san diego county

Market Overview a monthly real estate report | April 2010

More than 60% of sellers cited buyers

“backing out” as the primary reason the
The State of the Market
For the past few years, California home fell out of escrow. Other reasons
has experienced significant setbacks in cited were buyer’s remorse (26%), lender
housing — including its dubious position as withdrew and did not fund (24%), and
the state with the second-highest foreclosure declining home prices (18%).
rate in the nation.
Even homes that sold faced hurdles, failing
According to the California Association of to close on time 50% of the time compared
REALTORS® recent study of 2009 and 2010 to 36% of the time in 2008. Subsequently,
home sellers, 67% of California home owners seller confidence in buyers’ ability to close
put their homes on the market in 2009 as plummeted, with 75% of sellers reporting
concern, an increase from 54% in 2008.
a result of di culties related to meeting
their mortgage obligation. at’s a
substantial increase over 2008, when the Particularly hard-hit were first-time sellers
figure was 20%, or one in five home owners. (59%). Nearly half of surveyed sellers had
owned their homes for two years or less,
compared to one-third in 2008. First-time
Among the reasons for such sales cited in 2009 home sellers increased to 44% of all sellers,
and 2010 were di culty meeting mortgage compared to 33% in 2008.
obligations (30%), job loss (18%) and resetting
adjustable loans (18%). Lower housing
prices rendered some home owners unable to After such a thrashing, one out of three
refinance; others saw home prices fall
sellers surveyed moved out of California
below what they owed on their mortgages.
in 2009, compared to one of four in 2008.

Not surprisingly, only 7.5% of sellers surveyed According to First American CoreLogic,
reported they had a fixed-rate mortgage. 92.5% 35% of California mortgage holders are
had an adjustable rate mortgage (ARM) with a underwater — meaning they owe more on
two-year, three-year or five-year fixed rate, or a their mortgage than their home is worth. is
negative amortization ARM. makes it appear that 2010 will be as
challenging for sellers as 2009 was.

Nearly half of homes sold in 2009 were either

distressed homes in some stage of foreclosure Good news for buyers
or short sales. As a result of having such a high
As di cult as the market is for sellers, buyers
number of distressed properties on the market,
the sale price of homes sold in 2009 averaged are responding to extraordinary incentives —
$20,958 less than the original asking price and including the most a ordable home prices in
$32,315 less than the median asking price. a decade, historically low government-
aided mortgage interest rates and a
continuing supply of distressed homes to
Just as sellers found di culties in meeting keep sellers realistic about pricing.
mortgage obligations in 2009, buyers
also faced financing challenges. A In addition, the federal tax credit for first-
startling 63% of homes fell out of escrow time and move-up buyers is good until the
prior to closing, with nearly 70% of end of April 2010. Qualified buyers need
buyers unable to get an acceptable only have a solid contract and take
mortgage, according to sellers surveyed. possession by June 31, 2010.
Proof that incentives are working is the
increase in first-time home buyers: 47%
in 2009, up from 35.9% in 2008. at’s
the highest percentage increase since 1995.
Typically, says the National Association
of REALTORS®, first-time home buyers
make up about 40% of the market.

In a recent survey of home buyers,

C.A.R. found nearly 40% said they would
not have purchased without the tax credit
incentive. One reason for its strong appeal is
that the Federal Housing Administration
(FHA) increased its qualifying loan
guarantee from $362,790 to $729,750 for
high-cost areas such as California.
Reflecting that move, the percentage of home
buyers using an FHA-insured loan increased
to 32% in 2009 from 18.9% in 2008. ese
loans also allowed first-timers to buy
bigger. Most purchased single-family
homes (80%) at an average 1,560 square
feet, compared to 1,300 square feet in 2005.

Investors also jumped back in the pool, with

70% purchasing short sales and REOs (bank-
owned properties.) e median price of a
typical investment property was a $232,750,
with a median size of 1,367 square feet.

e momentum generated by first-time and

move-up buyers purchasing with government-
guaranteed loans and investors buying with
cash largely moved homes priced under
$500,000, causing quick sales, multiple o ers
and rising prices in “a ordable” homes.

