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As housing prices continue to rebound, distressed sales including foreclosures and underwater “short sales” account for a shrinking share of the total real estate market, the industry trade group California Association of Realtors reported yesterday (April 22), when it released March pending sales figures and a distressed property report.

Last month distressed sales made up nine percent of the total San Diego County market, down from 15 percent in February and a full 26 percent a year ago. With home prices in the county up an average of 18 percent in the last year according to research firm DataQuick, San Diego is well outpacing the rest of the state in eliminating distress sales – Realtors’ figures show 28 percent of sales statewide still involve a short sale or bank foreclosure, but that’s down from 49 percent a year ago.

Lack of sufficient inventory is likely a major culprit driving prices higher, as potential short sellers wait out the rising tide to regain equity, banks slow their foreclosure process as a result of new laws banning “dual-tracking” (proceeding to foreclose on a property while at the same time negotiating with a borrower to avoid foreclosure), and buyers who had long been hesitant to enter the market begin actively shopping.

A statewide inventory of 1.8 months’ worth of housing stock was available last month, the lowest point in recent memory and just over half the 3.2 months’ supply a year ago. A stock of available inventory equal to six months’ sales is considered an indicator of stable housing values, less indicates a rising market while more tends to predict falling prices.

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