San Diego Housing Market News and Analysis

Home prices appear to have dropped further last month, with the median price per square foot for single family homes down by 4.2% from a month prior. (Insert usual disclaimer about this being a noisy figure and Case-Shiller being a lot more accurate).

Here's a visual:


In inflation-adjusted terms, home prices have just about round-tripped to where they were a year ago:


Real monthly payments are still up 30%+ though! And this doesn't account for the recent surge to the 6% range for rates.


Switching to supply/demand... inventory flattened out (actually even declined slightly), after its recent upward surge:

I had a chance to update the valuation info. There shouldn't be any big surprises here based on what I've been posting in the regular monthly threads. The good news is that I can reinstate the "shambling towards affordability" title for this series.

As a reminder, these valuation ratios attempt to measure the fundamental expensiveness of San Diego housing by comparing home prices or monthly payments to a combination of SD rents and per capita incomes.

The small apparent purchase price decline, combined with the upward march of rents and incomes, has resulted in a slight retreat in purchase valuations. Emphasis on slight; this ratio is still not terribly far off bubble-peak levels.


This next chart shows the same thing except that instead of measuring purchase prices, it measures monthly payments. Until recently, this figure was nice and low as a result of very low mortgage rates. Not so much any more. Here there is some more distance from the bubble peak, but we're still well above anything seen outside the housing bubble and the high-rate 1980s.

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.