I like Bob Casagrand’s Reports. The low end vs. higher end sales volume explains why the zip code mix provide by SDR looks like it does. You can practically chart volume by price.
The San Diego real estate market continues its trend of higher sales. April finished with almost 3,000 sales, the best April sales record since 2005. For the second month in a row pending sales were about 4,000 contracts accepted. Since April 2008 pending sales were very steady in the 3,000/month range and did not show any normal seasonal downward adjustments during the fall and winter. In March this year pending jumped up to the 4,000 range and continued into April. The increase in buyer activity has been aided by lower home prices, lower interest rates and the $8,000 government tax credit.
The negative factor in the market is the market is operating with a split personality. Sales under $500,000 comprise 84% of sales while the over $500,000 market segment is only making up 16% of the sales. Previously the under $500,000 market was in the 50% of sales region, except for 2008 when it jumped to 64%. This indicates that the market is being driven by entry level buyers and the San Diego market is not seeing the normal move-up buyer market expand from the entry level buyer. A couple of reasons for the low move-up buyer market segment are the level of distress sales – bank owned, short sale and vacant homes – where the seller can not buy another home and with many of the regular sales the seller is not getting enough equity out of their home to move up to another home. Based on the fact that short sales and foreclosed properties will be with us for some time to come, the move-up buyer market will remain suppressed damping the full recovery of the San Diego housing market.
The real story of the market is inventory and where did it disappear to. In March of 2008 the market had about 19,300 homes for sale and it is now done to almost 13,000, putting the market at 3 months supply – seller’s market territory. We saw the market’s split personality in the sales profile now we will see it in the inventory picture. Homes priced under $500,000 have almost a 2 months supply while the over $500,000 market is over 9 months supply. In short we have a buyer’s market and a seller’s market operating at the same point in time. To make the picture even more striking, there are over 2,200 short sales with accepted offers waiting for lender approval that are still in the active listing category. This brings the effective inventory down to the 11,000 range. The impact on this low inventory level is multiple offers and bidding wars that are pushing prices up.
Besides seeing the multiple offer scenario, we are seeing an ever increasing number of cash buyers in the market. The number of cash buyers in the market has been on a steady rise since September 2008. In the under $250,000 price range cash buyers make up 35% of the sales and about 25% for the total market. I believe that this indicates that investors are back in the San Diego housing market. The lack of inventory combined with the increased demand has put upward price pressures on the lower end of the market. In fact we are seeing selling and list prices moving upward; detached homes less than 1,000 sq ft have seen the prices jump 10% in April versus March. We are seeing increased prices about half way up the price ladder then prices decline. One of the reasons for the decline in inventory is that many in San Diego can not afford to sell their homes because they would take a loss, tying into the move-up buyer issues effectively dampening the higher end of the market. In order to change the price pressures of the lower end of the market some combination of declining sales and increasing inventory has to move the months supply by a factor of 3 to 5 which I do not think is likely in the near term.
Data from Sandicor is deemed reliable but not guaranteed.
