The majority of this excess supply or total properties listed for sale existed from June through October of 2006 (Chart A). Not only was this supply greater than the supply in the same period of 2007, it accumulated very quickly, i.e. the number of properties available for sale grew by 70% from January 2006 to July 2006. The market reacted in classic fashion to this accumulation in supply by extending marketing timelines and further discounting sales prices from original listing prices (Chart C). When comparing the properties sold for this period to the same period in 2007, this reaction is evident with marketing times 8% longer and discounts 17% greater in 2006 than 2007.

Specifically, for this period, marketing timelines averaged 122 days in 2006 versus 113 days in 2007 and average discount from original list price was 10.8% in 2006 versus 9.2% in 2007. Ironically, all this excess supply and price discounting in 2006 did not yield more properties sold in 2006 versus 2007. The number of listed properties sold (Chart B) was virtually the same for 2006 and 2007, 610 and 606 respectively. Moreover, 2007 actually experienced a higher average sale price. This increase appears to come from sellers generally discounting their original listing prices less in 2007 compared to 2006. All in all, 2007 appears to have been a strong year in La Jolla. Not only did it correct a supply/demand imbalance, but it did so while selling the same number of properties at an on average higher sale price.

we compare the first trimester of 2008 to the first trimester of 2007. We also segmented Coronado real estate into 3 groups by original listing price: 1) Properties less than $1.5 million; 2) Properties greater than or equal to $1.5 million and less than $2.5 million; and 3) Properties greater than or equal to $2.5 million. Generally, and similar to other areas, the most dramatic change in Coronado has been the decline in the number of properties sold (Chart B). However, potentially compounding this decline has been a rise in inventory or the number of properties available for sale (Chart A). A prime example of this change can be seen from the first of our three price groups, i.e. properties with an original listing price less than $1.5 million. Average daily inventory increased 11% when comparing the first trimester of 2008 to that of 2007. Towards the end of that 2008 period, average daily inventory levels even exceeded any average daily inventory level for all of 2007. Interestingly, this increase in inventory did not come from marketing timelines increasing, but from an 11% increase in new listings and a 56% drop in properties sold. The result was an 18% decrease in median sales price, going from $1,000,000 to $821,000 (Chart C).

Bucking the trend on median price declines was our second price group, i.e. properties with an original listing price greater than or equal to $1.5 million and less than $2.5 million. This group managed to maintain its $1.7 million median price level (Chart C), despite a slight marketing time extension and a 50% reduction in the number of properties sold (Chart B). Going forward, there appears to be the possibility of some price erosion, if inventory levels continue to climb within this group. However, at this point, this is not clear. Unlike our first price group, this group has reduced its new listing by almost 30%, helping to offset the reduction in the number of properties sold, thus keeping supply and demand in better balance. Nevertheless, inventory levels for this group continue to climb, nearing 2007’s highest levels.

Our last price group, properties with an original listing price greater than or equal to $2.5 million, has done the best job at controlling its inventory levels (Chart A). We have not seen the spike in inventory levels for this group like we have for the other two groups (Chart A). Average daily inventory levels are 5% lower in the first trimester of 2008 than the same period of 2007. A 7% decline in new listings, as well as faster market timelines, helped keep inventory levels down. However, considering the number of properties sold in this group declined by 50%, relatively speaking, the ratio of inventory-to-sales for 2008 is dramatically higher than that of 2007. In part, this explains why this group experienced a 9% median price decline from $2,675,000 to $2,437,500. At these inventory levels, going forward, it will be important to watch Coronado’s inventory-to-price correlation for all three price groups. Downtown San Diego

The last time we covered Downtown San Diego, we discussed the new inventory coming online and its potential impact. So far, it looks like Downtown is absorbing that new inventory better

than most probably expected. While many other areas have seen the number of sold properties drop dramatically, Downtown sold almost 20% more properties overall (listed and non-listed) in the first trimester of 2008 versus that of 2007. For this analysis, we decided to examine the impact Downtown San Diego’s overall real estate market had upon listed properties versus new, non-listed properties, when comparing the first trimester of 2008 to that of 2007. We segmented the market into three groups by original listing price: 1) Properties less than $500K; 2) Properties greater than or equal to $500K and less than $700K; and 3) Properties greater than or equal to $700K.

Believe it or not, but our first price group, properties with an original listing price less than $500K, was the only group to experience a median price decline. For the year-to-year first-trimester comparison, this group experienced almost a 10% median price decline from $393,000 to $355,000 (Chart G). Average daily inventory levels did not help, increasing 16% from 199 properties to 231 properties (Chart E). Offsetting some of this supply was an increase in demand with 13% more properties sold (Chart F).

However, things to start change as we climb the price tiers. For our second price group, properties with an original listing price greater than or equal to $500K and less than $700K, median price remained constant at $555,000 when comparing the first trimester of 2008 to that of 2007 (Chart G). Helping to support this median price was a 16% drop in average daily inventory from 167 properties to 141 properties (Chart E). However, this group did experience the largest decline in properties sold going from 71 in the first trimester of 2007 to 47 in the first trimester of 2008 (Chart F). Much of this lost listed volume was picked up by new construction volume; nevertheless, it did not seem to depress listed values.

Our last group, properties with an original listing price greater than or equal to $700K, was the only group to experience a median price increase. Median price increased 7%, going from $949,000 to $1,012,000 (Chart G). Not only did this group experience a change in median price, but its marketing timelines fell as well. All of this occurred despite having higher inventory levels than the same period in 2007 and higher number of new listings. Inventory levels were 33% higher in the first trimester of 2008, at 241 properties versus 180 properties in 2007 (Chart E). New listings grew almost proportionally with 27% more new listing in 2008. The challenge now for the second and third group will be to see if the currently high inventory levels can support the influx of new inventory without depressing median prices. So far, Downtown has managed this high-wire act better than expected.

Written by Linda and Tom Sansone

Willis Allen Real Estate

www.LindaSansone.com 

Phone (858) 775-6356

1 comments so far...

Re: Statistical report JUly 2008 Nice article. Gives much information. Thanks Tom By Dilip on   7/3/2008 4:37 AM

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