The Morning Report
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Tuesday, April 28, 2009 | The open houses for real estate listings in some spots in the county have begun to resemble the giddy days of the housing boom — that is, except for the “bank-owned” and “reduced price” signs in the lawn.
Local broker Donna Sanfilippo reported close to 100 offers coming in on a small house on a small lot for sale in North Park last week. One of agent Peter Toner’s buyers who offered to pay more than the asking price for a Mira Mesa house and was denied found out that there were 25 other offers on the house.
Four clients of local broker Adam Rappoport’s have all made offers on the same three houses in Rancho Peñasquitos that are listed in the high-$400,000 or low-$500,000 range, he said. All of the houses received multiple bids, and none of his clients’ offers were accepted because “they weren’t high enough,” he said.
“To me the market is as active now as I’ve seen it in a good three to four years,” Rappoport said.
This movement comes despite continuing weakness in home prices and analysts’ warnings that prices could continue to fall for at least several more months, and despite a depressed economy with record unemployment.
For the most part, the frenzy of buyer activity is happening on the low end of the market — usually anything lower than $350,000, agents say — in neighborhoods where foreclosures have already wrought massive price declines from the peak. Some agents said their buyers are jumping in even as they admit their homes could fall in price in the coming years.
“The market is in kind of a twilight zone, where there’s a lot of activity and a lot of homes being bought but the underlying strength isn’t there,” Rappoport said.
Countywide housing prices were down 22.9 percent by the end of February compared to the same month in 2008, according to the most recent Standard & Poor’s/Case-Shiller home price index, released Tuesday.
The index, which tracks the price movement over time of houses that have sold at least once before, showed prices in the county down 41.4 percent from the local market peak in November 2005.
Even with the drop from the peak, San Diego prices remain about 47 percent higher than they were in January 2000, before the housing boom during which prices more than doubled. The most recent index shows San Diego prices at a level last seen around July and August 2002.
Many local real estate professionals say the buying activity is outpacing the available homes at the prices those buyers want to pay. Financially stable sellers still don’t generally want to drop their prices to enter a market epitomized by foreclosures and short sales. Meanwhile, the market could sustain a flood of homes for sale as foreclosures continue to mount.
Many analysts are trying to get their arms around what’s known as “shadow inventory” so they can try to project the future ratio of willing buyers — demand — to the supply of homes for sale at prices those buyers want to pay. Shadow inventory is a loosely defined concept that typically refers to the houses that will one day hit the for-sale market but haven’t yet for a variety of reasons.
In many cases, banks have held off on listing the homes while waiting to see what federal lawmakers would end up requiring them to do to abate the foreclosure rate, said Mark Goldman, real estate professor at San Diego State University.
But they seem to have decided that waiting period is over. The banks recently filed a flood of default notices.
“I’m watching to see what happens with these pent-up foreclosures,” Goldman said.
There were 7,858 foreclosure notices filed in the county last month, according to RealtyTrac numbers released last week. That’s up 29 percent from February and up 36 percent year-over-year.
Toner said he’s never seen such a stark difference in the market. “I’ve never seen it polarize as much as this,” he said.
The county is split in two, he said. There are some spots where the elusive bottom may be here with houses for sale that attract multiple offers and actually sell for more than their asking prices, he said.
And then there are the places, which he said are usually more coastal, where the prices haven’t crashed as far because there hasn’t been the same number of foreclosures.
Toner said those places may still be affected further, where owners are stretched to the max to stay in their homes. “My gut feeling is there’s a lot of people hanging on by their fingernails,” he said.
And it’s not very easy for them to sell right now. The loans for people hoping to buy homes priced between $800,000 and $1.5 million are far from as commonly available as the ubiquitous loans for buyers on the low end.
The activity has been so tilted to the low end of the county’s market that two-thirds of the sales measured in the Case-Shiller index in February were priced lower than $409,042.
And the month-to-month drops in each of the index’s three price-based tiers were slighter than they’ve been in previous installments, according to a version of the index adjusted for seasonal trends. The largest drop was in the lowest tier, which measured a 1.8 percent decline between January and February.
The middle tier and the high tier fell by 0.7 and 0.1 percent, respectively.
In San Diego, the three price-based tiers in the regular index sustained the following declines:
- Low tier (Under $281,207): down 50.4 percent from June 2006 peak and 27.6 percent year-over-year
- Middle tier (between $277,740 and $409,042): down 39.3 percent from the November 2005 peak and 17.9 percent year-over-year
- High tier (higher than $409,042): down 32.6 percent from June 2006 peak and 18.9 percent year-over-year.
All of the tiers’ year-over-year declines were smaller in February than they were in January. The index lags the market by two months.