You can buy a new home in San Diego, but it will cost you.

The traditional single-family house continues to be the most desired type of home, and competition among buyers — powered by a strong economy— has pushed the median home price to record highs in San Diego County.

That is especially true for newly built single-family homes that have seen prices rise to nearly $1 million, or higher, in many cases. Of the roughly 55 new home projects in San Diego County in 2020, only about 10 start pricing under $600,000.

Builders are expected to deliver around 3,000 homes this year, said Meyers Research, around the same amount as the last few years — but still fewer than many analysts say the region needs. It is substantially more than 2009 when 1,786 homes were built, but a departure from 2004 when 9,555 homes were constructed.


In the grand scheme of things, 3,000 new homes are not a huge part of the San Diego market. In 2019, 25,244 resale single-family homes sold, said CoreLogic data provided by DQNews, making newly built homes a rare and a niche product in the county.

Ali Wolf, director of economic research for Meyers Research, said builders aren’t wrong when they say it is hard to build a more affordable home. She cited high land costs, labor issues and increases in commodity costs.

“I’ve seen very few examples where builders or developers are able to hit a price point under $500,000 successfully,” Wolf said. “Their margins are already compressed.”


She said lack of land zoned for housing, especially difficult in coastal markets, is part of the reason why there are not more single-family homes opening this year. Wolf said it isn’t just that we run into the ocean, but that mountains throughout the county also make it hard to build.

“If you could create land, there would be so many more homes on the market,” Wolf said.

One of the places in San Diego County where land is still abundant is the Otay Ranch development in Chula Vista, and the price often reflects it. Homes there generally are around the median home price. For example, single-family homes at the Sierra project start at $536,000 for a 1,833 to 2,179 square-foot-house.

New housing this year tends to be heavily focused in South County, and the trend might continue with political and community opposition to new housing strongest in areas to the north.


Voters will be asked in March to decide on Measure A, which would require countywide votes for all housing projects granted an amendment to the General Plan by county supervisors. Measure B would overturn approval of a 2,135-home project roughly five miles north of downtown Escondido.

New homes potentially closer to job centers are much more expensive. Some of the biggest job centers in the county are north of downtown, such as Kearny Mesa and Sorrento Valley.

There aren’t a lot of homes directly in those job centers, but there are examples of places near them that are substantially higher than Otay Ranch. Homes at Cypress at The Preserve in Carlsbad start at $782,990; Oak Creek in Escondido starts at $750,000; The Commons in Rancho Peñasquitos starts at $815,900; and homes in Pacific Highlands Ranch near Carmel Valley start at $1.4 million.



Finding room for new homes

Even though one of the main complaints from developers is a lack of land, some are making do with urban infill.


San Diego-based Thomas Construction and Vista Nine Properties bought a site in the Bay Park area — less than an acre — for $840,000 in summer 2018 shortly after Derrick Thomas, owner of the construction company, noticed it while driving by.

It had one older house on the site, a 1914 Sears kit house, and the site was underused by most standards.

In its place, the company built four single-family homes, modern with Spanish colonial elements, averaging 1,800 to 2,000 square feet. The homes are close together but are detached, a distinction that means no homeowner association payments.

1 / 7 The open kitchen complete with stainless steel appliances and large farmhouse sink. This new construction home by Savannah, is a 2-level living area at 1,918 sq. ft. With 3-bedrooms (optional 4th using the loft), 3-bath and a roof top deck of 262 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune) 2 / 7 The master bedroom of this new construction home by Savannah. The home is a 2-level living area with 1,918 sq. ft. With 3-bedrooms (optional 4th using the loft), 3-bath and a roof top deck of 262 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune) 3 / 7 The family living room of this new construction home by Savannah, is a 2-level living area at 1,918 sq. ft. With 3-bedrooms (optional 4th using the loft), 3-bath and a roof top deck of 262 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune) 4 / 7 The master bathroom at this new construction home by Savannah comes with two shower heads and two vanity sinks. The home is a 2-level living area with 1,918 sq. ft. With 3-bedrooms (optional 4th using the loft), 3-bath and a roof top deck of 262 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune) 5 / 7 The family living room of this new construction home by Savannah, is a 2-level living area at 1,918 sq. ft. With 3-bedrooms (optional 4th using the loft), 3-bath and a roof top deck of 262 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune) 6 / 7 The loft on the 2nd level can be converted to a 4th bedroom or remain as a loft for a 2nd living room. This new construction home by Savannah, is a 2-level living area at 1,918 sq. ft. With 3-bedrooms (optional 4th using the loft), 3-bath and a roof top deck of 262 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune) 7 / 7 This new construction home (Plan-1) by Savannah, is a 2-level living area at 1,862 sq. ft. With 3-bedrooms (optional 4th using the loft), 2.5-bath and a roof top deck of 217 sq. ft. The home is located in the Bay Park area of San Diego. (Nelvin C. Cepeda/The San Diego Union-Tribune)


