

New Listings 1053 1079 1058 937 871 1201 1335 1507 1517 1376 1518 1543
Listings Absorbed 1005 1078 995 864 821 843 936 1172 1201 949 992 991

Listings Sold by Calendar Quarter

Detached properties in SANDICOR MLS
9 quarters through June 30, 2010
Detached Properties - Listings Sold by Calendar Quarter
9 Quarters through June 30, 2010
Average Sale Price (Thousands) Homes Sold

$600 10,000
Avg Sale Price Listings Sold Units
Detached home prices recovered almost to the two-year
$500

average by Q2 2010.
8,000

6,700 6,476
$400 6,352
5,927
5,705 6,594 6,000
5,360
$300
5,193 5,019
4,000
$200 $439 $424 $462 $468 $486
$551 $498 $393 $449

2,000
$100
1-year avg. price trend: Up 14.5 % 1-year sales trend: Down 1.8 %
2-year avg. price trend: Down 11.9 % 2-year sales trend: Up 20.8 %

$0 0
2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4 2010/1 2010/2

Listings Sold by Calendar Quarter

Attached properties in SANDICOR MLS
Based on data supplied by SANDICOR Multiple Listing Service and its member Associations of REALTORS, who are not responsible for its accuracy.
9 quarters through June 30, 2010
Analysis dates are April 1, 2008 through June 30, 2010. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.

Attached Properties - Listings Sold by Calendar Quarter

9 Quarters through June 30, 2010
Average Sale Price (Thousands) Homes Sold

$400 4,000
Avg Sale Price Listings Sold Units
After a two-year drubbing, prices rose nicely in attached
2,993
$300 2,891 2,840
2,888 2,941 2,872 3,000 homes under $1 million.
2,589
2,381
2,227
$200 2,000

$344 $311 $258 $229 $241 $252 $263 $242 $255

$100 1,000

1-year avg. price trend: Up 5.6 % 1-year sales trend: Up 1.1 %

2-year avg. price trend: Down 25.9 % 2-year sales trend: Up 10.9 %

$0 0
2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4 2010/1 2010/2

Based on data supplied by SANDICOR Multiple Listing Service and its member Associations of REALTORS, who are not responsible for its accuracy.
Analysis dates are April 1, 2008 through June 30, 2010. Does not reflect all activity in the market place. Copyright © 2010, Real Data Strategies, Inc. All rights reserved.

©2010 Prudential California Realty Independently owned and operated. Objective data used in this report provided by Real Data Strategies. Inc. An independently owned and operated member of the Prudential Real
Estate Affiliates, Inc. This is not intended as a solicitation if your property is currently listed with another broker.