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While foreclosures continue to fall, the sales pace for the real estate market as a whole continues to heat up, and with it come rising prices.

Total sales in December were up 9 percent as compared to a year ago, and up 9.5 percent from even a month before, according to figures released this week by the California Association of Realtors, a real estate industry trade group. The Association’s chief economist, Leslie Appleton-Young, attributes the volume spike to sellers of high-priced homes trying to close transactions before becoming subject to higher capital gains taxes in the new year (profits of more than $250,000 for individuals and $500,000 for couples on the sale of personal residences are taxed as capital gains).

The median-priced home selling in San Diego County last month was $418,290, up from $403,990 in November and $359,930 in December 2011, marking a full 16.2% spike in prices over the last year.

Market tracking firm DataQuick points to several markets that have done even better. Though they've only released numbers through November 2012 at present, areas with a significant number of sales that have experienced even stronger appreciation include Encinitas (18.1%), La Jolla (30.8%), Lemon Grove (23.3%), and Vista (20.7%).

An inventory shortage present in the market for some time has become more pronounced, as underwater homeowners (those owing more than their homes are worth) are able to negotiate loan modifications with their lenders, decide to hold off selling in the hope that rising prices will eventually allow them to avoid the credit hit of a foreclosure, or simply elect not to pay or sell (it takes over 300 days on average for a lender to foreclose).

There are currently enough homes on the market to satisfy about three months’ worth of demand, and properties around the county are listed for an average of 43 days. These numbers, however, can be misleading, as properties where a buyer and seller have negotiated a purchase but are waiting on the seller’s lender to approve a payoff for less than the full loan balance are counted in most statistics as active listings – some agents have speculated that the true supply of available homes doesn’t even match one month’s demand. Real estate economists say that a six to seven month supply is an indicator of a stable market, with anything less driving price increases and anything more leading to depressed values.

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