San Diego Housing Market News and Analysis
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I started this website in mid-2004 to chronicle San Diego’s spectacular housing bubble. The purpose of the site remains, as ever, to provide objective and evidence-based analysis of the San Diego housing market. A quick guide to the site follows:
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Submitted by Rich Toscano on April 4, 2007 - 12:12pm
I speculated in an earlier entry that measuring monthly home sales against monthly notices of default would provide a fairly good read on the health of the housing market.
This idea is borne of the observation that excessive inventory does not by itself put much downward pressure on home prices. As long as sellers can hold out for higher prices, they can be depended upon to sit tight and do just that. Prices don't fall substantially until too many motivated sellers -- those who are forced for one reason or another to sell at whatever prices they can get -- enter the market.
But how many motivated sellers is "too many?" That's where the sales volume comes in. If must-sell properties account for just a small number of the homes being sold, the must-sellers are unlikely to have much effect on aggregate prices. But if enough transactions involve highly motivated sellers, prices could suffer.
Submitted by Rich Toscano on April 1, 2007 - 11:53am
Last month, San Diego once again enjoyed a robust rate of employment growth outside of the housing boom beneficiary industries . Excluding the construction, retail, and finance/real estate sectors, the Bureau of Labor Statistics indicates that San Diego added 19,900 jobs between February 2006 and February 2007. The non-housing boom sectors grew by a healthy 2.1 percent.
However, the housing boom sectors continue to drag down overall employment growth at an increasing pace.
Submitted by Rich Toscano on March 28, 2007 - 3:47pm
The latest census data hit the streets last week, and as our friends at the Union-Tribune noted, the Census Bureau claims that during the year ending July 2006 far more people moved out of San Diego than moved in.
The census folks indicate that domestic migration, which measures movement between the states, weighed in at a loss of 42,034 former San Diegans. More foreigners moved into San Diego than left, however, raising the overall migration figure to a loss of 22,724 people. Enough babies were born on top of that to raise the overall population by a positive 4,845 San Diegans.
Submitted by Rich Toscano on March 26, 2007 - 11:34am
It's been a while since I updated the mortgage interest rate chart.
As you can see, rates have crept downward since my last update and are now near their lows of late 2006.
Submitted by Rich Toscano on March 26, 2007 - 11:33am
Retired foreclosure expert Ramsey Su has a theory that could render the meteoric rise in notices of default (NODs) to date slightly less alarming.
It all comes down to that local favorite: second-lien mortgages. More commonly known as piggyback loans, these mortgages allowed home purchasers to make smaller (if any) down payments and were thus in fairly widespread use in recent years.
The theory is that some homeowners are doubtless in default on both their primary mortgages and their piggybacks. Every such borrower might be served with two NODs -- one for each mortgage. The number of NODs filed could thus be overstating the number of homeowners in trouble as compared to what we saw in the early 1990s, when piggyback mortgages weren't as ubiquitious.
Submitted by Rich Toscano on March 20, 2007 - 3:11pm
During the month of February, San Diego saw 1,386 new notices of default (NODs), which are filed when homeowners neglect to pay their mortgages. As the first graph shows, this is more NODs than were delivered in any month during the housing downturn of the early 1990s.
Notices of trustee sale (NOTs) are also running high compared to recent years, but they lag NODs and are not yet at their early-90s heights. It is because of this lag that I focus on NODs as a more timely, if still quite approximate, indicator of how much "must-sell" inventory is out on the market.
Submitted by Rich Toscano on March 16, 2007 - 3:56pm
The housing boom beneficiary sectors are exerting a greater and greater drag on overall job growth, but employment outside of those sectors has been healthy enough to shake it off.
The construction, retail, and finance/real estate sectors, which I believe grew artificially and unsustainably bloated as a result of the region's prolonged housing boom, have collectively shrunk 2.7 percent since January 2006. Over the past year, the construction industry lost 3,800 jobs or 4.2 percent, retail lost 2,500 jobs or 1.7 percent, and finance/real estate lost 2,400 jobs or 2.9 percent. (The sharp drop in retail empoyment, and to a lesser extent in construction employment, is seasonal -- this is why I focus on the year-over-year changes).
