San Diego Housing Market News and Analysis

Hey all, sorry for the delay... I've traveling, but I wanted to at least put some charts up. Mostly just charts but here are couple quick observations:

First, the probability grows that there was something to last months' price decline, as we've had another month at that price level. (See the prior update for musings on how much of the decline was real vs. noise). Still, I put a ton more weight on the (unfortunately 2-month lagging) Case-Shiller index than on the median price/square foot.


Second, look at that move up in months of inventory. In just a few months, we've gone from epic lows to middle of the road post-bust levels. I'm very curious to see where that months of inventory figure goes from here.


More below!

Well... single family home prices look like they dropped a lot last month, but I suspect there is a lot of noise in that data point. In specific -- the price per square foot was down 5.6% from May. Though I think current valuations are unsustainable and wouldn't be surprised by declining prices, that's just too big a decline in one month to be "genuine."* Supporting this idea is the fact that condos (usually much more volatile than single family homes) only dropped 1.5% in price/sq ft terms.

*(What I mean by this is, the price per square foot is a pretty crude proxy for how much a given house has changed in value. It can get thrown off by compositional effects such as people buying more low price/sqft homes in cheaper areas, or fewer homes in expensive areas, etc. This is what I'm talking about when I allude to "noise" or the decline not being entirely "genuine.")

So let's wait for the Case-Shiller index on this one, and in the meantime say that prices likely dropped last month but not as much as that stat makes it seem.

Anyway! Interest rates are biting in other areas too. Here's pending sales -- down 21% from the prior month, and 40% from a year ago:

Prices were down a (very) wee bit last month:


Inventory started to build:


Pending sales hung in there from the prior month, but are still lower than a couple months ago. It's probably the case that many people going pending last month still had lower rates locked in.

I don't have too much to add to what I wrote last month, so I'll mostly stick to charts for now and refer people to last months' writeup for the color commentary.

Just a couple quick notes on April:

1. There was was a notable drop in pending sales:


2. This pushed months of inventory above last year's level (but still extremely low in the grand scheme of things):


3. Inflation-adjusted monthly payments are now comfortably above the bubble peak:



Given the lags in real estate transactions (rate locks, escrow periods, etc.), it might take some time for the full impact of the higher rates to be realized. The next couple months should be more informative on that front.

In the meantime - more graphs below and some thoughts/ranting on these valuations in the prior entry.

As of March, there was still nothing for sale. In fact we hit an all-time (in my data) low in months of inventory:


Prices rose accordingly:


Speaking of things going up really fast -- 30 year mortgage rates just hit 5%. This was at 2.9% 6 months ago! This is a violent move, and because it started from such a low level, has a major impact on monthly payments. I've made a couple charts to try to visualize this impact.

The price valuation index looks not too different from the last update. It's crept up a bit, but it in the same (albeit historically quite high) ballpark.


The monthly payment index, on the other hand, looks quite different thanks to the recent pop in rates. The red line below shows that the ratio of monthly payments to local incomes and rents has exceeded its post-crash highs, and is now at a level last seen in mid-2003.

Last month saw a big jump the single family median price per square foot:


Here's how it looks on the graphs -- a monthly move comparable to the height of last year's frenzy.