Tuesday, May 26, 2009 | Local home prices were down 22 percent from their year-ago levels in March, according to the closely watched Standard & Poor’s/Case-Shiller Home Price Index, released Tuesday. San Diego County’s year-over-year decline was ninth deepest among the 20 metropolitan areas measured.

The index, which tracks the same detached houses as they sell over the years, showed San Diego County home prices down 42.3 percent from their peak in November 2005. Despite that drop, prices were still 47 percent higher than they were in January 2000.

Falling prices and continuing economic uncertainty locally and nationally make projecting a recovery difficult. But some housing analysts see two significant indicators that stability may be coming: impassioned buyer activity and a dwindling number of homes on the market.

Buyers have continued to snap up homes, with all-cash investors elbowing past first-time homebuyers in their pursuit of perceived deals. The stock of homes on the market is about half what it was two years ago.

There’s another shoe to drop: more foreclosures. But banks, with thousands of distressed mortgages on their books, have rendered nearly impossible a forecast of when those homes will come on the market for sale.

“That’s a potential problem which none of us know the answer to and can’t know,” said Leonard Baron, real estate consultant and professor at San Diego State University. “The question is, are there people ready, willing and able to buy? And the answer’s yes.”

Though it’s a hard projection to make, the numbers of homeowners who are behind on their payments give no sign that the foreclosure flood will slow anytime soon. In March, 7.6 percent of outstanding San Diego County mortgages were at least 90 days late on payments, according to First American CoreLogic. That 90-day delinquency rate shot up 2.6 percent from March last year.

But the rate of home loans going into foreclosure was only 1.9 percent, up just 0.3 percent over the year. That means there were more loans falling delinquent than received official notice of default — indicating a bottleneck and a potential flood of foreclosures to come.

Factor in economic trouble, unemployment and a growing number of homeowners who owe more on their mortgages than they could sell for, and the number of foreclosures is certain to grow.

“You just can’t have that much negative equity, that many people not making payments and not have more foreclosures,” said Sean O’Toole, founder and CEO of ForeclosureRadar, which tracks foreclosures. “The current numbers are just unfathomably low compared to the number of people who aren’t making payments.”

O’Toole said in San Diego County, there are more than 18,800 homes in the first two stages of foreclosure — with either a notice of default or a notice of trustee’s sale — that had not yet been sold back to the bank or had their sale cancelled.

In the meantime, the number of homes on the market is considerably lower than it was in the last couple of years. To measure the health of a housing market, analysts take the number of homes for sale and divide it by the number of homes that sell every month. That creates a measure called “months of inventory” — the number of months it would take to sell through the homes on the market.

That number has plummeted — a sign of potential stability for prices — as the market has lured first-time buyers and investors into the market.

“You have more buyers than properties right now,” said Mark Marquez, president-elect for the San Diego Association of Realtors.

But Marquez and other real estate professionals admit that balance may soon be tipped again, later this summer.

“There’s kind of like this pause — it’s created an artificial tightening of inventory,” Marquez said. “Will there be more foreclosures? Sure. Is it going to be catastrophic? I don’t think so.”

The Case-Shiller index showed similar declines from February across all three price tiers, whereas in the past few months, the severity of the drops has shifted from tier to tier.

A seasonally adjusted version of the index showed a 1.79 percent drop for the low tier, a 1.57 percent slide in the middle and a 1.53 percent drop at the top. The index as a whole dropped 1.42 percent from the previous month.

Broken into tiers by the price the homes had previously sold for, the lowest priced tier (homes priced under $269,829) fell by 26.5 percent compared to March 2008. That tier was down 51.5 percent from its peak in June 2006.

The middle tier, homes priced between $269,829 and $397,733, fell by 17.4 percent year-over-year and 40.3 percent from the November 2005 peak.

And the high tier, homes priced higher than $397,733, fell 18.8 percent year-over-year and 33.4 percent from the peak.

Please contact Kelly Bennett directly at kelly.bennett@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.

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