The leper in the san diego real estate market this year is the luxury homes segment. We are currently experiencing a buildup of inventory, low sales volume, dropping values, high numbers of expired/cancelled listings, and an increase in short-sales and foreclosures.
The number of homes for sale over $2million has increased significantly. With prices in lower price ranges having dropped considerably over recent years, the gap between the first-time buyer areas and the luxury market has become huge. Search San Diego homes for sale to see for yourself.
In another CMA that I did for Mission Hills, I found similar trends. What?s causing the buildup of homes for sale is that nothing is selling. I was amazed to find that only 2 homes have sold in Mission Hills for more than $1.4 million this year. This is in stark contrast to the last 5 years. You can view more stats on this at my Mission Hills real estate site.
As a result of the decreasing sales and increasing inventory, we are now realizing a noticeable drop in property values. When sales pick up, it will be more apparent where the property values are at, but in some markets, where there are so very few sales, it is quite hard to estimate where the actual value of a home for sale currently sits.
We are also seeing increased numbers of homes that didn?t sell at all and fall off the market. There are many reasons why this could happen and some include: the owner can’t go lower on price, the owner is not willing to go lower on price, or the owner is unhappy with the Realtor they are working with. Some of these listings do come back on market, but some of them simply decide not to sell.
With such a bad economy and dwindling demand from buyers in the San Diego luxury market, we are seeing the occasional short-sale or foreclosure, which we never saw before this year. While this has been common in the lower price ranges, it is rare in the upper prices. As foreclosures, short-sales and other must sell listings (i.e. trust sales) enter the market, they will drive prices & home values down to the point at which buyers agree that the price is a fair value.
All in all, due to all these issues with San Diego luxury homes and the economy as a whole, I fully expect continued drops in home values for this market segment over the next 6-12 months. I think it is a part of the natural cycle, which began with the lower-price ranges and is now working its way up to the segment that was relatively unaffected a year ago, but is now feeling the pain…
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