San Diego real estate home sales in April had a year over year decline of 5% versus 2010 and 8% from 2009. The sales decline was not broad based throughout the county with 5 of the 6 regions being flat to down 1% to 2%, while South Bay had a 21% sales decline. Looking at sales by price range only the under $200,000 and over $1,000,000 had sales increase from the prior year. While sales increased in April versus March, the rate of increase was a low 2.8% versus the normal increase of 7.5% in previous years, indicating that the spring bounce will not be as robust as the prior two years. While the under $300,000 price range has declined in market share to 45% from the high of 54% in 2009 (share was 13% in 2007) this price range still drives the sales for San Diego homes. For prices above $400,000 sales are still well below their 2007 sales performance, we believe that this reflects an affordability issue that still exists in the San Diego housing market. Pending activity declined from March to April by 6% indicating lower future sales. We expect to see lower sales in 2011 versus 2010 and 2009.

In order to predict future price trends one needs to look at the relationship between selling activity and inventory. So far in 2011 the inventory has remained relatively flat. With the increased activity at the mid to lower price ranges this has resulted in low months supply. For price ranges under $500,000 the months supply ranges from 2.4 months to 3.7 months. This range of months supply tends to be classified as a sellers market due to the fact it will bring more multiple offers pushing prices upward. The under $500,000 market represents 60% of the San Diego inventory and 78% of the sold homes, which indicates that the inventory is not in balance with where the demand occurs. We do not see much growth in inventory as the year progresses. With current home prices the motivation to sell is low for many homeowners. Currently distress sales, foreclosures and short sales, makeup 35% of inventory and 47% of sales and these are focused mainly in the under $300,000 market segment.

San Diego home prices have increased since early spring 2009; however, prices have decreased since May 2010, after the tax rebate program ended. The San Diego housing market still has 30%, on average, lower prices from the peak prices of a few years ago. April prices have continued the downward trend in year over year price declines and they are broad based across all home sizes. Five of the six regions in the county had year over year price declines in April with only Central San Diego Coastal showing a 1% price increase. However, as mentioned earlier the continuation of the current trend of low months supply in certain market segments will cause more multiple offers and tend to push those prices upward. 2011 will be better than the trough years of 2007 and 2008 but not as good as the rebate incentivized years of 2009 and the first half of 2010.