The majority of this excess supply or total properties listed for sale existed from June through October of 2006 (Chart A). Not only was this supply greater than the supply in the same period of 2007, it accumulated very quickly, i.e. the number of properties available for sale grew by 70% from January 2006 to July 2006. The market reacted in classic fashion to this accumulation in supply by extending marketing timelines and further discounting sales prices from original listing prices (Chart C). When comparing the properties sold for this period to the same period in 2007, this reaction is evident with marketing times 8% longer and discounts 17% greater in 2006 than 2007.

Specifically, for this period, marketing timelines averaged 122 days in 2006 versus 113 days in 2007 and average discount from original list price was 10.8% in 2006 versus 9.2% in 2007. Ironically, all this excess supply and price discounting in 2006 did not yield more properties sold in 2006 versus 2007. The number of listed properties sold (Chart B) was virtually the same for 2006 and 2007, 610 and 606 respectively. Moreover, 2007 actually experienced a higher average sale price. This increase appears to come from sellers generally discounting their original listing prices less in 2007 compared to 2006. All in all, 2007 appears to have been a strong year in La Jolla. Not only did it correct a supply/demand imbalance, but it did so while selling the same number of properties at an on average higher sale price.

The largest group is the first group, properties with an original listing price less than or equal to $3 million. Of the properties that sold within this group, median sale price increased when comparing 2007 Q1 to 2008 Q1, specifically $1,900,000 versus $2,200,000 (Chart B). Furthermore, of the three groups, this group had the shortest average marketing time, 6.4 months (Chart C), as well as the smallest sales discount from original listing price. However, it did experience a slight increase in average daily inventory count for the quarter; moving from a daily average of 94 to 99 (Chart A), yet clearly not offsetting its year-to-year quarterly market performance.

The middle or second group, properties with an original listing price greater than $3 million and less than or equal $5 million, lost 1% from its 2007 Q1 median sale price, going from $3,225,000 to $3,207,000 (Chart B). Offsetting a potentially greater percentage decrease was a reduction in the number of properties sold and a marketing time increase of approximately 60% from 8.6 months to 14.1 months (Chart C). Given the protraction in marketing time, not surprisingly, some sellers within this group took their properties off the market, thus reducing the number of sales and also offsetting a potential year-to-year quarterly rise in inventory levels (Chart A). It was probably seller commitment to price that caused the marketing time protraction and helped maintain this group’s median quarterly sale price. Going forward, it will be important to monitor the sustainability of this strategy via any changes in demand. Lastly, albeit the smallest group by number of sales, properties with an original listing price greater than $5 million. While it is true that this group technically had higher average and median quarterly sale prices when comparing 2007 Q1 to 2008 Q1 (Chart B), it would be misleading to conclude this was due to appreciation, since the group is so small and the distribution of sales prices so varied, even above $5 million. However, what is safe to conclude, when comparing 2007 Q1 to 2008 Q1, is that inventory levels remained constant (Chart A), the number of new listings remained constant, discount from original listing price remained constant, number of sales remained essentially constant, and average market times fell from 15.5 months to 11.6 months (Chart C). All-in-all, a relatively strong performance.

Del Mar The most conspicuous change in Del Mar’s real estate market (defined for the purpose of this analysis as all attached and detached residential properties listed with the San Diego Multiple Listing Service for the 92014 zip codes) when comparing 2007 Q1 to 2008 Q1 is the reduction in average daily inventory (Chart E), i.e. the average daily number of listed properties available for sale. Overall, the first quarter average daily inventory dropped 31% from 185 to 127, leaving fewer homes for buyers to select from. Another consistent characteristic across the price groups we analyzed was an increase in the sales discount from original listing price. Overall, this discount increased by 2.8%; however, this should not be meant to imply that median sale prices fell for all the price groups analyzed. Just like Rancho Santa Fe, Del Mar’s real estate market exhibited varying behavior amongst price groups. For this analysis, we segmented the market into 3 groups by original listing price: 1) Properties less than or equal to $1.2 million; 2) Properties greater than $1.2 million and less than or equal to $2 million; and 3) Properties greater than $2 million.

For those properties that sold in the first group, properties having an original listing price less than or equal to $1.2 million, median sale price increased from $842,500 in 2007 Q1 and $850,000 in 2008 Q1 (Chart F). Furthermore, even though average daily inventory and new listings dropped significantly between these two quarters, the number of properties sold in this group was essentially the same, 12 versus 11, respectively. Helping to create the strong median price performance was the increase in the ratio of the number of properties sold to the average daily inventory during the two marketing periods. This ratio went from 1-in-5 to 1-in-4, essentially manifesting a stronger market demand for this group in 2008 Q1 than 2007 Q1.

Another group that experienced a median sale price increase when comparing 2007 Q1 to 2008 Q1 was the second group, properties with an original listing price greater than $1.2 million and less than or equal $2 million. Median sale price went from $1,370,000 to $1,527,500, resulting in an 11.5% change between the year-to-year quarters (Chart F). Not only did the median price increase for this group, but the average marketing time decreased by 20%, lowering the marketing time to 5.2 months from 6.5 months (Chart G). However, this group did experience the largest decline in the number of sales, 45% decline from the comparable 2007 quarter. Also, the ratio of sales to inventory during the two marketing periods, suggests potential pending weakness.

Lastly, there is the third group, properties with an original listing price greater than $2 million. This was the only group in Del Mar to experience a median price decline when comparing 2007 Q1 to 2008 Q1. However, this is where statistics can be misleading, if one does not look at the raw data, especially when dealing with small populations. The median price statistic for 2007 Q1 is $2,900,000, while it is $2,125,000 for 2008 Q1 (Chart F), but because this group is small and represents a broad price range, i.e. everything above $2 million, it is highly susceptible to being skewed by an uneven distribution of purchase prices. From the 2008 Q1 data, this is what occurred. There were more purchases in the upper-end of Del Mar, specifically in the $4 million range. These purchases make median price comparisons untrustworthy for this group. However, what is safe to say about this group is that it experienced the greatest protraction in marketing time from 7.4 months in 2007 Q1 to 10.8 months in 2008 Q1, resulting in a 45% increase (Chart G). Going forward, we’ll keep a close eye on this group’s marketing time and the potential effects thereof.

Written by Linda and Tom Sansone

Willis Allen Real Estate

www.LindaSansone.com

Phone (858) 775-6356

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