In the courtroom, when both sides agree to a relevant fact, it is said they “stipulate” to the matter to move onto the deeper question at hand. So, let’s stipulate up front that San Diego has a housing affordability problem, with too many members of the community being priced out of the market.

That said, let’s stipulate to some other facts. In 2002, 33,756 resale houses and condos — not new houses — will change hands in San Diego County for a median sales price of $328,471. San Diego Association of Realtors’ figures show that is a 77.3 percent increase from 1997’s $185,210.

Hottest of all is the new home market where builders will sell about 9,400 units this year, a 33 percent increase from the 7,049 sold five years ago, reports MarketPoint Realty. The median 2002 sales price for new homes is $501,617, up a staggering 90 percent from 1997’s $263,839.

What’s going on here? How are people financing these homes?

The short answer is a period of historically low interest rates and gobs of equity coupled with custom financing programs prepared and overseen by the region’s largest builders.

The long answer is a continuing trend of greater emphasis on customer service.

“The days are gone when a builder would offer one floor plan and one financing option,” says Kent Aden, the executive vice president of the Otay Ranch Co. who is responsible for directing development for the 6,000-acre, 9,200-home Otay Ranch.

The change in how new housing communities are marketed is pronounced, Aden says, when he reflects back on the sort of take-it-or-leave-it approach offered in the early days of EastLake where he worked as an executive.

“There really has been a shift in the last decade where builders have been very consumer conscious,” Aden says. “It applies to a lot of things, but I think it is a spillover from the Nordstrom retail philosophy of trying to establish a relationship with buyers. It leads to relationships with friends and relatives and leads to new retail buyers.”

Echoing those sentiments is Pardee Homes, one of San Diego’s oldest and largest builders.

Among the services offered by Pardee are financial packages created in partnership with Wells Fargo Mortgage that are designed to simplify the often numbing home loan task. “Pardee doesn’t look at it as selling homes,” says Rick Horst, Pardee Home Loan general manager. “They are building communities. We want to see homebuyers get the best available financing.”

To help with the financing, Pardee pays all or part of closing costs and will pay down loan points depending on where the community is and what the market is like. While buyers wait for their new home to be built, they have the opportunity to get a special long-term rate lock program with a free, one-time rate float down in case of rate improvement. The programs are designed to create a stable community and ensure buyers don’t get into financial trouble. “Look at Carmel Valley for example,” Horst says. “The community didn’t see an increase in foreclosures when people were getting laid off.”

Pardee has seven communities from Carmel Valley to Chula Vista. More than 500 homes are slated to go into new and existing communities in 2003. “It’s still a sellers’ market,” Horst says. “San Diego has such low inventory and high demand. The low rates are bringing people into the marketplace. With the median home price at $350,000, low rates are enabling people to buy who otherwise would not.”

The Instruction Of Construction

Taking advantage of Shea Homes’ programs that educate and support buyers through the process, Tanya and Mike Mulligan bonded with their Santa Luz home long before move in. While living in Point Loma, the couple visited and fell in love with the homes in Verrazzano, located behind Fairbanks Ranch. “We loved our home in Point Loma and didn’t intend to move,” Tanya says. “We were out here driving around, walked into a model home and said, ‘This is the place.’”

Shea’s program, dubbed Shea University, starts with the loan information, explains the building process, offers design advice and follows through to home maintenance for months after purchase.

Although not new to the home buying experience, the Mulligans are new to new-home buying. They visited their home while it was under construction and Mike took advantage of the university. “It was great,” he says. “It explained everything from why 2-by-4s may not be straight. In layman’s terms they laid it all out.” He says the program is hands-on and answered all his questions about home construction. During the weekend he toured the neighborhood and was given room-by-room explanations of the construction process and timeline.

Because of low interest rates and the profit on the sale of their Point Loma home, the couple doubled their square footage while only increasing their monthly payments by $80. They purchased their 3,800-square-foot home for $710,000 with 30 percent down and $5,000 from Shea toward closing cost.

“Whether times are booming or lean, Shea will maintain its principles and dedication to customer service,” says Jess Thieme, customer communications manager and training manager at Shea. That effort includes everything from helping buyers sell their existing home to teaching the number of individual parts it takes to build new homes, and how often the heater filters should be changed and carpets cleaned. Shea plans to build 670 new homes in 2003.

As rent in San Diego soars to a level even with some mortgage payments, McMillin Mortgage is schooling its buyers in mortgage options. More adjustable rate mortgages, 100 percent financing and no documentation loans are the new home builder’s answer to the rising cost of homes in San Diego.

“We created these options out of necessity because it’s hard to save to buy a home with such high rent,” says David Johnston, senior vice president of McMillin Real Estate and Mortgage. “People can’t save for a down payment, and with the economy, they don’t want to wait to buy a home.”

Another option is the no documentation loans. Instead of showing an income stream history, buyers are approved based on their credit. The better the credit, the better the rate. Johnston acknowledges the risk, but he points out that new home values are appreciating as escrow closes. “(Buyers) have already made a profit. It’s better than the stock market.”

As prices continue to rise, new-home developers are making extra efforts to create strong bonds with their customers. Everything from buyer’s handbooks and moving checklists to guided tours and on-site demonstrations are available.

William Lyon Homes offers a homebuyer’s guide that explains every process in detail and provides definitions for industry terms.

Buyers can make appointments to walk through their homes while they are being built and may take advantage of customized construction options. “There are more possibilities than people think,” says Sara Fraunces, a spokeswoman for Lyon Homes. “They can even have walls knocked down during construction.”

The Equity Connection

A huge factor in helping people buy new pricey new homes is the equity in existing homes, says Russ Valone, the president and chief executive of Market Point Realty Advisors.

In 1997, for example, the buyers of a $263,000 average-priced new home would make a 20 percent downpayment and land a loan at about 8 percent interest. The monthly payment, minus taxes and insurance, was $1,544. Fast forward to 2002. That home owner can sell, easily walking away with $200,000 in equity. If that equity is put into a $502,000 new home and a 6 percent loan secured, the comparable payment is only $250 more a month.

Consumer research, Valone says, shows many buyers are putting even more than 20 percent down.

“Back in the 1980s, the rule in real estate was leverage, leverage leverage,” he says. “If you made a lot of profit in a home sale you would put the equity in something else. Now people are putting that equity down into a new home.”

The Right Time To Buy?

Aden, who also is incoming president of the San Diego Building Industry Association, notes that the financing creativity exhibited by builders is helping many people move in, or up, who would otherwise be struggling to afford home ownership. He worries, however, that despite the builders’ efforts, new regulations and fees, such as those that recently boosted costs in the Uptown area of San Diego from $800 to $8,000 per unit, will shrink the pool of households that can afford to buy. At 25 percent, that percentage in San Diego is one of the nation’s worst.

Nevertheless, he is optimistic about the value and services his industry is providing today.

“I really believe that there has never been a better time to buy a home than right now,” says Aden, 44. “I know that sounds cliche. But as you know interest rates are hovering around 30-year lows. And a lot of people may not realize there are a lot of efficiencies and lifestyle improvements in the new homes on the market today. We know costs are only going up in the future. The shortage of lots isn’t going to get any better.”

Finally he has a tip by those pondering the new home market.

“I think that people don’t realize December is a great time to shop for a new home,” he says. “Builders love to make their year-end numbers look good. What a better holiday present than a brand new home.”

— With Tim McClain