Tuesday, April 25, 2006 | Home buyers in San Diego had 19,238 homes to choose from yesterday. And for a brief time over the weekend, San Diego had more homes listed for sale than ever before.

On Saturday, real estate information service ZIP Realty reported that the region’s previous inventory record of 19,250, set in the midst of the real estate industry’s last downturn in July 1995, had been surpassed.

Some analysts say that’s evidence of a market in serious trouble. San Diego has seen its inventory level increase 27 percent since the beginning of the year, increasing supply and leading to fears that prices could drop.

But other analysts say that inventory levels are nothing to worry about and will decrease in the coming months. Realtors say everything’s going fine, if a bit slower than the last few years, while some local homeowners say it’s time to get out before prices go down.

It’s just another day in the San Diego real estate circus.

Inventory levels have been creeping up since the beginning of the year, according to Bubble Markets Inventory Tracking, a Web site that tracks ZIP Realty’s figures. On Jan. 1, there were 13,916 homes up for grabs. That number rocketed up by about 100 homes a day throughout January and has been rising at a steady rate through early spring to reach its current level.

“I think the market is in serious trouble, in San Diego and in many other places as well,” said Edward E. Leamer, director of the University of California, Los Angeles, Anderson Forecast. “It’s not a sure thing. Something could jump in and save it, but we don’t see anything on the horizon, nationally or locally, that will turn these markets around.”

But some local analysts said there’s nothing to turn around. Prices aren’t in a freefall and sellers aren’t panicking, said Gary London, president of the London Group Realty Advisors in San Diego. It may be taking longer to sell a property, but London said people who can’t sell are more likely to pull their homes off the market than to slash their asking prices.

“Prices might level, might even go down a little, but where you’re really going to see a reduction is in this level of listings. People will simply take their homes off the market,” he said.

That’s Darren Fulhorst’s plan. The 39-year-old La Jolla resident bought his five bedroom, three-bathroom home in La Jolla in Jan. 2005 and he put it on the market one week ago. Fulhorst said he isn’t desperate to sell, but he nevertheless put his home on the market for $100,000 to $200,000 less than comparable properties.

“I’m not accepting anything lower,” Fulhorst said. “I’m listing it for six weeks, at the peak sales time, at an excellent price, and if it doesn’t sell, I’m holding onto it.”

Fulhorst said he can afford to hold on to his home, even if prices decline over the next few years. He said that with low interest rates, and with lots of properties on the market there are still plenty of opportunities for buyers.

Peter Chinloy, the new chairman of San Diego State University’s real estate program, said there are plenty of people in the same boat as Fulhorst. He said the reason the high inventory levels haven’t translated into substantial price decreases is that sellers are not yet willing to let go of the equity they have built up in their property.

“What you have is a large number of people who are sort of sticking it out there and hoping that some accident will happen – that someone will offer them a high price for it, but they’re not sufficiently distressed that they’ll take the low offers that come along,” Chinloy said

But people taking their homes off the market will not hide the basic truth: that there are lots and lots of homes for sale in San Diego, and fewer and fewer buyers, said Leamer. Eventually, barring a large rebound in sales activity, prices are going to have to come down eventually, Leamer said.

“It’s not until the sellers look around their neighborhoods and see all these other homes for sale and say ‘I’ve got to get ahead of this,’ that they start cutting prices,” he said.

Typically, it takes a while for high inventory levels to translate into price decreases, Leamer said. He said sellers typically stay optimistic for about a year before they start to get cold feet. Inventory levels have spiked in the first quarter of 2006, leading Leamer to conclude that prices will start going down within the next 12 months.

But Leamer’s been predicting a bursting bubble for years, and representatives of the real estate industry in San Diego said the high inventory levels are merely indicative of a slowing market that’s gradually settling back down to a “normal” level of sales activity and gradual price appreciation.

Charles Jolly, president of the San Diego Association of Realtors, acknowledged that it is taking longer for homes in San Diego to sell, and said Realtors have to work a little harder to promote their clients’ homes, but stressed that the high inventory levels are a good thing for buyers.

“We have heard forever from every agency and every city and county about more affordable housing and inventory, well, we got it,” Jolly said.

Jim Abbott, a downtown San Diego Realtor and analyst, concurred with Jolly, and said that the higher inventory levels must also be considered relative to the amount of new people and new homes the county has been adding in the last few years. Sure, there are more homes for sale, he said, but there are also simply more homes.

San Diego has also changed in other ways than demographics, Abbott said. The area has a thriving economy, a strong job market and few of the economic problems that existed the last time the real estate market tanked.

“I don’t think we’re in the economic straits we were in in the early 90s,” Abbott said.

That’s the same thing a lot of the local analysts have been saying for a while: Job growth is strong there’s no major sector of the economy in trouble as there was in the 1990s and, of course, the weather is good, so people are still going to want to buy homes in San Diego.

But with nearly 20,000 homes on the market in the county, all the analysts know something has to give. Whether disappointed sellers pull their homes off the market until things calm down, or relent on prices and give up some of the gains of the past few years, remains to be seen.

Please contact Will Carless directly at will.carless@voiceofsandiego.org with your thoughts, ideas, personal stories or tips.

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