August Housing Data

Submitted by Rich Toscano on September 12, 2007 - 10:52pm

August Housing Data

Prices

The size-adjusted median price dropped again for both property types:

Since peaking out in September 2005, this price indicator has dropped by 9.4% for single family homes and 12.6% for condos:

Now let's have a look at the plain-vanilla median:

Hey, the median price was flat since last year! I guess there's no housing downturn after all.

Here's a view since the peak:

In short, the plain-vanilla median price continues to be nonsensical. And the media along with most of the populace continue to slavishly follow this figure as if it is the most meaningful number on earth.

Here's a look at the bang-up job that the median-based price indicators have done since the subprime tightening began last year:

I think it's fairly safe to say that given the ongoing mortgage tightening, the continued surge in foreclosure activity, and the declining sales volume, prices are probably doing worse now than they were as of the last Case-Shiller print in June. With that as an assumption, it looks like the size-adjusted median may be falling back into line. The vanilla median continues to be worse than useless.

Supply and Demand

This is the same story as in recent months. Inventory was fairly steady -- actually down year over year:

...but volume was down a lot more:

Someone was asking about the above graph in the comments a while back. It represents the change in volume for each month using last August as a starting point -- it does not represent the year-over-year change for each month. The latter would probably be more useful, but I tried it a while back and a couple folks were confused by it. I will go back to the old method for next month; in the meantime there are some good graphs on this forum thread.

Overall, the months-of-inventory figure was 20% higher than it was in August 2006. So all things being equal, we could expect weaker prices in the months ahead than we got in the months after August 2006.

But are all things equal? Oh my, no. In between August 2006 and August 2007, we had ourselves a little credit crunch in the subprime space. And then we had another credit crunch for basically all non-conforming loans. And then there's this:

Conclusion

And yet, when I read the user comments after today's housing data report in the Union-Tribune I was struck by the confident attitude of many of the commenters. Newly confident, as far as I could tell, because I haven't seen that kind of chest-thumping in a while. Perhaps the permabulls were initially caught off guard by the downturn, after years of insisting that home prices could never stop rising, let alone decline. And maybe now they've regained their footing and are clinging to the completely misleading median data to start stridently justifying their worldview again.

Or maybe I happened across a particularly clueless group of commenters. I don't know. Either way, people are by and large still laser focused on precisely the wrong thing, using prices (that most lagging of indicators) to justify their forecasts, using a completely inaccurate price indicator to boot, and applying the "it's different here" argument to certain areas of San Diego without seeming to realize that they applied that very same argument, erroneously, to San Diego as a whole just a couple years ago.

This seems to me like a particularly bad time to experience a resurgence in bullish confidence. Phase 2 of the credit crunch -- the phase that will affect all areas of the market, and not just the cheap ones -- just got started in August. It hasn't even shown up yet in the data presented above, because that data primarily represents deals that were signed in pre-crunch July.

Just to put some numbers on this idea: per the chart above, August closed sales (deals that were signed in July and closed in August, for the most part) were down 20% from a year ago. August pending sales (those that were signed in August and will close in September) were down over 30% from a year ago. So next month is quite likely going to be uglier than this month, and the ugliness will become greater still when the REOs resulting from that almost-vertical rise in the blue Notices of Default line in the above chart start hitting the market. I don't think the UT peanut gallery will be feeling so emboldened a few months down the road.

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Submitted by lindismith on September 13, 2007 - 10:43am.

"The vanilla median continues to be worse than useless." Love that!

Great info as usual, Rich.

Submitted by JWM in SD on September 13, 2007 - 10:58am.

"Or maybe I happened across a particularly clueless group of commenters. I don't know. Either way, people are by and large still laser focused on precisely the wrong thing, using prices (that most lagging of indicators) to justify their forecasts, using a completely inaccurate price indicator to boot, and applying the "it's different here" argument to certain areas of San Diego without seeming to realize that they applied that very same argument, erroneously, to San Diego as a whole just a couple years ago."

Rich,

Have you been following the some of the new posters here lately? Because they exhibit a lot of the same cluelessness you're describing.

