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December 01, 2011

Luxury Home Sales In Decline, Despite Increased Overall Sales
Existing home sales rose more than expected in October, registering a 1.4 percent gain over the previous month, though that number is largely reflective of increased sales of homes on the lower end. Realtors expect sales to continue to rise slightly over the next few months, which, under normal circumstances would be an indicator that prices will increase, as well. But in today's market, with a continuous flood of heavily discounted, distressed properties, prices are actually still in decline.

On a year-to-year basis, single-family home prices fell 5.8 percent in October. That's because even though more homes are selling, the bulk of those sales are of foreclosures and other distressed properties, which are sold at heavy discounts compared to non-distressed homes. Sales of homes priced under $100,000 were up a staggering 24 percent in October.

Of course, part of the reason for the dramatic uptick is that the market was subdued in October 2010 following the expiration of tax credits for homebuyers, but it's also reflective of the fact that a third of the market is now accounted for by sales of distressed homes, which are generally priced in that range.

October also saw a 13 percent increase in sales of homes priced between $100,000 and $250,000, but homes priced above $250,000 actually declined almost 10 percent. While analysts say that the backlog of distressed properties have to be sold for the market to return to normal conditions, but the sale of these cheaper homes is having an impact on higher-end homes.

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