Upward Trends in San Diego Real Estate Sales

It's been a long time coming. After almost three years of declining home sales and home values, the San Diego County real estate market is showing good signs of recovery.

The first sign of recovery is a higher volume of home sales. After the lending crises began in mid-August of 2007, the number of home sales came to a screeching halt, averaging about 1,000 detached homes sold per month for about four months straight.

But, as the 2008 started, we could feel the buzz returning and buyer demand on the rise. Here is the number of detached homes put into escrow for the first six months of this 2008:

January: 1186
February: 1455
March: 1823
April: 1973
May: 2047
June: 1921

March was the best month since October, 2006. April was the best month since May, 2006. May was the best month since August, 2005, which was the peak of our last housing market boom. Obviously the upward trend in number of sales is easily documented and buyer confidence has returned to the San Diego real estate market, but home values are a bit more slippery to estimate and we never know if this trend will continue.

Historically, there is about a six-month drag between when home sales start up again and when prices start to rise. If this is true, we can expect certain areas of the county to have hit bottom by the end of the summer, and, should home sales continue to be strong, we will see prices start to creep upward again or at least level off.

There are definitely those that believe this recent increase in sales, which has actually lowered inventory, is just a "summer blip." Their main points of support come from data that expect a continued wave of foreclosures and short-sales due to adjustable rate mortgages coming to the end of their terms. I'm a little more concerned about home loan rates rising in response to inflation in addition to higher down payment requirements, which could more easily affect a buyer's purchasing power.

When it comes to foreclosures and short-sales, I think we need to focus a little bit more on the local market - are we talking Pacific Beach homes or condos in Escondido. The least desirable lower-end markets are the ones that will be affected the most by a higher number of foreclosures and short-sales, thus, they are the markets that will continue to have moderate declines for another year (about 5-15%).

However, I just sent out a market analysis to a client regarding north Mission Hills real estate, and the data clearly showed that there is only four months of inventory on the market and that reasonably priced homes are selling at a normal pace.

Generally speaking, I am a moderate when it comes to market predictions. That being said, I expect two more fairly strong months to end the summer and stabilize our central markets. Then I foresee a year or so of a mostly flat marketplace with seasonal variations to account for slight differences in prices and inventory. Barring any huge rate increases or major economic crises, I believe years two-five years will show moderately good home value increases, making this an excellent time to be purchasing homes for sale in San Diego, assuming you are looking to settle down and can hold a property for five years.

Adam Pascu
Team 73 Degrees
Keller Williams Realty