Submitted by johnnyre on September 13, 2007 - 11:09am.

I made about $500k in real estate up in sacramento, but will loose about $40 on my last spec. cashed out the summer of 2004. Moved back to So. Cal to RENT. I cant wait for my $200k home purchase in Carlsbad in a few years.....lol

Submitted by CarlsbadMtnBiker on September 13, 2007 - 11:39am.

Good thing you can't wait there johnny cause you would be waiting a long time. Better get back up to Sactown soon and get you a repo in the Sactown ghetto district.

Carlsbad is not going to give you any prospects at that level.

Submitted by johnnyre on September 13, 2007 - 1:06pm.

Well for your sake I hope you are right. But NOT. Can you explain to me how everyone in Carlsbad can pay for their $6-$700k mortgages? You can't. Well other then the fake loans they have. What do we have just Professional Athletes living there? Huh? Doctors? Lawyers? Whats the average income in Carlsbad? What $60k? lol keep dreaming and hoping for your equity to come back. I'll just keep waiting.......for the realistic prices of 200-250k it was only a few years ago this was true. Keep peddling mntbiker
Regards
Stupid Idiot Renter

Submitted by JWM in SD on September 13, 2007 - 1:07pm.

"Well for your sake I hope you are right. But NOT. Can you explain to me how everyone in Carlsbad can pay for their $6-$700k mortgages? You can't. Well other then the fake loans they have. What do we have just Professional Athletes living there? Huh? Doctors? Lawyers? Whats the average income in Carlsbad? What $60k? lol keep dreaming and hoping for your equity to come back. I'll just keep waiting.......for the realistic prices of 200-250k it was only a few years ago this was true. Keep peddling mntbiker"

Whoa, nice job johnny.

Submitted by johnnyre on September 13, 2007 - 1:23pm.

Speaking of the Ghetto district of Sactown....why not check this gem out, this is one of San Diego's finest opportunties in the "Bubble" Hey it is still less than $500k.
www.sdlookup.com/MLS-076066162-1530_Kena...
Hurry this will go fast!
Love
Stupid Idiot Renter

Submitted by CarlsbadMtnBiker on September 13, 2007 - 1:48pm.

To: Stupid Idiot Renter, (don't be so hard on yourself, by the way)

We actually have all of the above living here, I have 2 out of the 3 on my street, but do you really think the average mortgage is $700K...us SD natives and long term transplants (10+ yrs) have been around for awhile and there are many like me. You and Johnny Walker M. think about it and you will find your answer there.., at least for my hometown.

Peddling away always ...

Submitted by johnnyre on September 13, 2007 - 1:58pm.

Thats the point, try to sell to a NEW transplant. With 20% down and a conventional loan. It will not happen. I was in sac for 15 years, i am a SD native, i left during the last housing bust, back in 1989-1990. You and your buddies keep staring like the deer in the headlights watching your paper profits erode................(false wealth)
Love
Stupid Idiot Renter

Submitted by LostCat on September 13, 2007 - 2:04pm.

johnnyre,

Not a bad place down in Nestor. Man, I can fit my grandma and grandpa, with my four kids in one room, then me, my wife, her brother in the second room, and we can still have more room for my brother, his wife, and their 4-kids in the third room. If our cousins ever want to stay the night or for a week or two, they can stay in the TV room. All that space for only $430K. we can split that cost up, no problem.The backyard also looks idea for growing veggies.

Submitted by johnnyre on September 13, 2007 - 2:09pm.

I think it would be a great investment for a "Coyote" (illegal alien smuggler) It would make a great drop-off house, unless it already is......

Submitted by CarlsbadMtnBiker on September 13, 2007 - 2:37pm.

"Thats the point, try to sell to a NEW transplant. With 20% down and a conventional loan. It will not happen. I was in sac for 15 years, i am a SD native, i left during the last housing bust, back in 1989-1990. You and your buddies keep staring like the deer in the headlights watching your paper profits erode................(false wealth)
Love
Stupid Idiot Renter"

bummer, should have stayed and you would have been with me brotha.

anyway, who's selling >> me and my buddies are not. North county coastal is heaven and I just hate for you to think you are getting into the 92008, 09, 10 anytime soon for $200K. Rent the place in Nestor.

