San Diego Housing Market News and Analysis
Mar 2019 housing data: further strengthening (but real prices negative y-o-y)
Submitted by Rich Toscano on April 29, 2019 - 5:28pm
Last month I introduced a chart of the year-over-year price change, and I belatedly realized that I should have included an inflation adjustment. That is after all the more relevant figure -- if your house's price went up 1%, but inflation rose by 2%, your house is now worth less than it was in purchasing power terms, which what actually matters.
And on that note, the real "home price" (actually 3-month average of the single family price per square foot) did indeed go ever-so-slightly negative last month. This marks the first time in negative territory since 2012:
Weep not for the market, though, as it has shown some resilience of late, with months of inventory declining:
... and prices bouncing a bit:
Here are price changes and (inverted) months of inventory overlaid... it's amazing how well this relationship has held up, including during the recent pretty violent plunge and snapback (only some of which was seasonal):
I think it's likely that the recovery is largely owed to the plunge in mortgage rates:
My brief defense of this is pretty straightforward: rates went up hard and fast into late 2018, and the market weakened notably (becoming the weakest since the boom began). Then rates dropped and housing started to bounce back. Like I said, pretty straightforward!
The problem for the housing bulls is that rates dropped so hard because people downgraded their forecast for economic growth. A weak economy is not in itself good for housing, obviously. But a strong economy would likely see a resumption of Fed tightening and higher rates. So this current housing mini-rebound seems to require a very delicate balance that is unlikely, in my opinion, to persist for too long. But we'll see.
More graphs below...
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