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Wednesday, Oct. 1, 2008 | Home prices in San Diego County logged a 25 percent drop from July 2007 to July 2008, according to the latest Standard & Poor’s/Case-Shiller index, released Tuesday.
That 25 percent year-over-year drop was the steepest on record. The decline returns home prices in the county to a level not seen since late summer 2003. At the time, housing prices were in the midst of a period of extreme appreciation, a rapid rise that saw prices increase by 150 percent over six years to reach a peak in November 2005, according to Case-Shiller historical data.
Since that peak, prices have fallen 31 percent. July’s index shows housing prices are still 74 percent higher in the county than they were at the start of the decade.
But for many people who bought or refinanced homes in the last five years, the declines have erased down payments, caused hundreds of thousands of dollars of equity to vanish, made it impossible to refinance out of skyrocketing mortgages now that their homes are worth less than they owe, and left an unprecedented number facing foreclosure or with their homes already repossessed.
The impact on the regional economy has been marked by significant job losses in construction, finance and real estate. The San Diego economy has been destabilized by the housing market — including that job loss, falling housing prices and foreclosures, leading to another monthly drop in the University of San Diego Index of Leading Economic Indicators, also released Tuesday.
“Right now there’s just so much out there in terms of inventory and foreclosures and so on that it’ll take awhile before all of this stuff is chewed up,” said Alan Gin, USD economics professor who compiles the index.
Regional officials worry about the stability of some of the neighborhoods hardest hit by foreclosure, citing the blight that can come when homes are abandoned and left for vandals or squatters. The federal government allocated $17 million in grants to the region to assist with the efforts to combat that blight, officials announced this week.
Mayor Jerry Sanders announced San Diego’s piece of that allocation at a press conference Monday morning outside of a foreclosed home in Encanto, one of the city of San Diego’s hardest hit neighborhoods.
In that neighborhood, ZIP code 92114, the number of houses repossessed by banks in July increased 270 percent from July 2007, according to MDA DataQuick, reaching a rate of five houses foreclosed for every 1,000 homes in the community. That doesn’t count homes listed for sale at a loss or homes that have received notices of default, the first stage in foreclosure.
In the Case-Shiller index, the price declines show up strongest among houses priced below $354,157. In that category, the lowest of the index’s three tiers, prices have fallen 34 percent year-over-year and 41 percent from that tier’s peak in June 2006.
The middle tier — homes priced between $354,157 and $518,796 — saw a 24 percent drop from July 2007 and a 32 percent drop from its peak in November 2005.
And the highest tier, homes priced higher than $518,796, slumped 17 percent year-over-year and 21 percent from that tier’s peak in June 2006.
San Diego’s 25 percent drop from July 2007 to July 2008 ranks fifth-deepest among the 20 metro areas counted in the Case-Shiller index. Ahead of San Diego were Las Vegas, Phoenix, Miami and Los Angeles, with annual declines between 26 percent and 30 percent each.
The Case-Shiller index takes the most recent sales of detached houses and compares them with the last time that same house sold, tracking the changes in price in the index. It does not measure price changes in condos or new houses.
The effects of the declines in those neighborhoods where foreclosures reign and where prices have fallen by close to half since the peak are of greatest concerns to officials studying ways to fight blight. Plans for a private-public-philanthropic partnership to form a land bank have gained traction, with aims of purchasing repossessed homes in bulk from lending institutions and rehabbing them for sale or rent.
The federal government gave San Diego $9.4 million in federal grants to help with neighborhood stabilization efforts, Sanders announced Monday. That combines with $5 million for the county and $2.8 million for the city of Chula Vista for the same purposes. The agencies must submit plans by Dec. 1 for how they would use the money. Options include fixing up or repairing homes that have been repossessed and abandoned, expanding code enforcement, demolishing or removing abandoned properties, and buying or rehabbing homes to sell, rent or redevelop.
Sanders said the city would prefer to bolster homebuyer assistance programs with the money and clean up blighted properties, rather than purchase homes with the funds.
Liz Pursell, spokeswoman for the city of Chula Vista, said city staff in that city had expected a much smaller sum from the federal government.
“They were pleasantly surprised,” she said. “Now they’re just going to sit down and figure out how to spend the money. We need to establish our priorities and take them to the community and the policy makers.”
Chula Vista has been especially whacked by foreclosure. Three of the county’s top six ZIP codes with the highest rate of foreclosures are in the city, the county’s second-largest city.
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