Case-Shiller Index Down in January

Submitted by Rich Toscano on March 27, 2012 - 6:13pm
The Case-Shiller index of San Diego home prices declined once again in January, falling by 1.6 percent for the high-priced tier, 1.0 percent for the mid-priced tier, and .2 percent for the low-priced tier.  (The tiers represent, respectively, the top, middle, and bottom one-third of homes sold by price).  The overall San Diego index fell by 1.1 percent.

As the following graph shows that the middle and high tiers are now below the post-bubble low points they hit in early 2009.  (I guess that means I should remove the word "2009 trough" from these graphs).

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Submitted by Jazzman on March 28, 2012 - 6:44am.

Wow! Those are big dips. Rich do you remember monthly percentage declines when prices were falling off a cliff? It was about the same (1%) if memory serves. I'm not saying that is happening again, but the last few months have exceeded my expectations.

Submitted by ocrenter on March 28, 2012 - 7:47am.

Judging by how hot the market has been over the last month, this new bottom is likely to be rather short lived. Everything around my neck of the woods are selling. Only question is are we just looking at another bump or things are really starting to move upward.

Submitted by Rich Toscano on March 28, 2012 - 8:25am.

Jazzman wrote:
Wow! Those are big dips. Rich do you remember monthly percentage declines when prices were falling off a cliff? It was about the same (1%) if memory serves. I'm not saying that is happening again, but the last few months have exceeded my expectations.

If you look at the graph since the peak:

...recent drops are quite a bit less severe than the bloodbath phase. During the very fastest 6 months of the crash, 11/07-3/08, Case-Shiller was dropping by an average of 3% per month. Taking the average of that whole crash leg (a 2 yr period starting in April 07, eyeballing it), the avg monthly decline was 2%. So last month was pretty fast by normal standards but still much milder than during the crash phase.

Submitted by Jazzman on March 28, 2012 - 8:34am.

OC, I believe that is six consequtive months of fairly healthy declines (not forgetting it's a three month average). There'll be some kind if spring rally, and the question really is how strong it will be, and will it stave off the downward trend of late? We're talking in general terms here, so everyone's experience is different. Buyer behavior to the news is the one to watch.

Submitted by sdrealtor on March 28, 2012 - 9:17am.

Not to be the broken record but this is expectly what I said was happening in early December. High end homes (i.e. above 600K) dropped 50 to 75K in 2 months. Mostly it was short sales not selling because they were high priced short sales and it was the down season. These established comps that buyers are now looking at so the price levels shouldnt trend up much if at all in the short term. From my seat it wasnt so much of a trend as it was a gap down or event.

I'll take whatever bet you want to offer that prices stabilize starting with March/April closings. We could see them start rising from that point also but I dont see a trend of more falling prices anymore. It may very well have been the proverbial bottom everyone is trying to identify.

Submitted by Jazzman on March 28, 2012 - 12:33pm.

Hehe! I'm not a gambling man but I see a small momentum building. Couple that with low inventory and some buyers may be postponing plans. The stabilizing you refer to will be the usual spring bounce, and my guess would need to be healthy to offset the declines we've seen recently. Depending on where you are, I don't see an end to this for a while yet.

Submitted by sdrealtor on March 28, 2012 - 1:55pm.

Hehe back at ya cause I'm not a gambling man either. It would be like taking candy from a baby. Ask CAR. She will be buying me dinner at Donovan's in December based upon a wager we made 5 years. My worst case scenario wasnt even close to her sure thing dire prediction. My worst case scenario turned out to be about 15 to 20% below where we are now and time has proven it truly was a worst case scenario. I dont think we would have gotten there even without government support which I beleived would and did come. I'm not the guy you want to bet.

Submitted by Jazzman on March 28, 2012 - 2:04pm.

OK, I'll wager a Mai Tai in Maui, but the air fare's on you. I'm already there :)

Submitted by sdduuuude on March 28, 2012 - 2:36pm.

I'm not seeing that you two (jazz/sdr) are really in disagreement. Gonna stabilize in April, see a bounce in the Spring. If prices drop in the Fall, that isn't necessarily a continuing of the downward trend, just seasonal.

I agree the low-inventory conditions are signaling a bounce - but is it any more than a normal Spring bounce ? I don't think so. I think buyers on the high end are running into jumbo-loan limit issues, which will put limit price increases to mild increases, even in the face of low inventory.

I agree that the end of 2011 seemed to be an event, probably related to the jumbo-loan limit change.

The bearish signal I see is this: with prices falling in the face of low (below 6 mo) and falling months-of-inventory, what will happen if inventory picks up ?

The supply side is really saying prices are too low, but the buy side says they are about right.

This looks to me like a ball bouncing down a hill, though the hill is getting less and less steep. The ball just hit the pavement and is going to come up, but the next time it hits the pavement, I think it will be a bit lower.

I'm window-shopping in Carmel Valley now and don't feel like I'm going to be priced out in the next two years. Nor do I feel I will get a smokin' deal any better than I see today.

I could see the pattern of 2009, 2010, and 2011 repeating itself for another 6 to 12 years, leaving the housing market right where it is when the World Cup heads to Quatar in 2022.

Submitted by sdrealtor on March 28, 2012 - 3:33pm.

I agree with your short term assessment. Wont be priced out but not materially better prices either in the short term. If there was more inventory priced at market and it wasnt impaired (power lines, busy streets behind etc.) it would have no problem selling.

The major influence on my position is knowing what its like to earn a w-2 paycheck and pay a mortgage. Most realtors never really had a well paying professional job. I did. I know what a comfortable mortgage payment is relative to one's paycheck. When I look at prices in the areas I have been spending all my time, homes are very comfortably affordable to buyers. Lets look at very typical Carmel Valley first time homebuyers. P&I on a $550K loan is about $2600 these days. Adding another $900 for taxes, HOA and insurance brings you to $3500/month not even factoring tax benefits for a $700 to 800K home. Thats about the going rent for those homes also so the tax benefit makes it better to buy. Typical buyer is one highly paid profession (doctor, lawyer) or two well paid enginerd types. Household incomes of approx $200K or more(about $17k/month) are very common among these buyers. Many of whom have been sweating it out in small apartments around UTC/CV paying less than $2000 in rent for the last 5 years saving up for a house. Down payments dont seem to be an issue. The $3500 monthly nut is about 20% of gross income.

You can find similar scenarios in Mira Mesa with 2 income households making $100K or more. Heck we know fireman make that by themsleves. $400K buys you a decent house in MM with carrying costs just over $2K. Thats about rent on that house also. Thats also about 25% of gross income for those buyers.

Homes are now affordable to alot of buyers in the areas they want to live in. Now it all comes down to psychology determining where the market goes from here. Interest rates start going up and alot of buyers will rush to buy because any drop in price wont compensate for higher rates so that keeps prices flat or up. Economy starts getting even better and there are more buyers.

I just see more scenarios going forward to take prices up than down. I wouldnt call it a rush for the door but no way the housing market stays flat another 6 to 12 years. Its more likely we'd have an other bubble and be coming back down by then.

Submitted by sdduuuude on March 28, 2012 - 3:49pm.

There you have it. It's either gonna be up, down or flat. I'm sure of it now.

Submitted by ocrenter on March 29, 2012 - 2:18pm.

sdduuuude wrote:
There you have it. It's either gonna be up, down or flat. I'm sure of it now.

I'm going to go out on a limb a say it will be up or flat. =)

Although with the way things are moving these days, it really got the feel of the bubble days all over again. over million dollar listings going pending within a week is quite common place, simply not something seen for several years.

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