The question for this Springs San Diego housing market is "where is the inventory". Home sales remain higher than the past 2 years and pending sales continue to push the 4,000 contracts pending. The market demand took a 30% increase starting in March and the activity level has remained steady since. Over the past year we have seen the inventory drop from over 19000 to just over 9000 home for sale. The inventory drop combined with the increased demand has put the months supply at 2.6 months which indicates strong pressure for price increases. The current levels of supply have not been seen in the San Diego market since 2004. Even if one counts the Contingent homes, offer accepted waiting for lender approval, of about 3000 homes the months supply is still only 3.6 months.
The demand is not yet showing in the sales numbers because the increase in pending activity only began in March and with the longer escrow periods it is taking time to convert to sold homes. There are over 7000 pending contracts in the pipeline and if you add contingent sales, seller accepted contracts' waiting for lender approval, the number of seller accepted contracts is over 10000. The real demand exceeds what the numbers indicate because of the number of multiple offers to purchase homes. It is not unusual to see numbers as high as 20 to 30 offers on a home. This shortage of inventory is causing bidding wars similar to the recent past and that is pushing prices up. We see upward price trends by home size and by San Diego Region so the trend is fairly broad based. For the past few months we have seen prices trending upward, totally expected in the current market environment. Months supply is at 4 months or below for home sizes below 3000 sq ft and is 6 months or less up to $900,000. While year over year demand is down for the homes over 2500 sq ft the lack of inventory is keeping the months supply low so we are even seeing price increase trends in the mid-high market.
Bank owned (foreclosed) homes are making up a smaller percentage of the inventory, currently only making up about 6% of the inventory. Short sales now make up about 26% of the active inventory this is lower than the past due to the new classification Contingent for short sales with seller accepted contracts.
If we look at the buyer profile we can see that the recent spurt in demand is caused by the influx of a different buyer than a year ago. Last year conventional mortgages made up almost 80% of the sales with cash and FHA making up the balance. Now conventional buyers are only about 40% of the market, with cash at 25% and FHA at 35%. We also see new buyers jumping in at price points below $200,000. This market segment has doubled in absolute sales and as a percent of overall sales accounting for over 80% of the sales growth from last year. In may 2005 the under $200,000 price range had 22 sales and this May this market segment had 783 sales - with current inventory of 1580 - while the over $1 million market segment had sales of 296 in May 2005 and this May had sales of 95 - with a current inventory of over 2400. We also see a market disconnect between the list price of sold homes versus the list price of homes in inventory, by home size. The average sold home has a list price of just over 60% of the homes in inventory and we see this pattern across all home sizes. Obviously there is an affordability issue with the current buyer pool in terms of the price levels they can purchase. To me this indicates that many home prices in San Diego are still out of the reach of the buyer pool, which would indicate that some prices must still go down to reach a normal market.
Except for the very high end of the market, prices are being sustained and in some cases increased by very low inventories. Inventories are low because of the lack of homes being listed. Unlike the 2004 era when inventories started to increase because sellers had a good profit motive to sell, we are now faced with sellers either not being able to sell because of a lack of equity keeping inventories down. When the combination of events happen, to decrease demand and increase inventory the downward price pressures will again increase. Some of these events include higher interest rates, more foreclosures, job loses and general economic conditions.
If the current market conditions sound familiar from the recent past, it is. We are in fact entering a new bubble for many market segments with demand far outstripping the supply, below $500,000, and to expect different results could be disappointing.
For more details visit my website www.fidelitypacificrealestate.com
Data from Sandicor is deemed reliable but not guaranteed.
Approximate Location Boundaries: San Diego County
Location Characteristics: encompasses all of San Diego County
About Bob Casagrand:
As a Real Estate Consultant I serve both Buyers and Sellers with the goal of 'sell for more buy for less'. For Buyers, my Preferred Buyer Program provides you with the tools, information, guidance and council to assist you in making the buying decision that best meets your goals. For Sellers, my Magnetic Home Marketing System will market your home to be sold not just list your home for sale, with the objective of 'selling faster for more money', even in today’s market. Oh yes, for those of you that sell and buy your home from me I have a Total Value Program, which gives you the best of all worlds. For more details on any or all of these programs just e-mail your request to me at bcasagrand@searchinsd.com
In this transition market, if you are looking to buy or sell a home now or even 6 months or more away there are a couple of things you should do. Remember, information is the key to wise decision making. First, you should sign up for the home locator program on this website. The up-dates on new listings will keep you current on what is available on the market. For Buyers this will the opportunity to see the new listings as they happen and for Sellers you will be able to see what is going on with competing homes. Of course, I am only a 'click' away from being of assistance to you on any questions you may have about a specific property or the market in general. Second, you must keep up-to-date with current market trends; unit sales, average price and interest rates. The perfect tool for you to do this with is the premier real estate newsletter, Realty Times. This newsletter has daily up-dates on interest rates, a library of buyer/seller relevant articles and once a month a Market Trend analysis of San Diego and various neighborhoods. The beauty of this newsletter is that if the neighborhood of interest to you is not included I can add it to out list. To get your free subscription to Realty Times just e-mail your request to me at bob.casagrand@gmail.com .By using these two tools you will be current with the market and it's trends, this will enable you to make the best buying and selling decisions of the most valuable asset you will ever have.
These reports reflect the views and opinions of their authors and are not necessarily the views and opinions of Realty Times.
