Tuesday, June 30, 2009 | Perplexed by the current San Diego County housing market? You’ve got company. Buyers, sellers, real estate agents, economists and bankers are all trying to get their heads around the question of where this market is going, and the tea leaves are not exactly easy to read.

Price declines are slowing. The number of homes on the market has been cut in half from a year ago. Homebuyers anxious to take advantage of bank deals and government incentives are continuing to duke it out with cash investors, a fight most often won by the latter. The appearance of home scarcity — and a trumpeted “buy now!” message from a number of local real estate pros — is sparking some consternation in the hearts of desperate house-hunters.

But the stock of potential foreclosures continues to build, unemployment is rising and more exotic loans are coming due. In short, it’d be hard to say the bottom has come and gone, analysts say, despite what homebuyers might sense.

“There’s a perception that ‘Oh, my God, we missed the boat’ — they have the perception sometimes, the misperception, if they wait another six months, it’ll go up another $50,000,” said Yamila Ayad, owner of Mission Home Loans in San Marcos. “Myth, myth, myth.”

It’s not hard to see where buyers get that sense. The pace of price declines has slowed and the supply of homes for sale has been drastically reduced, revolutionizing the market on the low end and reinvigorating some of the frenzy of the boom. Inventory has shrunk dramatically from about 21,000 a year ago to 9,849 active listings on Tuesday, said Ray Ewing at Sandicor, keepers of the region’s Multiple Listing Service.

Local home prices had fallen 42.3 percent from the market peak in November 2005, according to the most recent Standard & Poor’s/Case-Shiller home price index released Tuesday. The aggregate index fell just slightly from March, so slightly that the index was down about the same amount from the peak as it was in March’s index.

The pace at which home prices declined has slowed. In the most recent index, prices fell 20 percent from April 2008. But March’s index showed a greater 22 percent year-over-year drop.

Home sales have been steadily rising for the past 11 months straight. In May, a month after the most recent Case-Shiller index accounts for, sales rose 8 percent year-over-year. The lower-end, $350,000-and-below neighborhoods that have seen significant impacts from foreclosure have seen the most increased activity.

But the slowing price declines and increase in sales does not mean the foreclosure flood has abated. In May, foreclosure filings increased 20 percent year-over-year to total more than 7,650, according to RealtyTrac.

The situation could very well worsen as more homeowners who are behind on their payments receive official notices of foreclosure. It’s a difficult projection to make.

But in April, 5.74 percent of outstanding San Diego County mortgages were at least 90 days late on payments, according to from First American CoreLogic released earlier this month. That 90-day delinquency rate marked a 0.94 percent increase from April last year.

But the rate of home loans going into foreclosure was only 1.58 percent. That means there were more loans falling delinquent than had officially entered foreclosure — indicating a bottleneck and a potential flood of foreclosures to come.

The shrunken number of homes on the market is temporary, said Seth Chalnick, a real estate broker in Cardiff-by-the-Sea. And that motivates buyers.

“It creates a sense of scarcity,” Chalnick said. “That does tap into our psychological sense of it must be valuable because it’s scarce.”

Growing trouble in the category of loans known as Alt-A in San Diego County has analysts concerned. A step above subprime, Alt-A consists of high-risk loans for good-credit borrowers who purchased more expensive homes, and the rate of such borrowers in default has soared over the past year.

These potential future foreclosures might more dramatically affect higher-end neighborhoods where a lack of financing has hampered home sales.

Chalnick, the broker, said the $700,000-plus market has been especially hard-hit. He said he’s reticent to declare an end to the weakness in the market, at least on an aggregate, countywide level.

“The idea of the real estate market being at the bottom when you lump the low end with the coastal high-end stuff — the only word that comes to mind is preposterous,” Chalnick said. “People are saying, ‘It’s not as bad anymore; we’ve turned the corner!’ It hasn’t even started.”

Still, broken into tiers by the price the homes had previously sold for, all of the tiers showed smaller year-over-year declines than they did in March.

The lowest priced tier (homes priced under $267,446) fell by 25.2 percent compared to April 2008. That tier was down 52.2 percent from its peak in June 2006.

The middle tier (homes priced between $267,446 and $395,965) fell by 15.6 percent year-over-year and 40.9 percent from the November 2005 peak.

And the high tier (homes priced higher than $395,965) fell 17.9 percent year-over-year and 33.6 percent from the peak.

Dennehy said the “glass-half-full” perspective on today’s market focuses on the houses that are coming to market that are getting snapped up at a healthy pace. Most of those are at the low end, he said.

“There are a lot of distressed properties selling very well at the bottom,” Dennehy said. “The overall picture is looking much better but it’s still a fairly unhealthy housing market.”

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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