Submitted by Rich Toscano on March 14, 2007 - 10:23pm
In the latest housing report, I neglected to break out the months of inventory data for condos and detached homes. Without further ado:
Interestingly, while the condo supply is still below the glut-tastic levels of late 2006, the single family home supply is as high as it was at any time last year.
Supply and demand figures are squirrelly at this time of year due to holiday disruptions. Next month will give us a better read.
Submitted by Rich Toscano on March 13, 2007 - 10:03pm
Continuing their tradition of issuing regulations three years after they would have done any good, the financial system powers-that-be have recently proposed stricter guidance for subprime lenders. And continuing in its own tradition, the mortgage industry has responded by throwing a hissy fit.
The rule that has lenders most up in arms (so to speak) is described thusly:
What this means is that when lenders are figuring out whether to give someone a home loan, they have to determine not just whether that person can afford to pay the initially low "teaser" rate, but also whether he or she will be able to afford the higher payments once the loan resets.
Submitted by Rich Toscano on March 13, 2007 - 9:16am
The prior guest piece by Ramsey (San Diego foreclosure guru and orderer of Chinese restaurant meats with questionable provenance) was a big hit, and Ramsey has kindly agreed to let me publish more of his thoughts...
THOUGHTS ON DEFAULT AND FORECLOSURE VOLUME
For those who have been receiving my weekly SD foreclosure updates, you know I have been somewhat puzzled by the week to week bumpiness.
I finally figured out a number of factors that are most like responsible for what I consider erratic foreclosure data.
Be forewarned that this email is almost entirely MY OPINION or hearsay with no data to substantiate my theories.
Submitted by Rich Toscano on March 9, 2007 - 9:52am
Administrative note: The new "Finance and Investing" section to your upper right will feature articles from my financial advisory firm's website. Wait a minute, is this marketing? Well, maybe just a little... but the articles cover topics that are oft discussed in the forums and that could be of interest to many an Econo-Almanac reader.
OK, back to your regularly scheduled programming...
Nothing exciting happened in the pricing department. The size-adjusted median price was pretty much flat for the month, and was down 6.4% for both single family homes and condos since February 2006.
Submitted by Rich Toscano on March 7, 2007 - 10:38am
The ongoing trainwreck that is the residential mortgage lending business continued to unfold on Friday:
Notably, it appears that the surprise default problem has spread from the subprime arena to that of so-called "Alt-A" loans. The nomenclature seems a bit fuzzy, but as near as I can tell, the term "subprime" is really reserved for borrowers with low credit scores. Alt-A loans are mortgages that are granted to borrowers with higher credit scores, but which allow non-traditional features such as low down payments, limited income documentation, or initially low "teaser" rates.
Submitted by Rich Toscano on March 6, 2007 - 9:53am
Confused by the alphabet soup of mortgage- and credit derivative-related acronyms? Seek comfort in this concise and simple explanation of the securitization process, courtsey of The Economist:
Nice work, Brits. How about another paragraph for good measure:
Submitted by Rich Toscano on February 27, 2007 - 10:12am
If you lack the required subscription, the first two paragraphs summarize the article well enough:
A number of questions spring to mind.
Submitted by Rich Toscano on February 27, 2007 - 10:08am
The Union-Tribune's latest housing editorial, Rickety Market, is so misleading that I just can't resist taking a few shots at it. Let's dive right in at the beginning:
And we're off to a good start with the classic strawman offered up by stubborn housing optimists, a group that I fondly refer to as “the permabulls.” The claim is an exaggeration, for one thing -- I'd really like to see a five-or-more year old example of an expert predicting that the San Diego market was going to "crash any day."
Timeline aside, this oft-utilized but completely ineffectual argument misses the point of the early warnings on housing. Some experts did start raising alarms a few years ago. The typical message, however, was that prices were reaching unsustainable levels and were likely to eventually adjust back to their fundamentals. The fact that prices went even higher before finally turning down did not render these analysts "wrong," unless they had attached a premature timeline to their predictions.
In fact, the people who were wrong were the "so-called experts" (to use the UT's smug phraseology) who insisted that home prices would never decline. And as I recall, the UT gave the "real estate never goes down" set a lot more airtime than they gave less optimistic analysts.read more at voiceofsandiego.org
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