Prices have leveled off in the last couple of months…
…which is interesting in light of a decrease in months of
inventory:
This is the opposite of the usual relationship between the two, as
shown in the below graph (with months of inventory inverted), in
which lower inventory tends to correspond to higher price increases
and vice-versa. The recent divergence from that pattern is
pretty unusual:
Prices do tend to flatten out near the end of the year regardless of
supply considerations — witness Dec 2012-Jan 2013 when prices
flattened and then went negative despite a lack of supply on
par with what we’re seeing now. However, we are talking
about August data here, so it seems a bit early for that to be the
explanation.
I’d expect the two lines to converge again over time, which implies
one of two outcomes (or, I suppose a combination of both):
- Prices start to increase again
- Months of inventory increases (driving the inverted blue line
down), which in turn would result from some combination of
reduced demand and increased inventory on the market
It’s also possible that this relationship has broken down, but it’s
worked pretty well over time, and it makes sense that it should
work: fewer months of inventory means some combination of more
demand/less supply, which should correspond to upward
pressure on prices. (And the other way around).
We’ll see what happens. More graphs to ponder below.
Thanks Rich
Election may be
Thanks Rich
Election may be having some impact, (investors).
Headlines about Fed meetings may confuse some buyers but likely not most.
Employment locally remains solid.
At some point, it is hard for new buyers to get the downpayment which may keep transaction levels down.
I had a couple of renters move out and buy recently. They had lost homes in short sales three years ago, would hate to think they bought right as prices stopped rising. Most likely (all other things being equal) the real estate market will enter phase where price rises match local income rises. (1-3%/year)
Flip side: many foreigners coming to San Diego to study, family comes in town and visits and suddenly, we have new buyers from India/China elsewhere. Of course this takes time but the number of Asian students seems to be growing at California universities and once a family member has ties to the area, the decision to buy makes more sense.
The thing is, prices have
The thing is, prices have already surpassed income rises… I will post a chart today on this.