For those reasons, the median California

home price is projected to increase to
$280,000 in 2010 from $271,000 in
2009.Like the rest of the nation, home
sales volume declined in February 2010
(-2.2% from January), but curiously, the
median price rose 14.1% year- over-year,
from $245,230 in February 2009 to
$279,840.
California Association of REALTORS® is is the time to go by the numbers.
chief economist Leslie Appleton-Young Currently, jumbo loans are also
explains the anomaly: “Supply benefiting from government-
continues to lag demand at the $1 suppressed mortgage interest rates.
million and above level with 27.9 months
of supply on hand a year ago, and at 15.7 Advice for sellers: Because of
months on hand to date. Overall in all the unpredictability of what buyers will
price ranges, C.A.R.’s Unsold Inventory do once stimulus incentives are over, now is
Index stands at 6.3 months on hand the time to put the best possible price on
compared to 7.1 months’ supply a year your home. e luxury market is improving,
ago. but that doesn’t mean buyers’ appetites for
good buys have diminished. e more
Advice for buyers: Because of negatives you can overcome before a buyer
uncertainty about what will happen in the sees your home, the less there will be to
marketplace after the home buyer tax negotiate and the higher the likelihood of
incentive is removed, home buyers may agreeing on a price and terms quickly and
be tempted to wait and see if prices fall solidly.
further — but that possibility must be
weighed against possible rising mortgage
interest rates or tighter loan standards.

SAN DIEGO COUNTY

Like other markets in Southern California, San Diego County is enjoying a healthy seller’s market in
homes priced under $1 million. Homes priced up to $3 million are not quite oversupplied, as upscale
and unique homes aren’t expected to sell as rapidly as affordable homes. Homes priced above
$5 million are in serious oversupply.

*A balanced market is widely accepted as having six months of inventory on hand with market conditions favorable to both
buyers and sellers. A buyer’s market is characterized by conditions such as high inventories, falling prices, concessions by
sellers, and incentives among other indicators. A seller’s market has low inventories of homes for sale, escalating prices, and keen
competition between buyers, including multiple offers.

Inventory in
Month’s
Supply
Less than $1 million 2.4 Upscale inventories tip toward serious oversupply at
the $3 million price range and above.
$1 million to less than $2 million 10.3
$2 million to less than $3 million 15.7
$3 million to less than $4 million 26.2
$4 million to less than $5 million 25.5
$5 million to less than $6 million 51.3
$6 million to less than $7 million 38.4

$7 million and over 45.0

0.0 10.0 20.0 30.0 40.0
50.0 60.0
 Monthly Listings Taken and Absorbed
Properties $1,000,000 and above
500 461 200 New listings have flooded the market (up 62%) since
New Listings Listings Absorbed
hitting lows in Q4 2009, while absorption rates haven’t
400 385 risen nearly so fast (up 22%.) San Diego County could
150 grow quickly oversupplied at this rate.
300
254
232 100
212
189 203
200 178
170 163 172 178

50
100

0 2009/03 2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 2010/01 2010/02 0
New Listings 170 163 172 178 189 203 232 254 212 178 385 461
Listings Absorbed 113 111 126 138 128 139 150 132 106 106 118 135

Listings Sold, 9 Calendar Quarters through December 31, 2009

$1,000,000 - $1,999,999
Average Sale Price (Thousands) Homes Sold

500
Homes priced $1 million to $1,999,999 traded in a
tight range throughout 2009. Inventories hit bottom
$1,600
Avg Sale Price Listings Sold Units

405 400 in Q1 2009, rose in Q2 and Q3, to ease once again

by Q4 2009.
$1,200
332
373 302
300
265

$800 267 229 273

174
200

$400 $1,300 $1,306 $1,263 $1,252 $1,224 $1,274 $1,253 $1,279 $1,259
100
1-year avg. price trend: Up 2.9 % 1-year sales trend: Up 19.2 %
2-year avg. price trend: Down 3.1 % 2-year sales trend: Down 17.8 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Listings Sold, 9 Calendar Quarters through December31, 2009

$2,000,000 - $2,999,999
Average Sale Price (Thousands)

$3,000
Homes Sold

100
Prices in homes sold between $2 million and
85
82
Avg Sale Price Listings Sold Units $2,999,999 were down 6% in 2009, but sales volume
79
75
improved on softer prices.
63
$2,000
60 58
53 51
50
35
$1,000

