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August home prices in San Diego County fell 25.8 percent from the previous year, a record annual decline, according to the newest Standard & Poor’s/Case-Shiller home price index released Tuesday.
Prices declined 32.8 percent from the peak in November 2005, continuing an unprecedented downturn in the region’s housing market. August was the 28th straight month in which prices were lower than the month before, although local home prices in August were still more than 68 percent higher than they were in January 2000.
The data come a week after a separate report declared that the number of home sales rose for the third straight month in the region in September, the month after the most recent Case-Shiller data. The 56.4 percent increase in September was a record year-over-year increase, according to MDA DataQuick.
But a large share of those sales were distressed homes — 43 percent of the homes that sold in the county in August had been foreclosed upon in the last 12 months. In September, the share of such sales grew to 47 percent, according to MDA DataQuick. Thus the price declines were exacerbated by foreclosure sales by banks eager to dump repossessed homes off of their books.
Meanwhile, the region’s new homebuilders experienced their worst quarter in 30 years in the three-month period ending in September, MarketPointe Realty Advisors reported Monday. Just 505 new homes sold in July, August and September in San Diego County. In the second quarter of 2005, the best boom-time quarter, 4,662 new homes sold in the region. Last quarter represents an 89 percent decline from that level.
Russ Valone, MarketPointe’s president, said he never expected to see sales drop below the 1,000 level. But now three of the last four quarters have shown sales rates below that line. “This is unprecedented,” he said.
Valone attributed the weakness in new construction to the strong price competition builders face from foreclosures.
“What’s happening is the foreclosure market primarily, and the resale market secondarily, is sucking all the wind out of the housing market right now, taking most of the sales,” he said. “The new home market really can’t compete with that.”
The August index shows a continuing housing market downturn that has lasted for more than two years. But these most recent Case-Shiller data don’t capture any of the trouble from September and October, when a global financial crisis took hold, leaving credit markets tight and threatening more turbulence in the housing market.
In a local economy impacted heavily by job losses in real estate related industries like construction and real estate and finance, the housing market-led downturn has begun to show up in spillover sectors like retail. The sector declined by more jobs year-over-year in September than it has so far in the downturn.
“We’ve got a slog to go here,” said Mark Goldman, mortgage broker with Windsor Capital and real estate professor at San Diego State University.
The Case-Shiller index takes the most recent sales of detached houses and compares them with the last time that same house sold, tracking the changes in price in the index. It does not measure price changes in condos or new houses. A house is placed in a tier based on its previous sale price, and then the change in price is tracked.
Broken into thirds, the Case-Shiller index showed the deepest declines in the lowest tier. Those houses, priced less than $345,452, sustained a 33.7 percent drop year-over-year and a 42.6 percent drop from the tier’s peak in June 2006.
The middle tier — homes priced between $342,452 and $501,477 — sustained a 24.9 percent drop year-over-year and a 33.4 percent drop from that tier’s peak in November 2005.
And the high tier — homes priced above $501,477 — dropped 17.2 percent year-over-year and 22 percent from the peak in June 2006.
Goldman said gloominess is settling in across income levels in the region.
“There’s also an emotional malaise that’s going on right now,” he said. “There are millionaires who are just staying home. Go to a shopping center, take a look around. There’s a lot fewer buyers. Car lots are closing up. People are just buying less and less stuff.”
And Goldman doesn’t expect that mindset to be entirely temporary. Households in the region, and the nation, are starting to come to grips with the fact that their home equity will not serve as an ATM any longer.
“Can it get worse? Yes it can, but the world hasn’t ended,” he said. “It’s going to change significantly. There’s going to be a bleeding off of all that consumption. You can’t put all the stuff on the credit card anymore and pay for it by refinancing your house.”