San Diego home sales for July were the best sales since 2005 at about 3100 homes sold.  Both detached and condo’s had their best July since 2005. Condo’s made up 1/3 of the sales and detached 2/3. Over the past few years we have seen a dramatic shift in the price makeup of homes sales. The under $200,000 price segment 5 years ago was 1% of total sales and this year it has been between 25% to 30% of monthly sales, while the over $1 million market segment peaked at over 10% of sales and is now less than 4% of sales.  This year the sales mix has seen a slight shift toward mid-priced homes as the year has progressed. The upward shift is seen by a decline in the under $200,000 and a growth in proportional sales to the $300,000 to $600,000 ranges. Almost 80% of sales are still focused on price segments where distress – bank owned, short sales and vacant – sales make up about 75% of the selling activity.

It still appears that San Diego still has 2 sets of inventory, one that sells and one that waits to sell. For example, the less that 1000 sq ft home segment has a sold list price of $180,000 while the homes in inventory have a list price of $300,000, we see this pattern all the up the home size scale.  The inventory overall months supply is 2.4 months, with the price segment below $400,000 is between 1.1 and 1.4 months supply. The effect of the split inventory makes the already low months supply even lower causing the difficulty people are having buying a home. Multiple offers are the rule of the day.

In July there was a slight drop in pending/contingent activity; however, this could be just a monthly blip not a trend. The inventory also took a small drop from June, combined with the decline in pending/contingent activity the months supply stayed the same as June.  The low months supply has been causing the home prices to increase for the past few months. However, in July we see the rate of increase leveling off. The overall rate (%) of increase was almost the same in July as it was in June.  These home size market segments are in price ranges where the months supply exceeds 9 months so one would expect to have negative price pressures.

Looking forward is difficult to predict because of the swings in the economy. The stimulus should keep demand at current levels until the end of the year, the inventory supply will remain low due to the fact that many homeowners are not in a position to sell at current price levels and prices will continue to have slight price increases, at least in the high demand price segments. We expect to see bank owned stay in the 8% of active listings and 34% of sold and short sales to be in the 20% of active listings and 20% of sold.  In the less than $400,000 price ranges these distress sales make up 70% of all sold homes and with about 1 months supply these prices will continue to increase despite the large component of distress sales.