From http://voiceofsandiego.org :
Supply Surplus Symptoms
By WILL CARLESS
Voice Staff Writer
Wednesday, Dec. 21, 2005
It used to take a couple of weeks to sell a property in San Diego. These days, sellers had better be prepared to wait at least a few months, according to those in the industry.
Total Number of Homes on the Market Versus Total Homes Sales in San Diego County
Percentage of Properties on the Market Left Unsold Each Month in San Diego County
The number of properties listed on the county's Multiple Listing Service, a database used by buyers and sellers to list homes for sale, has risen dramatically in the last 18 months. In June 2004 there were slightly more than 6,000 properties on the market in San Diego County; today there are more than 15,000.
As more properties hit the market and investors begin to abandon the city's once bonanza-like real estate market, there has not been a subsequent rise in home sales.
Indeed, the number of completed sales in the county has dropped sharply in the last two quarters of this year, from 3,765 in August to 2,530 in November.
This increase in inventory, coupled with the drop in home sales, means sellers have had to wait longer to sell their properties, and may have to settle for profits that are substantially less than they expected. Some sellers -- albeit a small minority -- have even begun to sustain losses on their property.
Analysts said that would have been unthinkable just two years ago.
"We are so spoiled that we need to be spanked," said Kismit Cyriacks-Vella, a realtor and real estate investor in downtown San Diego.
Cyriacks-Vella is not just being flippant. She said investors are due a good thrashing because the last few years have seen them earn rewards that are simply impossible to sustain. The rise in inventory shows a market coming back down to reality, she said.
"The average home, in 50 states, takes about six months (to sell)," Cyriacks-Vella said. "Now, if any house in San Diego is on the market for 60 days, people are freaking out."
Craig Gagliardi is one seller who hasn't reached the point of freaking out, yet.
Gagliardi bought his two-bedroom, two-bathroom condo in the Marina District downtown in 2002. Three months ago, he put the property on the market at a price he said was lower than he expected, but that should still net him a tidy profit.
The condo is still on the market. Gagliardi, himself a real estate broker, said he has been a little disappointed, but not surprised by the length of time the property has taken to sell.
"A year and a half ago, if I had priced it as well as it is now, it probably would have gone in 30-25 days," he said.
Edward Lynch is another property owner who has found himself a victim of the emerging "buyers market" in San Diego. Lynch, an architect and a native Australian who has studied the real estate market in cities like London and Sydney for signs of what might happen in San Diego, put his condo on the market five months ago and is still waiting for an offer.
Lynch said he knows what to look for when buying property. He said he never expected the 1,600-square-foot condo in Park Loft, a development near Petco Park, to remain on the market for so long.
"The property has been typically very well-received," Lynch said. "People survey half a dozen of these in a day and ours will almost always be ranked as the most attractive. It is also ranked as being appropriately priced, yet it hasn't cleared."
Lynch and Gagliardi both acknowledge that the increase in the number of properties on the market has had a marked effect on their ability to sell their properties. More choice simply means that buyers are more cautious, they said, and as investors have shied away from the market, sellers have had to cut prices or grit their teeth and sit it out.
The sharp increase in the amount of inventory on the market is not, of itself, a concern to real estate analysts. However, coupled with the decrease in home sales since August, experts say this is further evidence of a weakening market in San Diego.
"It's indicative of a slowdown," said Alan Gin, a professor of economics at the University of San Diego's Burnham-Moores Center for Real Estate. "It's a sign that fewer houses are being sold and more are available."
That doesn't worry realtors like Cyriacks-Vella. While she acknowledges that some fiscal flagellation is certainly in order, the upbeat realtor said the vast majority of property owners have still seen record profits in the last few years. "If a person has owned more than one piece of property, they have made all sorts of money," she said. "If they've had a house in the last five years, they've made all sorts of money. If they have bought in the last six months, they may not have."
Analysts said it is the next six months that will prove crucial in establishing whether the upward trend in inventory is likely to have long-term impact on property prices. If inventory continues to rise and sales do not pick up, they said, the net effect will inevitably be lower property prices across the board.
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