By Kirk Sanderson
Home prices in San Diego County hit an all-time high in April, and in coastal North County, homes are selling at prices even higher than during the housing bubble of the mid-2000s. In Carlsbad and Encinitas, fixers are getting upwards of 30 offers and selling for significantly above the asking price.
Meanwhile, inventory levels are at an all-time low and there’s talk up and down the state of Sacramento taking drastic measures to intervene in the Golden State’s worsening housing shortage, which is driving up both sales prices and rents.
Are there still bargains to be found?
“North County is a bit mixed since the bubble; some areas have surged while others still lag behind their peaks,” says realtor Brian Flock. “Prices in Carlsbad … are substantially higher, especially Olde Carlsbad, where home prices are up by as much as 20% from bubble levels. A lot of this can be attributed to 20% population growth in both cities over a decade plus active redevelopment in Carlsbad’s Village-Barrio.
“Meanwhile, the number of homes for sale is about 75% below the peak. Only prices in ZIP code 92011 (southwest Carlsbad) are effectively flat from peak levels. This ZIP code was last to peak at the beginning of the recession and the population has not grown much during that time.”
Conversely, Flock said, “Oceanside and Vista home prices are still 6% to 7% below their pre-recession peaks. Even though housing inventory in these two cities has dropped by a whopping 80% from the peak, the population of these two cities has only grown by 6% to 7% in a decade. This puts less upward pressure on prices in comparison to Carlsbad and San Marcos.”
Flock says one notable “price sweet spot” in North County is the Foothills/Alta Vista area of Vista, “where you can get the most home and land for the money.”
“If you look really hard, you can always find a bargain,” adds local realtor Kelly Lauro. “If the seller’s motivation is desperation, you can get a deal. There are not any foreclosure deals to be found like back in the day. Banks are now selling foreclosure properties that they have in their inventory to either asset managers in big chunks (many homes at a time) or holding them and selling them at market value. Bargains aren’t really found in specific areas, just here and there. Obviously the further from the coast, the better the price point.”
Veteran realtor Kelly McLaughlin, of AARE, agrees. “It will be tough for the coastal ZIP codes because affordable housing has declined in the past two years and will continue to fall this year,” she says. “Many homeowners who have lived in their homes for several years could be thinking of moving but won’t list their homes for sale because they are among the millions of homeowners locked into a mortgage rate below 4%. Rising mortgage rates will likely work as an incentive for these people to stay in their homes to hold onto that low mortgage payment. So with only a two-month supply of inventory in most areas the demand is high, causing the prices rise. Sellers have been receiving multiple offers, many over the asking price. Some buyers are aggressive and shortening the contingency periods and even waiving the appraisal. The percentage of list price to sale price is currently up 3.3%. I think this will lead to a permanent shortage of starter or affordable homes for sale.”
She notes that homebuyer demand is stronger now than it was at the same time last year. The median sales price in all four ZIP codes in Carlsbad from this time last year has increased 12.25%, according to data taking from Market Watch report for North San Diego Association of Realtors. Still, McLaughlin says, “I believe real estate is a great investment if you are in it for the long haul.
Kathy Tetalman of Progressive Realty agrees. “Prices [in coastal North County] are higher than the peak 2005-2006 bubble, but real estate is a long-term investment, and this investment is something that is occupied and enjoyed by the owners for many years,” she said. “Real estate remains a good investment. An owner has many long-term benefits, including control over the property; enjoyment; choice of residence in terms of neighborhood, location, and floor plan; and the ability to modify and change the property to suit the occupant’s needs – not to mention tax benefits and pride of ownership. There are wonderful communities in Oceanside that are a bargain in terms of being in coastal Southern California – they are undervalued for their location and features of the property.”
Buyers looking for bargains, realtors say, had best look beyond the coastal communities of Carlsbad and Encinitas and consider looking further east – or north, in parts of Oceanside.
Jeffrey A. Pashby, a senior associate with The Lund Team, says, Vista. I like the section of Oceanside in ZIP code 92056 that borders Calavera Hills in Carlsbad. Why? Oceanside address + Oceanside price = CARLSBAD SCHOOLS. One neighborhood in particular is Bay Shores South. You’ve got 30- to 40-year-old townhomes with carports or garages, two and three bedrooms, no Mello Roos, low HOA dues (currently $160/month), community pools, and CARLSBAD SCHOOLS. Price range: $275,000 to $350,000. A bargain in today’s market!”
In addition to the Foothills/Alta Vista area of Vista, Flock has pinpointed several other areas where potential home buyers may find happy hunting.
“For square foot value, San Marcos, Oceanside, and Vista are the lowest at $280/ square foot,” he said. “Northeast (92010) and southeast Carlsbad (92009) follow at an average of $340/square foot, with developments like Tanglewood (92010) off of Carlsbad Village Drive being a good value.
As for areas where buyers are unlikely to find bargains, realtor Mike Fraijo of Fraijo Real Estate & Mortgage points to the 92008 (Olde Carlsbad) and 92054 (Oceanside, between Mission Boulevard and Oceanside Boulevard, west of Interstate 5) ZIP codes. “Listings aren’t lasting long unless they are just really over-priced,” he says. “Shadow Ridge [in Vista] is also going strong because it’s close to jobs in and around Faraday or Palomar Airport Road, and also offers quick access to Interstate 5.”
Flock says “the priciest areas in Carlsbad are Olde Carlsbad and Aviara, at an average of $390/ square foot. Talking about affordability in these areas is mostly a comparison with our southern coastal neighbors. For example, a one-bedroom shack in the Barrio can cost $800,000 which clearly reflects the land value alone.”
Is the adage, find the worst house in the best neighborhood, still accurate?
“In Oceanside and Vista, , the answer is yes,” Flock says. “There is less competition and home buyers have more opportunity to find ‘sweat equity’ opportunities. Investors are also able to turn a decent profit on a rehab.
“In Carlsbad and San Marcos, it depends. For example, we recently listed a very dated home in Carlsbad that attracted both investors with cash and regular buyers that required loans. The result was 27 offers! That competition takes a lot of stamina for new home buyers and minimizes sweat equity opportunity. In that situation, buyers have to be willing to live in the home ‘as is’ or substantially limit their upgrades to help preserve their equity.”
Tetalman agrees. “Yes, the worst home in a more expensive neighborhood is a great value, but only if you have the funds to bring it up to similar care and standards of that neighborhood,” she said. “There are experts in home remodeling that can assist a new homeowner in making improvements and modifications to real estate to correct any deficiencies in the property.
“If you don’t have those skills you can find a reputable craftsman to make those repairs. It takes time and effort and money, and some people can do it with great outcomes, but others should find a home in turnkey condition.
“A word of caution here – taking on a project without an end result that is satisfying is an expensive lesson and one that can be very difficult for the owners. We have sold homes in which the owner took out a kitchen and did not have the resources to put it back in, running out of money, then having to sell a home that was not occupied, and not loanable, under value because the only buyer could be a cash buyer. This was difficult for that family financially and put a huge strain on their marriage.”