(Source: North County Times)
By Eric Wolff, North County Times, Escondido, Calif.
May 29--Even as home sales slow and prices fall, optimistic San Diego and Riverside county homebuilders are opening more new communities than they have in the last two years, builders and analysts said.
The North San Diego County and Southwest Riverside County housing markets are glutted with bank-owned houses and short sales, which put a drag on local house prices. And sales of new houses, which tend to be more expensive, have dropped below 2010 levels.
Yet builders opened 18 new communities in San Diego County in the first three months of 2011, five more than in the same period of 2010, and 16 opened in Riverside County, six more than during the same period last year, according to MarketPointe Realty Advisers.
Builders spent 2010 snapping up cheap land from banks or from developers desperate to sell. Lower land prices translate to lower housing costs for buyers, especially with a bevy of energy- and water-efficiency improvements many builders now include on their models.
"Builders probably believe they've hit a bottom, and based on construction costs, they think they can make it work," said Nathan Moeder, an economist with The London Group in San Diego.
Sellers of new homes face stiff competition from the used-home market, which is struggling to recover from the real estate bubble that imploded in 2006.
Foreclosures and short sales, in which borrowers sell for less than they owe in loans, dominate much of the existing market. In April in San Diego County, 27 percent of listings were foreclosures or short sales, and in Riverside County, 66 percent of sales were distressed, according to the California Association of Realtors.
Foreclosures and short sales tend to sell for low prices, and in turn push down prices for entire neighborhoods.
In April, the median house price in North San Diego County was $430,000, down 34 percent from the 2005 peak, although up 21 percent from a 2009 bottom, according to data from the San Diego County assessor.
In March, the median price in Southwest Riverside County slipped to $202,000, down 55 percent from the 2006 peak, and up 5.3 percent from a low in 2009.
Those low prices undercut sales of new houses, which were 32 percent more expensive than used houses in the region in 2010, according to a North County Times analysis of that same data.
Similar pressure pushed down homebuilding nationally, as builders applied to construct 385,000 houses in April, the lowest figure in three years, according to the Department of Commerce.