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January 2011 Market | Inventory | 11,556 | Up | | Inv Avg Price | $709k | Down | | Sold | 1,889 | Down | | Sold Avg Price | $382k | Down | | Pending | 2,420 | Up | | Months Supply | 4.8 | Down | |
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San Diego Real Estate Sales, Inventory and Price Trends - January 2011
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San Diego real estate sales in January were lower than the sales in January 2010 (-8.8%) and 2009 (-16.8%), this was expected due to the low pending activity in  December. The home sales declined across all price ranges except for the $400,000 to $500,000 segment which had a slight increase in sales versus January 2010. Another indicator of a broad based reduction in demand is that all 6 regions of the county had declining year over year sales. In terms of demand, 2010 had a split year, the first half had increased sales versus the first half of 2009 and the second half had reduced sales. The downward trend started after the tax rebate program was eliminated at the end of April. While January had an increase in pending activity versus December 2010 the pending level was lower than January 2010 (-9.2%) and January 2009 (-24%) indicating that 2011 continues the trend of lower demand.  February pending should give us a good indicator of what will happen with demand in the upcoming spring market. The sales of the past 3 years have been dominated by the under $300,000 market, unlike earlier years. While this market segment has declined in demand – especially since the end of the tax credit in April 2010, it still makes up about 50% of all sales. Since we do not have any major “government stimulus” at this time, the combination of higher interest rate trend and prices being stagnant to declining may bring some new demand into the market. The combination of increased inventory (2%) and increased pending activity (14%) for January versus December lowered the months supply from 6 months in December to 5 months in January. Since a price neutral market is in the range o 4 months to 6 months both December and January are in the neutral range. As we  move forward in 2011 the months supply trend will be important to watch to see which price direction the market is moving. Normally we see inventory increase in the January to June time frame and at the same time we see increasing pending activity, which one moves the most will determine the months supply direction. Distress sales are still a major factor in the San Diego real estate market. Foreclosures and short sales make up 10% and 29% respectively of the current inventory; however, they comprise 28% and 27% of January sales. Since foreclosures and short sales sell for less than regular non-distress sales this is an indicator of the importance of price in the market.  While distress sales exist across all price ranges their major dominance is in the below $400,000 market segment, in fact distress sales comprise 77% of all sales below $200,000. Typical of a neutral market, some January prices increased but a majority were down versus Jan 2010. However, since the elimination of the tax credit, prices  from May 2010 to January 2011 are down a composite 10% - the amount of decline is dependent on home size. We also see year over year price declines across all 6 San Diego regions. Major price increases occurred during 2009 when we had months supply running at 2.5 months (seller’s market) as inventory rose months supply rose as well, the rate of price increases decreased until the tax rebate program was ended and prices began a slow decline. Since home prices are a function of supply and demand and the level of distress in the market the price direction in 2011 will follow the trend in months supply and the levels of distress in the  market sales. We do not see any major reduction in distress sales in 2011 and inventory will go up slightly and combined with pending activity will keep the months supply in the 5 to 6 months region. This would indicate that the 2011 market will continue the trends since the tax rebate program was eliminated. |
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