San Diego ranks 2nd in Case-Shiller July housing index

Behind San Francisco and somewhat slower than in June

Tuesday, September 28, 2010 at 2:07 p.m.

San Diego continued its national lead in home-price recovery in July with the 15th consecutive monthly increase, the closely watched Standard & Poor's/Case-Shiller Home Price Index issued Tuesday.

San Diego rose 9.3 percent year-over-year, second only San Francisco’s increase of 11.2 percent. The national average for 20 metro areas was up 3.2 percent.

With all index values set at 100 as of January 2000, San Diego reached a peak of 250.34 in November 2005 and since dropped to a low of 144.43 in April last year.

Thus, San Diego’s July index of 165.02 was 14.3 percent above the low but 34.1 percent below the high.

Although July was up year over year, the change was lower than in the previous four months, which ranged from 10.8 to 12.4 percent. Analysts believe the end to federal homebuyer tax credits cooled demand less pressure on prices.

“While we could still see some residual support from the homebuyers’ tax credit, which covers purchases closing through Sept. 30, anyone looking for home prices to return to the lofty 2005-6 might be disappointed,” said S&P Index Chairman David Blitzer. “Judging from the recent behavior of the housing market, stable prices seem more likely.”

Blitzer said in an interview that the national real estate picture does not apply everywhere.

California has had a substantial rebound in terms of housing, and that’s been pleasant,” he said. “If you go over to the neighboring states of Nevada and Arizona, it’s a whole different picture completely.”

In some markets, such as those, overbuilding and thousands of foreclosures are hampering recovery. In places like Detroit , it’s the economy that is keeping home prices from rising. Ten cities saw year-over-year gains in the Case-Shiller index, while Las Vegas saw a new bottom at 100.91 -- meaning its current prices have returned to their 2000 levels. Detroit had the lowest index, 71.17, and Washington the highest, 187.98, followed by Los Angeles, New York and San Diego.

“It really depends on where you look in terms of whether the economy’s the bigger problem or it’s quirks in the housing market,” he said.

Kelly Cunningham, an economist at the National University System’s Institute for Policy Research and a member of the U-T’s EconoMeter panel of economists, said he was surprised San Diego prices have recovered at all.

“Our employment numbers are still very stagnant and weak and the unemployment rate persists in being high (at 10.6 percent in August),” Cunningham said. “We’re not seeing job growth that would suggest higher demand and housing prices increasing.”

Even with the drop in prices since the 2005 peak, Cunningham said the local median price -- $337,000 in August -- is still much higher than median family home can support. The National Association of Home Builders’ most recent survey showed only 44 percent of homes for sale were afffordable to median-income households, compared with 72.3 percent nationally. With three years of ever-rising foreclosures, previous gains in homeownership have been reversed.

“We’re certainly back to a lower homeownership rate,” he said. “I think a lot of people that have tried to get on the lower rungs of the housing market and lost their homes have become permanent renters.” And tighter lending rules have made it harder for renters to qualify for mortgages.

Christopher Thornberg, a founding partner at Beacon Economics in Los Angeles, said he expected more of a slowdown in prices, given the slowdown in sales following the end to the homebuyer rebates.

“I think we will see a whole lot of nothing,” he said, when asked how prices will perform the rest of the year. “These markets, when the bubble pops, sit on the bottom for two or three years.”

This time, he said, the federal government is trying to “reignite a new bubble.” But he said that’s like restarting a barbeque after the charcoal has turned to ash.

“There’s no fuel in our market,” he said. “They really should let it go. Don’t spike the market.”