San Diego has gotten used to climbing housing prices — 13 months by one count — but that might soon end.

County home prices will decline 9.6 percent in the first quarter of 2011 vs. the first quarter this year, says an analysis from Fiserv, which provides the data for the widely watched Case-Shiller Indexes.

The San Diego area is projected to have the 28th largest drop of the 384 markets surveyed. National home prices are expected to fall 4.9 percent in the same period.

David Stiff, chief economist for Fiserv, said foreclosures, even though they have dropped in recent months, are expected to be a drag on housing prices. Even though prices are far off their peak, affordability continues to dog the local market.

“The problem with San Diego is that the run-up was so large that we don’t think the market has fully adjusted back to an affordable level of housing,” Stiff said.

By his estimation, San Diego County is the ninth most unaffordable market based on its median family income of $72,100 and median home price of $370,000 in the first quarter of 2010.

Why will San Diego — the only metro area to show more than a year of monthly price increases in the Standard & Poor’s Case-Shiller Index — see such a big drop in housing prices? Economist say the answer is simple: The federal homebuyer tax credit artificially inflated sales over the last year, stealing business from future months.

Stiff, who based his projections on Case-Shiller numbers, is not alone in thinking home price drops are coming but others are less pessimistic.

Michael Lea, director of the Corky McMillin Center for Real Estate at San Diego State University, predicted that prices would fall but probably not as precipitously as Fiserv was forecasting. “It’ll certainly be more than a percent or two, though,” he admitted.

Loan modification gambits are almost over, he explained, so there could be some more distressed property making its way to market and pulling prices down further.

“We’re going to see a lot of that inventory in the next six to nine months,” Lea said.

Still, Stiff tried to sound a slightly positive note. While a 9.6 drop sounds pretty nerve-racking, he said San Diego has already hit bottom. By his calculations, the prices of single-family homes hit their trough in the second quarter of 2009. Through the first quarter of this year, prices have increased by 11 percent so even with the projected decreases the region will be above the low, albeit by just a bit — between 1 percent and 2 percent.

“San Diego is basically bouncing around its trough,” he said, adding that by the first quarter of 2012 prices here are projected to edge up by 2.6 percent.

Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange, was more optimistic about the overall state’s short-term performance. He said his calculations have home prices increasing this year between 3 percent and 6 percent throughout California. But Adibi acknowledged that his projections might be a little inflated because more expensive homes have been coming onto the market, helping push up the median price.

“If we stay flat, or even if we go down 1, 2, 3 percent, we should be OK,” he said. “We are probably at the bottom, but we are not going to bounce back immediately.”

http://www.signonsandiego.com/news/2010/aug/03/prices-of-homes-in-county-may-fall/