San Diego real estate home sales in September were the lowest in the past 4 years. Sales also declined by 5% from August. Two regions – Central San Diego Coastal and East County – did have sales increases year over year. The largest sales declines occurred in the North County Inland and South Bay regions. Much of the sales decline is fairly typical of demand as we head into the slower winter season. However, considering the extremely low interest rates one might have expected to see a lower drop in demand. Sales changes by price range were a mixed bag, with 6 of the ranges having sales declines and 4 of the ranges having sales increases. No pattern exists with the sales changes by price range. For example: sales for homes priced under $200,000 declined by 5% while sales of homes priced between $200,000 to $300,000 increased by 9%. We also saw sales for homes priced between $800,000 to $900,000 increase by 23%, this could be a result of buyers getting in before the new lower price range before jumbo loans kick in. If the new lower loan interest rates do not bring in new buyers then we will see more sluggish demand for the balance of the year.

San Diego housing inventory declined by 9% and the inventory decline was seen across all price ranges. Again, inventory declines are fairly normal at this time of year. There was a 14% reduction in new listings in September versus August. With the current price trends many sellers are putting off selling their homes. The reduction in inventory combined with the 15% decline in pending activity pushed up the September months supply a bit to 3.9 months. Distress sales, foreclosures and short sales, continue to make up about 35% of the active inventory while comprising 44% of total sales. Since distress sales sell for less than regular sales, they are keeping downward pressure on price levels.

San Diego home prices continue to decline in a slow but sure pattern. In September all home size ranges had price declines except for the over $1 million segment. Overall prices had just over a 4.5% year over year decline. As mentioned above, the large component of distress sales in the sales is keeping the sold prices lower. The sort of stagnant price trends will continue until we see a major reduction in the distress sale component in the market. Since current prices are about 35% below peak prices short sales could be with us for a number of years, perish the thought. All 6 San Diego regions experienced year over year price declines so the price trends are not dictated by region. As I have mentioned before, San Diego still has an affordability problem with many of the current prices. If you look at home prices above $300,000 you see that from 2008 to 2011 the makeup of total sales is well below the 2007 and earlier. This indicates San Diego just does not have the market to buy those homes as it did in the past. Until this changes the market will not recover to a robust housing market.