The area is showing traditional trends in declining sales, inventory and pending sales for the fall season. October sales decreased by 26 percent in October 2008 and 2009 and declined in the month of September 4 percent for both years. Pending sales stayed about the same around 2600 for the last few months with October sales declining 8 percent from the previous year in October. Double-digit sale declines were seen all across San Diego County but two coastal regions show the smallest declines, which were around thirteen percent.
After the tax rebate program came to an end in April, the real estate market is a bit softer, even though it was thought that since current interest rates are as low as they were in the 1950’s, the trend would be quite different with demand higher. The lack of demand increasing and the low interest rates should have been the ticket but other factors are at play here like the price of homes and economic uncertainty.
The growth that was seen in demand all began in 2008 with homes that were priced under $300,000. During 2007, this market was 18 percent of total sales, which increased to 48 percent of the sales in 2008.
Over the past year, home in this market have declined by thirty percent even with the low interest rates that are around and the low down payments. The trends seen in demand have changed dramatically over the past three years. Homes now under $400,000 were 65 percent of the total sales in 2008 to 2010 when in 2008 this area was only 37 percent of the total sales. The San Diego area is still having a few issues with affordability that is causing demand to be lower and there is only a 55 percent home ownership rate in the San Diego area at this time. Therefore, demand is here.
The housing inventory in San Diego decreased three percent in October, which follows historical trends except for the years of 2008, and 2008. The normal trend is to have reductions in inventory for the winter months. The month of October saw 15 percent fewer new listings that the average of all new listings during the last six months, which was the huge reason for seeing the drop in inventory for the month of October. All the declines in inventory were for homes listed at more than $400,000.
There is still not a connection in San Diego with the list price and the average selling price in inventory. The average sold list price is $426,000 while the average price in inventory is $779,000. Homes that are listed for more than $1 million represent more than 16 percent of the inventory however only around 5 percent of the sold homes. Another thing to look at when balancing inventory is the average days on the market, which for sold homes is 57 days whereas the average days on the market for home still in inventory, is 97 days.
The prices for homes in the San Diego area have been decreasing over the last six months. Peak prices for the 2009 – 2010 time period was May of 2010. October home prices are up dramatically from March of 2009. During 2009, inventory was low and demand was up which created a 2.5 month supply for San Diego County. Due to this, bidding wars and multiple offers caused prices to go up. During the 2010 time period, inventory started to increase but demand slowed down and the months supply increased to around five months supply. Once again, this brought prices downward a bit.
The San Diego real estate market is expected to stay in a declining demand with prices reaching a stable market in the early months of 2011.