San Diego County Residential Real Estate Market Analysis – Part 3

This is the  3 of a three part article By Mark A. Melikian California Certified Residential Appraiser appraisals@san.rr.com

Comments and Outlook: In San Diego County the number of sold listings and the absorption rate peak in 2003 and descend through 2008, several years prior to the peak in mean sales price. As the number of days on market reaches a low in 2004 and increases three years prior to the mean sales price decreasing, one can expect the mean sales price to continue to decrease until the number of sold listings begins to rebound. Personal observation reveals that as sales volume has decreased over the past several years, there has been an increase in the amount of seller paid concessions. These concessions are not reflected in the average sales price data. A sale of $100,000 with $3,000 in seller paid concessions gives the seller actual net proceeds of $97,000 (exclusive of commissions and other selling costs). While seemingly insignificant on an individual transaction basis, concessions can have a significant impact when factoring an annual cumulative total. It should therefore be noted that recent mean sales prices likely reflect a number higher than the seller’s actual net proceeds. As is evident in the data provided, it is noted that the mean sales price is approximately at the same level as 2002 year end. Individual markets in the county behave differently and there are exceptions to the following statement however; a general observation based on this data is that home prices today in San Diego County appear to be near the same level as those of 2002 year end. Further personal observations and market data have shown an increase in sales activity in the lower price ranges ($400,000 and below) with multiple offers being reported on many properties in this price range. The second quarter 2009 projections have shown support for these observations with an upturn in sales volume and a lower mean sold price.

As disclosed, projections for 2009 are based on MLS data from January through June of 2009. It is noted that the rate of price depreciation has lessened compared to the 1^st quarter report which was based on the typically slower real estate months of January through March. Signs of recovery are evident for detached properties priced below $400,000 and attached properties priced below $200,000. This can be attributed, in part; to the feeling that entry level property prices may be near a market bottom; to readily available credit at historically low interest rates; and to a continuation of government sponsored buyer incentives. Conversely, a tight credit market including higher interest rates for loans above $697,500 coupled with the prospect of a new wave of foreclosures in these price ranges continue to keep demand at low levels for higher priced properties. For properties above $400,000 real estate professionals must continue to focus on setting realistic price expectations for sellers and using price reductions, when necessary, as a way to stimulate demand and sales through 2009.

A recovery in the residential real estate market will occur when supply and demand begin to align across all price ranges. As of June 30 there were 8,868 detached and attached property active listings in the San Diego County MLS system. With the current absorption rate it would take 3.4 months to sell the existing supply of all properties (down from 5.9 months at the end of the 1^st quarter). As noted above, a supply of six to seven months is typically indicative of a normal market. The current market demand for properties priced below $400,000 appears likely to continue into the third quarter, assuming credit remains available and interest rates remain relatively stable. Tight credit, higher interest rates and the potential for future foreclosures in the $400,000 plus price ranges may continue to stall market activity in the higher price ranges. Whether a reduced supply in the higher price ranges has an impact on market activity will be analyzed in subsequent reports.

San Diego realty

San Diego County Residential Real Estate Market Analysis – Part 2

This is the  2nd. of a three part article By Mark A. Melikian California Certified Residential Appraiser appraisals@san.rr.com

Market Specifics – 2^nd Quarter 2008 compared to 2^nd Quarter 2009: Detached home sales data for the second quarter of 2008 shows the highest number of sales in the $300,000-$400,000 price range (see figure 5). During the second quarter of 2009 we see both an increase in the number sold and a shift in market activity with the highest number of sales now in the $200,000-$300,000 price range. Further analysis shows fewer current listings than sales through the $500,000-$600,000 price range. The 2^nd quarter data is consistent with the Market Overview data which shows an increase in the number of sold listings and a continued reduction in the mean sales price in San Diego County.

figure5

Attached homes sales data for the second quarter of 2008 shows the highest number of sales in the $200,000-$300,000 price range (see figure 6). During the second quarter of 2009 we see both an increase in the number sold and a shift in market activity with the highest number of sales now in the under $200,000 price range. Further analysis shows fewer current listings than sales through the $300,000-$400,000 price range. The 2^nd quarter data is consistent with the Market Overview data which shows an increase in the number of sold listings and a continued reduction in the mean sales price in San Diego County.

figure6

Normal residential real estate markets typically have a six to seven month supply of housing inventory. Current supply levels, based on 2^nd quarter absorption rates only, for detached properties are at or below normal market levels up to the $900,000 plus price ranges (see figure 7). Current supply levels for attached properties are at or below normal market levels up to the $700,000 plus price ranges. Whether this is a signal that some degree of recovery is imminent in these price ranges will continue to be analyzed in subsequent reports.

figure 7

*See the next part of this post tomorrow.

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