Bought and held baby .... stay the course .. love the surf. Life is great ! Man, Sac gets hot in the summer.. but you gotta luv Tahoe.

Submitted by johnnyre on September 13, 2007 - 2:58pm.

Sure i could have stayed but had to work. Sac. sux i could not stand it but like i said i made bank. I'm liquid about 300k i would be retarded to buy now. I bought and held and SOLD. I guess i was lucky to catch the market at the right time. 2-3 years Carlsbad 250k for a nice home. No knock on Cbad, you could use Encinitas for all i care............www.patrick.net

Submitted by Duck on September 13, 2007 - 4:04pm.

Let me know when a nice home in Carlsbad goes for $250k. I'll take four.

Submitted by johnnyre on September 13, 2007 - 4:06pm.

OK, the Summer of 2009-2010 there will plenty of inventory

Submitted by johnnyre on September 13, 2007 - 4:09pm.

why wait? Why not purchase 1 house at $1 million. today, (250 / 4)
Put down 200k and ride a $8k a month payment..........

Submitted by Bugs on September 13, 2007 - 4:35pm.

$200,000 might be a little too optimistic for Carlsbad. Then again, maybe not. There were 20 sales of detached homes for less than $250,000 in 2000. I didn't look any of them up but I assume they were mostly down in the barrio area over by the Seniors Center.

If interest rates make 10% by 2010 the combination of events might make for a $200,000 purchase in Carlsbad. I wouldn't say it could never happen but I wouldn't be betting the farm on that one.

Carlsbad is definitely no sanctuary - there is already foreclosure activity in town and there is already significant and noticable price erosion in most of the neighborhoods.

I'm not knocking Carlsbad - I've lived here since 1990. I'd never call it heaven, though.

Submitted by CarlsbadMtnBiker on September 13, 2007 - 4:39pm.

I take that bet all day long Bugs ...although the laws of risk vs. reward would prohibit me from getting much return. Nobody in their right mind would take the other side of that one.

Here is as good link for ya just in case you missed the recent post from the duckman.

http://www.harrisinteractive.com/harris_...

Submitted by Bugs on September 13, 2007 - 7:18pm.

Mate, you don't get it. Simple demand, which is what the poll refers to, is meaningless. Effective demand is where it's at. That's where people put their money where their mouths are. "Their money", as in not other people's money, which is what has resulted in these price distortions.

Right now we have population outmigration from the region, and the population that's leaving aren't the illegals and homeless. It's the people who would normally have the means to get ahead if they lived in any other economy.

You're running a variation of the "it won't happen here because everyone wants to live here" argument which is a great way to show your pride, but it doesn't square with the facts on the ground. Not only are people moving out, but prices are dropping, and that includes your neighborhood, too. We have foreclosures in Carlsbad, we have ARM abuse in Carlsbad and we have a glut of homes in Carlsbad that includes some REOs.

It's all connected, and Carlsbad may not suffer as much as Vista but by the time its all over the difference in correction won't even be 10%.

Bro.

Submitted by babbleon on September 14, 2007 - 9:17am.

Great blog.

I have been sitting on the sidelines for the dot-com bubble (was a student) and the housing bubble. I've just been working my 9-to-5 and saving as much as possible.

My question is:

Where is the next bubble going to be?

I'm not an expert, but I know enough to know there's going to be one.

Submitted by SD Realtor on September 15, 2007 - 5:48pm.

Here is the lookup I did on the MLS for 92009.

Total escrows closed from 1/1/00-1/1/01 = 759
Average price = 472,197
Min price = 210,000
Max price - 2.2M

Average sized home was 2584 square feet.

So it looks like you are both right. (at least for 92009)

So, if prices do fall to the 2000 price levels, then you will live in a 1200 sq ft 2 bedroom home for the low to mid 200's. If you want a larger home then you will pay more.

I am just posting what the old MLS says.

SD Realtor

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