San Diego Real Estate Update

• Home prices. As with employment, San Diego County’s long-beleaguered home market has been picking up since hitting bottom in March, with increases in sales and median price. But skeptics say sales have been picking up largely because of soon-to-expire federal tax incentives and the median price has been rising because pricier homes are being foreclosed upon and resold.

Sharon Hanley, principal of the Hanley Group, a building research firm in Oceanside, estimates that sales in 2010 will increase 10 percent to 15 percent and prices will rise 5 percent. But much of that growth depends on whether banks will start lending again.

“It used to be that the three key words for real estate were ‘location, location, location.’ Now they’re ‘financing, financing, financing,’ ” she said.

As the economy begins to revive, the Federal Reserve will likely start cutting the money supply and slowly raise interest rates to counteract any threat of inflation. USD economist Alan Gin said that could boost mortgage rates from their current level of less than 5 percent to around 6 percent by year’s end. Although those rates would still be low by historical standards, they could make some prospective buyers think twice before purchasing an expensive home.