$2,364 $2,307 $2,334 $2,214 $2,272 $2,201 $2,182 $2,212 $2,137 25

1-year avg. price trend: Down 6 % 1-year sales trend: Up 9.4 %

2-year avg. price trend: Down 9.6 % 2-year sales trend: Down 26.6 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

2-year avg. price trend: Down 1.3 % 2-year sales trend: Down 28.1 %

$0 0

Listings Sold, 9 Calendar Quarters through December 31, 2009

$3,000,000 - $3,999,999
Average Sale Price (Thousands) Homes Sold

$4,000 40
38
Avg Sale Price Listings Sold Units

32
$3,000 30
28

23

$2,000 20 20 19 17 20

$3,010 $3,104 $3,280 $3,177

$3,218 $3,400 $3,231 $3,147 $3,272
8
$1,000 10

1-year avg. price trend: Down 2.9 % 1-year sales trend: Up 15 %

 After hitting bottom in Q1 2009, both sales prices
and volume rebounded by the end of 2009 in $3
million to $3,999,999 homes. Two-year price trends
show prices are firm, but sales volume remains
under that of 2007 and 2008.

2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

 Listings Sold, 9 Calendar Quarters through December 31, 2009
$4,000,000 - $4,999,999
Average Sale Price (Thousands) Homes Sold
$5,000 14

12
Avg Sale Price Listings Sold Units
12
Sales volume suddenly plummeted in Q4 2009 for
$4,000

10
homes priced $4 million to $4,999,999, but the year’s
9
10
average was better than it was in 2008. One sold unit
$3,000
7
8 8 isn’t enough to determine true price trends.

$2,000 5 5 6
4
4
$4,207 $3,970 $4,077 $3,924 $3,993 $3,988 $4,102 $4,450
$1,000
1-year avg. price trend: Up 13.4 % 1-year sales trend: Down 88.9 %
2-year avg. price trend: Up 5.8 % 2-year sales trend: Down 80 % 1 2

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Listings Sold, 9 Calendar Quarters through December 31, 2009

$5,000,000 - $5,999,999
Average Sale Price (Thousands) Homes Sold

$6,000 8

After hitting bottom in Q2 2009, sales volume in

7 7 Avg Sale Price Listings Sold Units
$5,000

5
6 homes priced $5 million to $5,999,999 improved
$4,000 5 5
for the remainder of the year. Prices also were at
their lowest in Q2 2009.
$3,000 $4,840 $4,995 $4,996 $4,966 $5,034 $4,933 $4,300 $5,125 $5,075 4
3
3
$2,000

2
2
1
$1,000 1-year avg. price trend: Up 0.8 % 1-year sales trend: Down 40 %
2-year avg. price trend: Up 4.9 % 2-year sales trend: Down 57.1 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Listings Sold, 9 Calendar Quarters through December 31, 2009

$6,000,000 - $6,999,999
Average Sale Price (Thousands) Homes Sold

$7,000 6

$6,000
5
Avg Sale Price Listings Sold Units
In homes priced $6 million to $6,999,999, the sale of
$5,000 4 4 one or two units can swing averages greatly, but sales
4
prices and volume were obviously down for 2009.
$4,000 3

$3,000 $5,966 $6,013 $6,084 $5,592 $5,838 $5,225 $6,080 $4,900 $4,925
2 2 2
2
$2,000
1 1

$1,000 1-year avg. price trend: Down 15.6 % 1-year sales trend: Down 50 %
2-year avg. price trend: Down 17.4 % 2-year sales trend: Up 0 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

Listings Sold, 9 Calendar Quarters through December 31, 2009

$7,000,000 and over
Average Sale Price (Thousands) Homes Sold
$14,000 9
Avg Sale Price Listings Sold Units 8

$12,000
Sales volume soared in homes priced $7 million
$10,000 7 7 6
and above in 2009, likely on attractive pricing, as
5 6 evidenced by lower averages met in Q1 2009.
$8,000 5 5

4
$6,000

$11,727 $11,264 $11,355 $11,534 $9,875 $7,133 $10,350 $8,400 $9,553 3

$4,000

2
$2,000 1-year avg. price trend: Down 3.3 % 1-year sales trend: Up 60 %
2-year avg. price trend: Down 18.5 % 2-year sales trend: Up 14.3 %

$0 0
2007/4 2008/1 2008/2 2008/3 2008/4 2009/1 2009/2 2009/3 2009/4

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