When I first came to San Diego County in the early 1970s, I did an
analysis of the price of housing based on a home's distance from the
Ocean. My "100% corner" was in La Jolla where if you could
walk out the door of your house and be on the sand, the price per
square foot was sinful. One block off the beach, the dollar per
square foot dropped almost in half. And then west of I-5 but still in
La Jolla (but not walking distance to the ocean), home prices dropped
dramatically. By the time you reached East County, prices were 10% of
what they were on beachfront.
mathematical exercise still applies. I bring this to your
attention because of a recent analysis we did that shows price
recovery since the depth of the recession (typically 2008-2009). We
compared the peak prices obtained in 2005-2006 and then monitored the
recovery since then to see how far we have recovered.
As you might
imagine, not all areas had the same rate of recovery. And,
paralleling the study I did in the 1970s, those areas closest to the
ocean had the most vibrant recovery. Thus, the area straddling
straddling I-5 from Pacific Beach to Carlsbad has had the strongest
recovery. They now are within 14% of their boom-time peak. Carmel
Valley is actually within 4% of where it was at the peak. Typically,
if you are within three miles of Qualcomm headquarters, your home
value is probably where it was in 2005-2006.
As you move to
the tertiary areas (the I-78, East and South), prices are still
30-40% below what they were in the hot times. They too are
recovering, but at a slower pace. The tertiary areas are suffering
because a disproportional percent of the homes are being held by
investors, thereby limiting the amount of saleable inventory.
needs to be asked: If you were going to invest in a new place to
live, will the long-term value of that home increase more in one of
the outlying areas, percentagewise, than a home near the I-5 north of
Pacific Beach? My bet goes to the homes in the outlying areas. It is
more rational to believe that a home can move from, say, $350,000 to
$500,000 (a 43%% increase) than a $1 million home can move up a
similar percentage to $1.43 million. Only time will tell.