Home sales in San Diego fell about 2% in July from a year earlier hurt by fewer purchases of homes priced above $300,000, according to a new report. "The San Diego housing market cannot return to the robust sales levels of the past until some combination of events makes homes priced over $400,000 more affordable to buyers," according to Fidelity Pacific Real Estate. Demand for San Diego homes is down 27% from peak years, and July's decline outpaced a statewide drop in home sales of 1.4%. Homes priced below $300,000 made up 45% of sales in July, an increase from their 42% market share a year earlier. The inventory of homes for sale in San Diego far outpaces pending sales in every price category, but the disparity starts to widen further at prices in the $500,0000 range and becomes especially acute as home prices rise above $800,000, the report shows. For homes priced above $500,000, the available supply grows from five months to 13 months. "We believe that current market prices explain the lack of increased sellers," Fidelity Pacific Real Estate said. "The inventory does not match up with the demand profile, a trend we have seen for a few years now." Financing trends were steady in July, with 42% of buyers taking out conventional loans, 31% financing with support from the Federal Housing Administration or Veterans Affairs, and 25% paying all cash, according to the report. One possible ray of light: Foreclosures fell 14% and short sales declined 10% in July. "It is too early to tell if this change in distress sales is a trend or just a temporary blip," according to the report. Write to Liz Enochs.