Perspective, please. How's the real estate market?

Here's a letter to the editor of the San Diego Union/Tribune from Coldwell Banker's San Diego President and Chief Operating Officer. It puts things in a little different light, and keeps the facts front and center.

January 21, 2007
Putting real estate numbers in perspective
Regarding “2006 housing decline paints uneven picture” (A1, Jan. 16):

The story reports that “housing prices turned negative last year for the first time since 1995.” But read a little further, and you learn that the magnitude of the drop was 0.8 percent, or less than 1 percent. And the story reports that resale prices of single-family homes, which are 50 percent of the market, actually rose an equally tiny 0.9 of 1 percent.

If it is the newspaper's job to examine facts and put them in context for readers, this story is disappointing. To put these numbers in perspective, according to data from the California Association of Realtors, the last time the median price of a California home declined was 1996, and that was a minuscule 0.5 of 1 percent. In the ensuing 10 years, the price of the median home has more than tripled, from $177,270 in 1996 to $540,000 at the end of 2006, an appreciation of 305 percent. More than 200 percent of the gain has come in the last five years, with double-digit increases in home values almost every year. This has been a phenomenal, decade-long appreciation in home values in California, the backdrop against which to understand the median price dropping in 2006 by less than 1 percent.

This is not to deny there are changes going on in the market. It has been well reported that in addition to overall prices being flat, the number of sales has decreased and the average time a home is on the market has increased.

Overbuilding of condominium conversions and some categories of new homes in 2006 have put downward pressure on some sectors of the market. Market forces are now re-balancing, and the adjustments need to work through the system. This is a process that will take months and not years. Headlines that trumpet a decrease in prices and imply a declining market do not reflect the reality of a market in the process of turning around.

Buried at the end of your story is the fact that people in our industry reported a pickup in buying activity in December and January. We will soon be entering the all-important spring buying season. Some national economists believe the data show the home sales market bottomed in the fourth quarter. Mortgage rates remain historically low.

As president of Coldwell Banker Residential Brokerage for San Diego and the Inland Empire, I urge your readers to take a closer look at what is really going on in the housing market, and to explore their options if they are considering buying or selling.

RICK HOFFMAN
Del Mar