NORTH COUNTY - It may have been a torrid month as far as the weather was concerned, but July was ice-cold in the North County housing market.

Continuing a slowdown that has persisted throughout the year, sales of single-family houses last month plunged 31 percent from July 2005 and sales of condominiums fell 28 percent during the same time period, according to a report released Wednesday by the North San Diego County Association of Realtors.

Last month, the local housing market posted its second-worst performance of 2006, one eclipsed only by June's 37 percent year-over-year plunge in single-family home sales, said Robert Brown, a Cal State San Marcos economist who compiles sales figures for the association.

Real estate analysts said the drop isn't cause for alarm. They said the market is just settling down after its quick 2005 pace, and fewer people are buying because the investors are gone.

"Last year we had an overheated market," said Pat Hunter, an Escondido real estate agent. "It was going so fast and furious, and appreciating at such a high rate, that it simply could not sustain itself. And we don't have people flipping houses anymore."

Hunter also said the unrelenting heat wave had something to do with the decline.

"I mean, you just can't hardly get a buyer out when it's 100 degrees," she said.

However, a San Diego economist who tracks trends in real estate and publishes a newsletter advising investors on when and when not to buy, said the decline is a clear indication that the housing market is entering a downturn.

"Prices have reached a point where they simply can't go any higher," said Robert Campbell, who publishes the online Campbell Real Estate Timing Letter. "We are on the down side of the cycle. This movie has replayed for the last 40 years. This shouldn't surprise anybody."

Market activity also fell sharply in July by another measure, the total dollar value of sales.

Brown said total money changing hands for single-family homes was $634,821,476, down almost 25 percent from the $839,877,471 that changed hands in July 2005.

In the condo market, a total of $103,455,116 changed hands, he said. The number represented a dip of 33 percent from the July 2005 total of $155,770,529.

When it came to the key market indicator of inventory, the number of single-family homes on the market swelled to 6,482 last month, the association report showed. Coupled with the 727 homes that sold, that meant North County had a nine-month supply of houses in July, up sharply from the six-month supply it had in March.

There is an even bigger glut of condos.

With 2,645 condos listed in North County in July and only 257 of them selling, the area had a 10-month supply of town houses and other owned shared-wall housing.

The median condo price fell 10 percent year over year to $359,000 in July, the report stated.

But Kevin Burke, a Del Mar real estate agent, suggested the condo numbers were misleading.

"That just means we flooded the market with condo conversions. That doesn't mean the market has come down," Burke said.

Meanwhile, single-family values continued to hold up -- barely. Year over year, the median price edged up less than 2 percent, to $635,000 in July. That represented a decline from the all-time high of $650,000 a month earlier.

Hunter said the weak sale numbers and flat prices signal that "we are transitioning from a sellers' market to a buyers' market."

And Burke said the transition is triggering more concessions on the part of sellers. But that doesn't mean the sky is falling, he said.

"I have seen bad markets. This is not a bad market," Burke said. "It just means that there is more to choose from and that they (buyers) can afford to be more choosy. I'm enjoying the fact that, for the first time in a long time, I can actually negotiate a deal."

But Campbell maintained that some real estate analysts are refusing to acknowledge that, for most people, the market is out of reach and no level of negotiation or creative financing will help them buy a home.

"Basically, what has happened is, the consumer has gotten squeezed and something has got to give," Campbell said. "People are saying, 'I don't want to go naked for the rest of my life. I still have to eat.'"

And, he said, they are canceling plans to buy until the market becomes a whole lot more affordable.

The association report estimated that a mere 8 percent of San Diego County families can afford to buy the median-priced home in North County, compared with 9 percent one year earlier.

"Granted, affordability is at an all-time low," Hunter said. But she said the high prices constitute a sort of "sunshine tax" that people pay to live in San Diego County because of its popularity.

Campbell countered that, while residents indeed have always paid more to live here, the difference is far greater now than ever before, and that suggests housing is overvalued. He said that, on average over the last 35 years, San Diego County residents paid 73 percent more for housing than the national average, and today they are paying 180 percent more.

- Contact staff writer Dave Downey at (760) 740-5442 or ddowney@nctimes.com.