HOUSING: Sales increase, prices drop ---- again

Low-end sales continue to lead market as foreclosure rates don't slow

By ZACH FOX - Staff Writer | Thursday, September 11, 2008 9:27 AM PDT ∞

North County home sales increased significantly in August for the second straight month, with activity clustering around lower-priced homes as buyers snapped up foreclosures, according to a monthly housing report released Wednesday.

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At the same time, sales in high-end areas such as Encinitas and Carlsbad tumbled from a year ago, according to HomeDex, a monthly housing report by the North San Diego County Association of Realtors. And analysts said price drops are starting to accompany the sales decline in those areas ---- an indication that the region's housing recession could be shifting gears, with some regions seeing a nascent recovery and others just starting to feel weakness.

"The people who really have to sell, they're dropping the list price by a few hundred thousand dollars," said Eric Elegado, a real estate agent in Mira Mesa who also specializes in Rancho Bernardo and Rancho Penasquitos. "As prices keep coming down and more foreclosures come on the market, you'll see prices come down even more."

The number of houses sold in Encinitas dropped 55 percent last month from the same time a year ago while sales in Carlsbad fell 12 percent, according to the report. It also showed that low-end, high-foreclosure areas such as parts of Oceanside, Vista and Escondido carried the sales bump for North County, with sales increases of about 100 percent.

Overall, North County's sales in August jumped 9 percent from a year ago, to 703 houses sold last month, while prices continued to drop, according to HomeDex, a monthly housing report released Wednesday by the North San Diego County Association of Realtors.

While some real estate agents point to a rush of investors leading the sales bump as an indicator of a recovering market, other analysts said they foresee more turmoil in the housing market.

"Last year it was awful, so it's 9 percent above awful," said Bruce Norris, founder of The Norris Group, a real estate investment firm based in Riverside that covers Southern California. "I would consider it fairly meaningless when saying we're entering a healthy market. We're not. We still have a lot of foreclosures to work through."

And prices continued to drop. The median price for a house ---- the point where half of houses sell for more and half for less ---- dived 32 percent to $450,000, according to HomeDex. It was the largest fall in median home prices for North County since the housing recession began in late 2005.

Still, signs of strength have popped up throughout Oceanside and Escondido, where bank-owned foreclosures are selling for more than the asking price. Investors have jumped back into the market, buying low-priced homes because the properties can be rented for more than the cost of a mortgage, real estate agents said.

"Certainly on the foreclosure side, there is just a preponderance of all-cash investors," said Carlton Lund, a real estate agent based in Carlsbad. "That's usually a fair indication that the market is getting better, and we're approaching the limits of price decline."

But along the coast, homeowners who want to move but don't have to are reluctant to lower their prices, real estate agents said.

That is about to change, Norris said. A growing number of high-end homeowners holding risky mortgages are about to see payments jump, he said, forcing some of those hesitant sellers onto the market. The loans, known as option-adjustable-rate mortgages, allow homeowners to make payments less than the interest owed each month.

With a large number of mortgages set to have payments jump, "there's no possible way this is going to get better this year," he said.

And even with sales bumps over the last two months, North County house sales from May through August, when sales are typically most robust, were just 5 percent higher than a year ago and 31 percent below sales in 2005, according to the monthly housing reports.

Low-end houses led the market in sales increase, with the number of sales priced for less than $300,000 tripling from a year ago, according to HomeDex. Every other price tier saw sales flatten or drop compared with last year.

Meanwhile, the HomeDex report showed that inventory remained relatively high ---- it would take eight months to sell all active listings at August's sales rate.

Normal inventory is considered to be about four to six months of supply.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Read his blog, "On the Realside," at nctimes.com/blogs/minding_your_business.