Year over year sales for the San Diego real estate market in June continue to lag the sales for 2009 and 2010. The sales decline in June was about 14%; however, June sales did increase by about 6% from May. Homes selling for less than $400,000 are still driving the market, making up about 64% of the total market. This market segment comprised only 28% of the market in 2007. The market segments above $400,000 make up only 36% of the homes sold versus 72% in 2007. Year over year sales declines were seen in all 6 regions of San Diego County. Four of the six regions had double digit sales declines while the two coastal regions experience about 7% declines. We also see year over year sales declines in all 10 price ranges we monitor. While sales declines vary by region and price, all are moving in the same downward direction indicating what we are seeing is not particular to any region or price range but broad based covering the whole market. It appears that investors are propping up the lower end of the market – below $300,000 – with cash buyers making up 35% of all sales in that market segment. For the balance of 2011, sales could run about the same as the 2^nd half of 2010 since the 1^st half was boosted by the tax rebate program. We do not expect to see a return to robust sales levels for some time, overall conditions stand in the way of robust sales.

Inventory for the San Diego market has remained fairly static so far in 2011. The June inventory is up only 2% from the January level. The June months supply is at 3.9 months; however, that varies greatly depending on your price range. For prices below $500,000 months supply ranges from 2.3 to 3.7 months while over $500,000 the months supply ranges from 5.2 to 11.8 months. The current price levels in San Diego, 30% below peak prices on average, does not make it very attractive for many potential sellers to jump in and try to sell their homes. If you are trying to sell your home you should be aware of what is happening in your neighborhood, especially with regards to distress sales – foreclosures and short sales. While distress sales make up 32% of inventory they jump to over 45% of homes sold. Distress sales sell for less than normal equity sales; thus, they put negative price pressure on all sales in a neighborhood. Another issue with the San Diego inventory is that it is out of phase with the buyer pool. Homes listed over $1 million represent 16% of the inventory while only 5% of the sold homes while homes listed under $300,000 represent 30% of the inventory but are 44% of the sold homes. This imbalance creates markets within markets depending on the range that you are buying or selling.

San Diego home prices continue to show slow erosion. June home prices have declined on average just under 5% from May 2010 – the end of the tax rebate program. Price decreases are seen across 70% of the home sizes we track as well as across all of the San Diego regional areas. The inventory levels – 3.9 months supply – provide some protection against major price changes and we expect that to continue. Over the past 3 years there has been very little movement in prices toward the peak prices of the past. The San Diego prices are still over 30% below the peak prices and are not likely to return to peak price levels any time soon. While the current prices are low compared to the peak prices, the San Diego market still has some home prices above what would be considered affordable prices. In terms of market share only prices below $400,000 have improved their share above 2007 levels.