Unlike many new home developments, the four homes on the 5000 block of Savannah Street will not fall in a Mello-Roos tax district, which adds to monthly costs for many new buyers. But, the price isn’t cheap. The homes range from $1 million to $1.2 million.

Thomas said he worked with real estate agents and looked at recent sales in the area to come up with the price. He said it would have been possible to build an apartment building with up to 16 units, but felt it didn’t fit in the neighborhood — and anticipated major demand for actual houses.

“Single-family homes are always going to be appealing to people,” Thomas said. “A lot of builders seem to be moving away from single-family residences toward multifamily. Development is a constantly moving goal post and we are constantly chasing after what’s favorable to the market.”

The homes have other elements that could make them favorable other than just simply being detached. Each home also has a small rooftop deck with views to Cabrillo National Monument, SeaWorld, Presidio Park and Pechanga Arena. And garages are equipped with chargers for electric vehicles.


The prediction that the homes would be desirable has seemingly proven to be true. Even as Thomas Construction continues to finish up the last of their work on the homes, one has already sold and another is in escrow.



Challenges

At night in the bustling Otay Ranch development, thousands of people sleep before their alarm clocks rudely wake them up for work. But not all of them are in a home.

Construction labor shortages have been a constant issue for years, with many developers needing to go south to find workers. Increasing wait times at the border over the last several years have resulted in many Tijuana construction workers leaving before 3 a.m., driving across and then napping in their vehicles, said Angel Nuñez, on-site project manager for Shea Homes at the Seville development.

Nuñez has worked in home construction for 25 years and said one of the biggest hurdles for builders has been labor shortages. He said hundreds of skilled workers left during the recession and trying to get them to come back, or train new people, is a challenge.


“I don’t blame them, many of them had bills and mortgages,” he said.

1 / 12 Shea homes construction Field Manager Angel Nuñez, right, and Community Sales Representative Maricel Paras, left, inside a four bedroom single family home in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 2 / 12 New single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 3 / 12 A carpenter installs a piece of sheathing on a new single family home under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 4 / 12 New single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 5 / 12 A worker installs plumbing drains in a new phase of single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 6 / 12 A worker installs plumbing drains in a new phase of single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 7 / 12 Foundations are laid for a new wave of new single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 8 / 12 the back side of new single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 9 / 12 Construction workers install sheathing on a new single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 10 / 12 Newly completed single family homes getting finishing touches in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 11 / 12 New single family homes under construction in the Seville project in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins) 12 / 12 A view through the framework of a new single family home under construction out to the Seville neighborhood in Chula Vista on Friday, January 31, 2020. (John Gibbins/John Gibbins)

On the plus side, when they get enough workers, Shea Homes can build around six single-family homes in 140 days, Nuñez said. Otay Ranch was one of the top-selling master-planned communities in the nation last year with 836 new home sales. But a lot of time it feels like the Chula Vista development is one big construction site. At the Seville project, where Nuñez is working, the 2,498 to 2,891 square foot homes sell for an average of $656,000.

Real estate analyst Gary London, of London Moeder Advisors, said the county has been building too few single-family homes each year, resulting in long commutes from Otay Ranch, Riverside County and other areas far from job centers. He said the housing market is particularly tough for young families who could use the space of a detached house.


“Single-family homes seem to be the one market segment that we just perpetually underserve,” he said. “Middle- to upper-middle-income families just can’t find housing. That bleeds into the future economic prospects of our region.”

London said regulatory fees and construction costs are major factors in why prices are high for many San Diegans, but nothing is quite as bad as land costs. He said that the closer a builder gets to the coast, 50 to 80 percent of the cost to build a home is from the land.

“Theoretically, it doesn’t cost any more to build a house in Otay Ranch than it does in Encinitas,” he said. “Scarcity bids up the price of properties.”