No need to start a panic By: North County Times Opinion Staff
Our view: Slower growth in home prices lets rest of economy catch upWith the news that the median price for a home in North County is down and speculation that our long-running housing boom might be about to go bust, it's easy to be an alarmist.
The sound of the 1.4 percent drop reported this week, though, is not necessarily that of a bubble popping. It's more likely the hissing of a red-hot real estate market cooling. This is a chance for many in our area to breathe easier while the rest of the local economy catches up.
According to the North San Diego County Association of Realtors, the median price for a home in North County was $628,750 in August, down from the price in August 2005 of $637,000. While local housing prices tend to fluctuate, moving slightly up or down from month to month, this drop marks the first time in a decade that the median dropped from the previous year.It's to be expected. Area home prices hit an all-time high in June after skyrocketing during the first half of this decade; North County's median home price more than tripled from 2000 to 2006. Such growth far outpaces the rest of the local economy and can in no way be sustained, especially when many of our residents are priced out of the market.The disparity between our healthy overall economy and a real estate market on steroids helps explain why the number of homes sold in August was down 25 percent from the previous August. Houses are staying on the market longer as potential buyers become more picky, holding out for a home they can afford. Or many residents are opting not to buy ---- the costs of renting a home have kept pace with the economy.Some economists are making doomsday predictions, suggesting home prices could fall 40 percent by 2010 and cause a major recession. Most, though, say we can expect median home values to continue to climb, just at a slower pace, keeping up with economic growth.This forecast for slower growth, rather than retreat, makes sense in light of other economic factors. The area's retail sector is up 8 percent, unemployment is near historical lows, salaries are growing and interest rates are still relatively low. There's enough movement in the local economy to avoid a painful housing crash, but not enough to sustain outlandish growth in the cost of housing ---- which jumped 23 percent from 2004 to 2005.Many predicted the day would come when the housing market would finally took a breather. We may be there. Or we may not be. Last year, home prices hit a high of $644,849 and then dipped to $610,000 before taking off again in 2006. The same kind of dip and turn-around occurred from mid-2004 until 2005.And home prices are still high ---- the August drop only takes us back to January levels, when the median was $620,000.The drop is a benchmark, for sure, but we aren't panicking. We suspect it's more symbolic than anything else. Slow and steady growth, as opposed to wild fluctuation, makes for more solid investment, and allows North County's economy to catch up with home prices. It may even someday allow more of us to buy a house in our hometown and realize a significant part of the American dream.