The second quarter home sales in La Jolla declined by 7% from the same period last year. This is the same sales trend we have seen in the county as a whole. The largest sales declines occurred for homes priced between $500,000 to $900,000 which declined by 33%. The largest sales decline occurred in the condo market with an 11% decline, detached homes were flat. La Jolla June sales were even with May sales which is different from the county which had increasing sales May to June. June pending sales activity indicates that sales should remain around the June sale mark. A change in high balance conventional and FHA loans at the end of September could have the impact of lowering demand and possibly prices. This will change the loan limits from the current $697,500 to the 2008 levels of $546,250. This means that jumbo loans with higher interest rates will be effective at lower purchase prices.

La Jolla inventory remains out of balance with buyer demand with an average 11 months supply compared to the overall county level at 3.9 months. This high level of inventory will continue to keep negative pressure on home prices. Distress sales (foreclosures and short sales) do not pose any issues relative to price pressures only representing 3% of inventory. We see high months supply across most price ranges with a few exceptions. This out of balance inventory position will continue to keep negative pressure on prices.

La Jolla home prices have declined an average of 5% for the second quarter versus the same period for last year. However, measuring price changes can be difficult to accurately measure because of the wide variation in home prices and the impact location has on prices. Overall it makes sense that prices should be under pressure to fall due to the inventory picture, the absolute decline is in question. When we look at same home current sales prices versus the prior sale for the same home we see a picture that shows that since 2004 home prices in La Jolla have been down to flat. As long as the inventory picture remains as it is these price pressures should persist. The change coming that lowers the price where jumbo loans come into play could reduce demand adding to the current price pressures.