A study by ZipRealty has found that housing inventory has increased in 18 major markets across the US. This data is based on condos and single family homes.



Look for the markets with the largest increase in inventory and you will find the markets that will have the least support for current prices. The place that experienced the largest increase in inventory in August was Orlando. In Orlando housing inventory for sale increased by 8%. Also in Florida Miami also experienced a large increase in homes fore sale. In Miami the increase was 5.6%. Florida as a whole has experienced a large jump in homes for sale.

On the west coast the city that has the highest increase in in homes for sale is Seattle which has experienced an increase of 6.1%. Next is San Francisco with a housing inventory increase of 5.6%.

Another indicator to watch is the percentage of homes whose prices have been reduced in a fixed time period. In the last ten days 44% of the homes for sale in Boston have had their prices reduced. Sacramento is close behind Boston with 43.6% of its homes for sale having their prices reduced in the last ten days.

Of the 18 metropolitan areas included in the study (all of which had homes reduce their prices in the last ten days on the market), Dallas was at the low end with 27.4% of homes on the market reducing their prices. In San Diego 28.8% of homes on the market have dropped their prices in the last ten days.

In southern California San Diego is the leading county to watch for trends in home prices. In the month of August prices were down 2.2% from August of 2005. This was the third straight month of year over month price declines. According to DataQuick, August of 2006 was the slowest month for home sales in San Diego since August of 1997. In August of 2005 the median price of homes in San Diego was $493,000. In August of 2006 the median price of homes in San Diego dropped to $482000.

The home prices in San Diego county peaked in November of 2005 at $518000. With more homes coming onto the market the downward trend in prices is expected to continue. According to DataQuick the prices will not head into a freefall. It appears for the near future that prices will slowly continue to deflate.

This projection is based on the strong economy of San Diego County. In this strong economy housing prices will slowly deflate and then flatten. As long as the economy remains strong (there are no signs of weakening now) home prices will not go into a freefall.

The condo market in San Diego may not fare as well as the single family home market. In the condo market there has been a large amount of speculation. The most dramatic price drop is in downtown condo housing. In August of 2005 the median price of a condo in downtown San Diego was $654000. In August of 2006 the median price of a condo had dropped to $495000. This trend may be emerging in other areas of the country that have had over building or over conversion in the condo market. Areas in Florida and Las Vegas have experienced an oversupply of condos.

One trend that is emerging in San Diego is the unwillingness of many sellers to accept the lower prices offered for their homes. Expectations are still not in line with the market. While homeowners are holding out for higher prices, the market continues to decline and home values fall even further.

The California market tends to move in long cycles. The cycle of slowly dropping or flat home prices is likely to last for at least two years. Mortgage rates are still way below their historical averages and the job market is strong. These two factors are likely to keep the brakes on falling home prices.