Housing, Condo Inventories Open Up Buying Opportunities in San Diego

Despite a recent rise in California mortgage rates, many parts of the state are considered to be buyers’ markets.

For example, in San Diego housing market, developers have more than 10,000 condos available for sale in new buildings, projects under construction or properties being converted from rentals, says Peter Dennehy, a senior vice president at Sullivan Group Real Estate Advisors, a consulting firm based there.

He says that supply is enough to last more than 20 months at the current sales rate. This provides mortgage applicants with a significant advantage during price negotiations.

Mr. Dennehy estimates that condo prices have fallen at least 15% to 20% in the county over the past year, though it’s hard to measure price changes because sellers often give incentives such as free upgrades or help with closing costs that aren’t reflected in the price.

The glut in inventories is likely to increase in some markets as sellers try to take advantage of what they hope will be a stronger selling season. Some sellers pulled their homes off the market late last year, intending to relist them in the spring.

Overall, some of last year’s strongest housing markets now are showing signs of cooling a bit.

The median home price in San Franciso for new and resale homes in December was $612,000, up just 0.5% from a year earlier, according to DataQuick. But prices fell in parts of the Bay Area; they were down 6.3% from a year earlier in Sonoma County and down 5.1% in Solano County, DataQuick says.

One of California’s weakest markets last year was the Sacramento area. Anthony Graham, an analyst at Trendgraphix Inc., a provider of housing data, says sellers of previously occupied homes there have had trouble competing with the huge discounts and builder incentives to buyers.

Mr. Graham expects average home prices in Sacramento to fall between 6% and 8% this year, but believes the market will begin to recover modestly by the fourth quarter, assuming that home builders continue to cut their production.

Greg Paquin, president of Gregory Group in Folsom, Calif., which gathers data on new home construction throughout the state, also thinks Sacramento is stabilizing after last year’s price cuts.

“Buyers who were on the fence are starting to say, ‘Hey, this is a pretty good deal,’ ” Mr. Paquin says.

California’s Central Valley, which includes such cities as Bakersfield, Fresno, Merced and Stockton, may take longer to absorb excess new-home inventory and bring prices down to more affordable levels, Mr. Paquin said. He said that area may not bounce back until next year when it comes to applications for California mortgages.