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Home Prices Continue to Fall in San Diego

By Mike in Downtown San Diego Real Estate Market Analysis|November 2008 with 0 Comments


Housing Market GraphIn the October 28th edition of SignOnSanDiego.com, Staff Writer Roger Showley illustrates the recent drop in the home price index in San Diego County: Home price index still tumbling in San Diego. This is an important article for you, the homebuyer, in that it helps to make the decision whether now is the time to buy that Downtown San Diego Condo or Loft youve had your eye on.

For the last three years San Diego has experienced a housing slide and we know that eventually it will hit bottom; but the questions are determining when and will we know were there? With the Standard & Poors/Case-Shiller Home Price Index showing prices in San Diego County down 25.8 percent in August from a year earlier there is hesitation stating that were close.

More recently, from the months of July to August, San Diego prices dropped 2.3 percent placing us at fourth-highest out of the 20 cities tracked.

One of the tools used to forecast the bottom is sales volume. When we do see sales increase, meaning buyers are becoming more comfortable with the thought of buying, the obvious supply and demand rule goes into effect. In the past three months sales in San Diego were up after a 48-month slide, according to the MDA DataQuick figures. Though, its important to note, that through September sales were still around 10 percent below those of last year. According to Lawrence Yun, chief economist of the National Association of Realtors, This is the first and necessary step before anything else stabilizes. Basically, more buyers mean fewer homes on the market which eventually leads to price stabilization.

Something to consider is that though the bottom may be near, there are still issues in the financial market that will undoubtedly affect home buying. Some believe that the market is still treacherous and may continue to get worse.

Still yet, MDA DataQuicks September numbers state that median prices dropped to $328,000 last month, down from $350,000 in August. Market observers continue to support the idea that San Diego prices will keep falling, level out by the second or third quarter of next year and then start to rise slowly in 2010.

A key issue that makes it difficult to know what will actually happen is the backlog of distressed properties for sale. Last month the proportion of all homes sold that were foreclosed hit a 47.3 percent record. Some believe as long as these properties continue to be put on the market, prices are unlikely to stabilize.

As of recent, foreclosures have had two straight month-over-month declines; and defaults have been dropping for five consecutive months.

To point out the positives: The San Diego Association of Realtors reported six straight months with a declining number of active listings, suggesting an increase in demand. Also, in some areas, investors are reportedly buying up dozens of foreclosure properties indicating that some professionals may feel the bottom is near. In addition, the GDP rose 2.8 percent in the second quarter. The Housing Opportunity Index reached 31.1 in the second quarter, meaning 31.1 percent of homes for sale were affordable to median-income households; this compared to just 9.6 a year earlier.

To point out the negatives: There is a low level of housing permits and were seeing the slowest pace since the 90s. Job losses are threatening housing recovery as San Diegos unemployment rate was 6.4 percent last month, up from 4.8 just a year ago.

All in all, If buyers start coming back and people absorb the inventory, says Yun, that will be one shining light that begins to show other sectors of the economy can now begin to grow.

As our office has been around for the real estate boom just years ago and now, as were living through the slump just as you, we encourage our buyers to do their homework. Now may or may not be the right time to buy for you. There are clearly many aspects to consider but it all comes down to your comfort level. As consultants, we will do our best to arm you with the tools you need to make the best decision for you. There are many useful blogs and articles posted on our site that reference the state of the real estate market, we recommend checking those out for a broad picture view.