Annual home price appreciation in San Diego County is nearly back to a normal pace, continuing its descent from last year’s gains of more than 20 percent.

Last month, the median price for a home sold in San Diego County was $445,000, which is 6.6 percent higher than the median price in July 2013, real-estate tracker CoreLogic DataQuick reported Wednesday.

By comparison, home prices in July 2013 were up 22.1 percent from the previous year, an increase driven largely by investors who fixed up and resold distressed properties, or rented them out and therefore constrained supply.

“When we were seeing 22 percent price appreciation, I would argue it wasn’t the case that the same exact house was selling for 22 percent more,” said Jordan Levine, director of economic research at Beacon Economics. “It was that the mix of houses were skewing toward less distressed, which pumped up those overall medians.”

Levine said he sees annual appreciation returning to about 4 to 5 percent, which is in line historically with incomes and inflation. In the housing bubble that led to the Great Recession, eased lending standards allowed home prices to grow beyond what incomes could support, Levine said.

From June to July, the median home price in the county declined by $5,000. At the same time, activity in the county’s real-estate market declined both over the month and annually. In July, there were 3,474 transactions closing in San Diego County, down from 3,736 in June, and an 18.5 percent drop from the 4,260 transactions in July 2013.

Gary Kent, a La Jolla-based agent with Keller-Williams, said he considers the current housing market to be the first balanced market since 2000, meaning it’s not a strong buyer’s or seller’s market.

“I think that’s partly because prices have reached the point that we have some people selling because they like the price they can get for the house,” he said. “The flip side is that buyers aren’t seeing what looked like bargain prices anymore. Some buyers are dropping out of the market saying, ‘Well, it’s not a bargain.’”

While the market may be returning to regular levels, inventory remains constrained, although it is improving. In July, there were 8,122 active listings in the county, up from 5,443 a year earlier, the San Diego Association of Realtors reports. July’s supply represents a little more than two months of inventory, while Levine said economists would like to see five to six months worth of inventory.

He also noted stricter lending standards were curtailing affordability, although the average rate for a 30-year fixed mortgage in July was 4.13 percent, down from 4.37 percent a year ago, Freddie Mac reports.

The slowdown in the housing market isn’t limited to San Diego but extends across Southern California, where sales fell to a three-year low, DataQuick analyst Andrew LePage said in a statement.

“Prices came a long way in a couple of years, and now a lot of would-be buyers just can’t stretch their finances enough to buy in today’s more conservative lending environment,” he said. “The more spectacular annual price gains of a year ago — over 20 percent — seem far back in the rear-view mirror now. Looking ahead, such double-digit price jumps seem unlikely unless there’s a burst of pent-up demand, perhaps triggered by more robust income growth, a loosening of mortgage credit or a significant move in interest rates.”

Los Angeles saw its median home price increase 7.6 percent over the year to $457,500, while Orange County’s median value increased 8.4 percent annually to $585,000.

A separate report released this week by the National Association of Realtors, which measures only single-family homes, says in the second quarter San Diego County was nation’s fifth most expensive housing market behind San Jose, San Francisco, Anaheim-Santa Ana, and Honolulu.


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