Wednesday, March 26, 2008 | In the sharpest price drops recorded since two economists developed their popular method to track housing prices in the 1980s, local home prices declined a steep 16.8 percent from a year earlier and 21 percent from the peak in November 2005, according to the Standard & Poor’s/Case-Shiller home price index.
The index for January, released Tuesday, marked the fourth straight month of yearly double-digit plunges for local prices. The monthly plunges are beginning to strike a dramatic resemblance to the skyrocketing double-digit price ascent in the county during the boom.
Some real estate professionals said the decline has tugged hesitant buyers off the fence, coaxing the house-hunters back out to Sunday open houses. But a stream of foreclosures continues to set new low prices in many neighborhoods, and threatens to pull overall prices down even further.
Sales of foreclosed homes constituted more than one-third of all sales in February — one month more recent than the Case-Shiller index — according to DataQuick Information Systems. Of the 1,954 homes sold in February, 37.6 percent were foreclosed upon at some point since January 2007. Such sales constituted just 4 percent of sales in December 2006.
“And it’s not going to stop,” said Ramsey Su, a local retired real estate broker and investor who sold bank-owned properties in the 1980s and 1990s. “There’s so much competition out there from sellers in the must-sell category.”
That category, in which Su includes foreclosures, short sales and new homes, constituted more than half of the pending sales on the region’s MLS, the database where sales are recorded, this month.
Some buyers see a 20 percent price decline as enough of a discount, said San Diego real estate agent Dan Cassidy with the Coshow Group. He said some buyers who would have been “unable to afford at any stretch” even a condo a year ago are now able to purchase a detached house.
“A lot of people who felt uncomfortable buying before, when the market was over-hyped and unattainable pricewise, are now able to afford places that they were not able to afford before,” Cassidy said.
The lowest-priced tier of the homes measured for January’s Case-Shiller index — those homes priced lower than $420,873 — saw a sharp drop in price of 24.8 percent year-over-year and 28.6 percent from the peak for that tier in June 2006.
The middle tier — homes priced between $420,873 and $629,470 — experienced a 18.2 percent drop from January 2007 and a 23.1 percent drop from that tier’s peak in November 2005. With more modest, but still significant, price drops, the highest tier — those priced higher than $629,470 — saw a 10 percent drop year-over-year and a 14.6 percent drop from the peak, in June 2006.
The Case-Shiller index accounts only for detached homes that have sold at least once before. And the condo market — especially those units that were old apartments renovated for sale mid-boom — has sustained an even more dramatic price hit.
The price paid per square foot in February for resale condos and townhomes was $265, down 17.9 percent from February 2007 and down 24.3 percent from the peak, according to DataQuick. Cassidy said the declines in that type of home are often even more dramatic.
“The condo conversions … are disproportionately more affected than the rest of the market,” he said. “For them, the [data] is, in my opinion, understated. The resale attached side vacillates between 25 and 45 percent, depending upon market area and whether or not it’s a conversion.”
The Case-Shiller index assigned a value of 100 to the county’s home prices in January 2000 and tracked the market’s ascent as a percentage of that base. At the peak, in November 2005, the county’s index reached a level of 250.34, meaning prices were 150 percent higher then than they were in 2000.
This January’s index marked the first time since March 2004 that the value assigned to prices in San Diego County has been less than 200 — 197.45 for this month’s index. That means prices are still 97.45 percent higher than they were in January 2000. But they’ve fallen significantly from that peak, in November 2005.
Largely contributing to that is the onslaught of foreclosed homes reentering the market with the lender as the seller. But, like Cassidy, North County real estate broker Roberta Murphy said she’s seeing more buyers wade into the market.
“I’ve never encountered so many multiple offers before,” she said. “They were looking for bargains, but we have six or seven bidders on a property.”
Still, some places have further to fall. Murphy has a listing for a three-bedroom townhouse in Paradise Hills that was previously purchased in April 2003 for $275,000. They’ve listed it for six months at $195,000, she said, and it still hasn’t sold.
“We’ve got some properties that need to be at 2002 levels, like the South Bay and Paradise Hills,” she said.
Cassidy said the waiting game is wearing on some buyers.
“There are always going to be those who are looking at the sheer number side of it —
more of an academic way,” Cassidy said. “But the other side of that — this isn’t a perfect market. If you see something that is attainable for you at a monthly living expense, it might be the right time.”
Still, with more uncertainty than certainty in the market, even some veteran real estate pros say they stop short of reassuring buyers that they should buy now.
“Every day people ask me, ‘Is it going to go down more?’ and I shrug my shoulders and say, ‘Maybe,’” said Brian Brady, a local mortgage broker with World Wide Credit Corp. and author of www.mortgageratesreport.com. “I’m just a lender. I tell them, ‘When you know when the bottom’s going to hit, give me a call.’”