Monthly Housing Market Report: June 2005

Submitted by Rich Toscano on June 30, 2005 - 9:58pm
While I remain as concerned as ever about the eventual fate of San Diego real estate, this past month's housing market data reinforces the messages found in the economic and credit market data: San Diego housing does not appear to be under any imminent threat of decline.

For starters, while prices aren't appreciating like they used to, they do continue to trend ever-so-gently upwards:

But prices are a lagging indicator, so let's check under the hood. Sales volume is down compared to the same month last year, as it has been for quite some time:

However, the trend is that it is less down than it was in prior months. So while sales aren't as robust as they were last year, they are not really deteriorating yet.

The Breadth and Decliners Indices, which I have now split into separate readings for condos and SFRs, are still telling us that very little price instability is occuring even in the weaker zip codes:

So far so good. Even inventory isn't too bad:

While inventory is at its highest for quite some time, this won't really be a negative factor until people are selling because they have to. And right now, as was clear from our economic report last week, most people are selling because they want to. Anyone who isn't getting the price he or she wants can yank the property off the market at any time.

I am less sanguine about Downtown inventory, which has now quadrupled since this time last year:

Somewhere down the line, the Downtown inventory build could start to exert negative pressure on prices (unlike San Diego inventory in general, many Downtown condos are being sold by developers who actually need to sell units, and might be incented to lower prices to do so). How much of an impact such a lowering would have on the broader market remains to be seen, but meanwhile we will keep a close eye on Downtown inventory.

Overall, however the supply and demand scenario seems to be fairly stable. The latest batch of housing market data indicates that San Diego remains in the clear.

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