San Diego Housing Bubble News and Analysis

The aggregate index was down for another month, dropping by 1.5%. But what's this? The monthly change for the high-tier index doesn't have a minus sign in front of it? I'm confused...

But it's true. The high tier of the Case-Shiller index managed to stage a spring rally. A late one, and a very small one -- but hey, it's something. The high tier rose .3% from June. The middle and low tiers were down, however, 1.6% and 2.4% respectively.

My Case-Shiller proxy, which utilizes the median price per square foot, predicted a 1.6% decline in the overall index for the month vs. the actual 1.5%. So this proxy still seems to be working pretty well, at least for the time being. The aggregate index is down 29.5% from the November 2005 peak.

Some graphs follow: the first two nominal, the second two adjusted for CPI inflation.

I think it's funny that the folks at the North County Times have created a "Bottom calling" tag in their new business blog.

The titular bottom-calling in their inaugural post for the new category was made by longtime DataQuick pundit John Karevoll. In addition to opining that sales volume had already hit bottom, Karevoll said:

“I'm pretty sure we're at or very close to the bottom here in true values. The only thing that could throw things out of whack is if there is a nasty recession or a year or two of nasty inflation that would push interest rates up and prices would have to come down. But I don't see either one of those happening, so I think we're very close to the bottom.”

Karevoll was pretty circumspect -- in addition to the disclaimers above, he noted that the market is likely to "drag along the bottom for a while.”

Nonetheless, this is a fairly bold call.

continue reading at voiceofsandiego.org

San Diego County shed jobs again in July, according to the EDD's latest estimates. As in the prior month, the problem wasn't that the housing-related sectors accelerated their decline, but rather that the non-housing sectors were unable to make up for housing's weakness as they had in the past.

continue reading at voiceofsandiego.org

I've already wasted a bunch of time tooling around Redfin's new (to me, anyway) neighborhood-specific data pages. They have inventory and price per square foot, among other things, but the cool thing is that it's by neighborhood and not by zip code. They even show you a little map of what they consider the neighborhood.

Don't read too much into these charts, though, because the price per square foot metric is only marginally accurate with these smaller data sets. Still, the charts can be useful in showing the prevailing trend. Perhaps the Redfin charts can supplement pigg esmith's excellent (more accurate, but less neighborhood-y) same-home price data.

While the number of homes entering the final stage of foreclosure hit another all-time record in July, the number of homes entering foreclosure actually declined.

This decrease may not be very meaningful, however.

continue reading at voiceofsandiego.org

The size-adjusted median dropped once again in July -- at least overall.

In my opinion, the only thing classier than a bright yellow Hummer H2 is a bright yellow Hummer H2 with a real estate-themed vanity plate:

Forgive the questionable photo quality, as I took this picture through my driver's side window, on my CrackBerry Cam, while driving on the I-5 at rush hour.

Trust me, though: the plate says "DABROKR."

I am reminded of another vehicle I've seen twice in the past around my neck of the woods. It, too, was a bright yellow Hummer H2, and its license plate was "RENVSTR" ("real estate investor," presumably). I never got a picture, sadly, and come to think of it I haven't seen that vehicle for a couple of years now. Maybe it's been repossessed.

So if your real estate investing career hasn't been as successful as these folks', perhaps the problem is that your vehicle is insufficiently enormous or brightly hued. Or maybe your license plate does not do an adequate job of publicizing your participation in what you apparently did not realize was a gigantic speculative bubble.

City Attorney Mike Aguirre has filed a lawsuit against Bank of America and its new subsidiary Countrywide. The central complaint of the suit appears to be that Countrywide engaged in fraudulent practices by putting people into high-risk mortgages and that Countrywide, as Aguirre put it in a press statement, "originated loans with little or no regard for the borrowers’ financial ability to afford the loans or to sustain homeownership." The suit is intended to prevent Countrywide (now Bank of America) from initiating foreclosure on any homeowner who has a high-risk mortgage and who actually occupies the home.

The lawsuit may be well-intentioned, but it's unlikely to help San Diego and there's a fairly good chance that it will make things worse.

It's also yet another bailout attempt.

continue reading at voiceofsandiego.org

Nobody should be surprised to learn that the HPI was down again in May. Here's a view from the peak:

Earlier this year I wrote about Joseph Galascione, a San Diego real estate broker who does some serious digging into the local mortgage pool to try to ascertain the prevalence of future foreclosures. Below are some conclusions from Galascione's recently released study of mortgages due to reset in the third quarter of this year. The study, incidentally, is freely available at the website of Galascione's firm, ERA® Metro Realty.

To review the premise, a resetting loan is considered to be at "high risk for foreclosure" if the borrower made a down payment of less than 20 percent and the monthly payment is expected to increase by at least $500 upon reset.

continue reading at voiceofsandiego.org

Better late than never? Maybe? Hey, I can't help it if the GSEs go tango-uniform before I get a chance to do the monthly foreclosure charts. Here they are:

I just put a brief writeup about the June employment numbers up at voiceofsandiego.org. The following graph was featured:

I will begin this blog entry with an allegorical play in three acts -- starring you as the protagonist!

Act I

Your deadbeat brother-in-law shows up at your door and explains that his business, Joe's Exclusively Deep-Fried Seafood and Mortgage Hovel, hasn't been doing so well. You aren't surprised, given that his company is extremely indebted and has been mired in accounting scandals for years.

As a result of his troubles, he has gotten himself into so much debt that he has no chance of paying it off. He asks you and your spouse for a loan.

Act II

Your spouse, sympathetic of course, suggests that you lend Deadbeat Brother-In-Law (DBIL, for the remainder of the play) some money. You suggest to your spouse (Spouse) that since DBIL is unable to pay his current debts, loading him up with yet more debt isn't really a good solution. You also note the unlikelihood of being paid back in such a scenario.

Act III

Without asking you, Spouse dips into the joint checking account and lends DBIL the money anyway. Spouse also makes a big investment in the stock of DBIL's insolvent Mortgage and Deep-Fried Seafood business. But Spouse tells you not to worry: it's in everyone's best interest, and anyway, DBIL wasn't actually having any financial problems in the first place! Also, the stock pays out its dividend in fried clams!

Fin

read more at voiceofsandiego.org

Fannie Mae and Freddie Mac, collectively known as the government-sponsored enterprises or GSEs, are huge government-backed yet privately owned companies whose main purpose is to buy mortgages. They are also, according to a recent Fed governor among others, insolvent -- that's "broke" to you and me.

This story is all over the news so I'm not going to rehash it -- here's a NY Times piece for those who want more. I just wanted to note that this is a huge crossroads for the housing and mortgage finance bailout efforts about which I've written several times on these pages.

A failure of the GSEs would be huge. They either own or guarantee over $5 trillion worth of mortgages, accounting for nearly half the mortgage debt in the country. And in the days of dwindling private mortgage issuance, the GSEs provide a huge chunk of the lending that takes place. Were they to stop buying mortgages, as the Times article puts it, it "could bring much of the American housing economy to a standstill." Many think that the government would step in and take over the companies before that was allowed to happen.

read more at voiceofsandiego.org

Let's do a quick review of the resale data for June.

As in May, the size-adjusted median fared much better for single family homes than for condos: