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 City of Solana Beach
Section 2
Shoreline and Coastal Bluff Management Strategies Draft MEIR
Project Description
Cost to Purchase Homes
The estimated average cost per square foot for ocean view single-family homes is $694 and the
estimated average cost per square foot for ocean view condominiums is $635. These estimates
are for planning purposes and are not appraisals.
It is estimated that the sales price of single-family homes in the retreat zone, which were sold
from 1997 to 2001 (there were no sales reported so far in 2002), appreciated at an average rate
of 4.3 percent per year in real terms, above the inflation rate. Condominium prices per square
foot may have increased by as much as 7.2 percent from 1997 to 2002. Most of this time was a
period of significant economic expansion and should not be used for long-term projections. It is
more appropriate to review long-term growth rates over a period that at least includes one
economic recession and one expansion, such as the 1990 to 2000 period. Based on data
reported by the San Diego Regional Chamber of Commerce, which was adjusted to account for
inflation, real home values in Del Mar increased by an annual compounded growth rate of 2.1
percent while home values in Encinitas grew by a 0.5 percent annual rate from 1990 to 2000.
Countywide, home values did not exceed inflation, or grow in real terms, from 1990 to 2000.
Published data was not available for Solana Beach specifically for this period. Prices have risen
sharply, well above inflation, during 2001 and 2002.
While there has been a significant increase in countywide home values during the last few
years, the increase is compensating for the significant decline in values that occurred in the
early and mid-1990s during the region's recession. The higher than average increase that
occurred in Del Mar and Encinitas reflects the desirability of coastal properties. Also, the
disproportionate increase in income among upper-income households may have bid up the
price of high-end properties faster than average. Given the limited resource of coastal
properties, the projected growth in the region, and likely increases in wealth among upper-
income households, the coastal properties in Solana Beach should expect continued price
appreciation.
It is assumed that beginning in 2014, the City will acquire approximately 5 single-family homes
every ten years and several blocks of condominiums every twenty years over the 100-year
project life. Table 2-4 shows the estimated cost (in year 2002 dollars) to acquire homes in
today's values and considering real appreciation. A 2.0 percent real (inflation-adjusted) rate of
annual appreciation was used. While a higher-rate would not be unreasonable, the long-term
uncertainty about each property's land and foundation stability would mitigate appreciation.
The cost of acquiring the 50 single-family homes was an estimated $57.4 million without
appreciation and $207.7 million with 2.0 percent real annual appreciation. The cost of acquiring
the condominiums was an estimated $72.6 million without appreciation and $143.6 million with
real appreciation. The estimated total acquisition cost was $130.0 million without real
appreciation and $351.4 million with real appreciation (in year 2002 dollars).
Project No. 323530000
Page 2-41
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