California’s recovery? The truth behind the facade

san fran houses
 

 

Although it’s been five years since the financial crisis, a full on recovery has yet to be seen in California, according to a recent report from PropertyRadar.

California single-family and condominium sales grew 3.5% in May 2014; however, this is still down 11.1% from May 2013. Year-to-date sales are the lowest level since 2007.

For May, non-distressed property sales increased 5% while sales of distressed properties dropped .7%.

“What continues to surprise us month after month is that in the fifth year of a so-called recovery, year-to-date real estate sales are on track to be the lowest since 2007,” said Madeline Schnapp, director of economic research for PropertyRadar.

“Government policies that have constrained supply coupled with high demand from all cash buyers pushed up real estate prices so quickly that in many parts of California the median income home buyer can no longer afford the median priced home,” Schnapp said.

The median price of a California home reached its highest level since December 2007 in May, up $10,000, or 2.7%, to $385,000 from $375,000 in April.

The uptick in sales is primarily due to a 4.5% increase in the sales volume of higher priced non-distressed properties, which accounted from nearly 81% of total sales.

Year-over-Year, median home prices jumped 10%.

“The significant jump in median home prices this past month is being driven by the change in mix between the sales of distressed properties versus sales of non-distressed properties, rather than a big jump in actual home values,” Schnapp explained.

“Just a few years ago, distressed properties accounted for 60 to 70 percent of sales as opposed to 19 percent today. Higher priced non-distressed property sales now dominate monthly sales numbers, so it should come as no surprise that median prices are up,” she added.

At local levels, median home prices in four Bay Area California counties – San Francisco, Marin, Santa Clara and San Mateo – are close to or exceed their pre-housing bubble peaks.

Meanwhile, in only 8 of the state’s 26 largest counties – Kern, Merced, Riverside, San Bernardino, Solano, Stanislaus and Tulare – can the median income homeowner in that county afford to purchase the median priced home.  

“Real estate prices continue to march higher on declining sales volume which is an unhealthy combination,” said Schnapp. “At some point you run out of buyers willing to pay these prices setting the stage for a decline in sales volume, which we are already seeing, and later for the possibility of a price correction.”

Real estate market flattens in May

By Jonathan Horn9:49 A.M.JUNE 11, 2014

Homes are lined up near Carmel Valley.
Homes are lined up near Carmel Valley. — K.C. Alfred

Annual home price appreciation in San Diego County continues to decline in single digits after last year’s large gains.

Last month, the median price for a home sold in the county was $440,000, a post-Great Recession high that is up 8.2 percent from the $406,500 median in May 2013, real estate tracker DataQuick reported Tuesday. However, that appreciation rate pales in comparison to the 21.3 percent gains seen from May 2012 to May 2013. The county is now on the brink of hitting its lowest year-over-year appreciation in home prices since 7.9 percent in August 2012.

“The sort of price spikes we saw this time last year – annual gains of 20 percent or more – are less likely today given affordability constraints, higher inventory (compared to last year) and the drop-off in investor purchases,” DataQuick analyst Andrew LePage said in a statement.

The higher median values are also dampening sales. In May, 3,654 transactions closed, 10 fewer than in April. Typically, activity jumps into the spring and summer months, which are considered peak buying season. In May 2013, there were 4,236 transactions, 444 more than in April 2013.

BALBOA PARK GOLF COURSE PLAN GETS GO-AHEAD City attorney’s office deems funding method sound

Architect's rendering of clubhouse expansion

  • Architect’s rendering of clubhouse expansion

The City of San Diego, golfers who frequent the Balboa Park Golf Course, and pedestrians who traipse and cycle the the winding road where the clubhouse is located hope to replace the 1930s clubhouse, pathways, and the adjacent dirt parking lot. They hope to do so by using cash from the Golf Enterprise Fund, an extra fee tacked on to the green fees golfers pay to play the 18-hole city-owned golf course. Good news for them: the city attorney’s office has changed their opinion and is now allowing the city to use those funds on non-golf-related portions of the project.

The change of heart comes amid questions over whether or not tapping into the “Golf Enterprise Fund” violated Proposition 26, the state law requiring any tax or fee’s approval by two-thirds of the electorate unless the revenues of said fee are used specifically to benefit those who pay the fee. Because the renovations include a bicycle and pedestrian path, updated wedding facilities, a new bar and restaurant — amenities that will be used by the general public and not solely golfers — using those revenues were at first thought to be contrary to the law.

Of course, the city has been stung by that provision before, most recently in the case of the Greater Golden Hill Maintenance Assessment District. In that case, the city was forced to dissolve the maintenance-assessment district for (among other issues) failing to address the specific benefits for residents who paid the assessment and the improvements benefiting the general public. The city continues to defend several lawsuits over special assessments.

Oddly enough, the same community that won the lawsuit wishes to use the golf revenues on the non-golf-related items.

In February of this year, the Greater Golden Hill Planning Group voted to deny the clubhouse expansion solely because, at the time, pedestrian improvements were not included in the plans. In fact, before the vote, city staffers were under the impression that the Golf Enterprise Fund could not be used for any pedestrian improvements.

This from a February 15 article by the Reader’s Ian Anderson:

[Project manager Todd] Schmit indicated the Golf Enterprise Fund, which would be paying for the new development, would or could not be used for improvements to Golf Course Drive, which also cannot be funded by the city’s Street Division because it is considered a park road.

While private developers would be required to provide pedestrian-access considerations, work on the public golf course seems to exist in a bureaucratic gray area, where the project does not seem to be accountable for maintenance or improvements to its access road.

Since siding with the residents, the city attorney’s office has given the council and city staff the green light to move forward with the plan.

“The use of Golf Enterprise Funds to construct special event facilities at the proposed Balboa Park Golf Course Clubhouse is a permissible use of those funds if the special event facilities are for the operation, maintenance and development of the golf course,” reads a May 27 memorandum from the city attorney’s office.

“Similarly, the use of Golf Enterprise Funds for pedestrian and bicycle improvements to Golf Course Drive as part of the proposed Balboa Park Golf Course Clubhouse Project is a permissible use of these funds if these pedestrian and bicycle improvements are for the operation, maintenance and development of the golf course.

“The use of the Golf Enterprise Funds for these purposes is likely exempt from Proposition 26 under the ‘specific benefits or privileges’ exemption or the ‘use of property’ exemption, or both, although the ‘specific benefits or privileges’ exemption requires that a determination be made that these improvements provide a specific benefit to the payors, and that the fees charged do not exceed the reasonable cost to the government of providing that benefit or privilege.”

The city council is expected to weigh in on the expansion project during an upcoming hearing.

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