The Cascade Team Blog

Currently in San Diego, 15% of the active single family listings are bank owned. An increase from the previous month, these bank owned properties are concentrated mostly in zip codes 92114 and 92115 and typically have price points below $400,000. Additionally, of the active properties currently available, approximately 29% are short sale. These are primarily concentrated in zip codes 92102, 92105, 92114, and 92115 also with price points typically below $400,000. These zip codes also show a higher concentration of fixer properties that have been renovated for the purpose of reselling.

In December the San Diego real estate market continued to follow the trend of declining year over year sales, declining inventory levels, increasing days on market and stable to declining prices. Home sales in December declined by 17%, from December 2009, which continued a trend that started back in June of last year. In terms of sales, it was really like yin and yang.  The first half of the year sales were greater than 2009 by 2.5%, while the second half of the year sales declined by 14.5%. The tax credit expiration in April seemed to have the effect of pulling sales forward, but almost creating a false demand for homes. After the tax credit expiration there was a significant decline in demand by homebuyers.   On a brighter note, December sales increased over November by 19%, which was consistent with historical sales patterns.

Year over year sales declines were experienced across all price ranges, with the largest declines occurring in the under $300,000 price range. This is almost the inverse of what was experienced in the Seattle market.  Sales declines were experienced across all regions of San Diego county, with the smallest decline in Central San Diego Coastal only showing a 9% decline. The broad decline in home buyer demand indicates that San Diego is experiencing an overall market decline which could indicate that the market has an affordability issue.

In terms of % change, inventory reductions were in double digits for all price ranges above $500,000 which are the market segments with the most excess inventory. With 17% of new listings in December showing price reductions, this would explain part of the inventory reduction issue; as buyers are snapping up the good deals that are presented. The 3% inventory reduction, combined with a 16% decline in pending activity, pushed the absorption rate up to 5.9 months; which is at the top end of a price stable market. Normally you see inventory levels increase from the first of the year through late spring. If this trend occurs, without an increase in demand, then absorption rates will continue to pushing upward, ultimately driving prices lower. 

San Diego home prices in the month of December reflected a neutral market condition. There is currently about a 50/50 split between homes with price increases and those with price reductions; the average year over year price change is up about 3% at $425,000. However, the average home price is still down 7% from May 2010.  For current price trends to change, 2011 will have to have some combination of increasing demand and/or inventory reduction to significantly reduce the absorption rates. Based on increasing interest rates, more restrictive lending and current affordability we believe the current trends will persist during 2011.