San Diego Housing Market News and Analysis

Prices

It was another down month as measured by the size-adjusted median price:

November registered another month of positive job growth, but troubles in the construction and real estate sectors are starting to take their toll.

read more at voiceofsandiego.org

While we were out, the San Diego Daily Transcript ran a story (subscription required) pointing out that over 3,000 condo units are currently under construction downtown. Additionally, another 7,000 downtown units are either approved or proposed.

How many of those latter 7,000 will actually be built is open to question. But friends in the industry tell me that once a building is under construction, the odds are high that it will be finished, which implies that most of those 3,000 units in progress actually will be built to completion.

read more at voiceofsandiego.org

It's time to rise up against your oppressors and make your voice heard!

Ok, on second thought, that sounds pretty hard.

Instead, why don't you make your voice heard by casting a vote in the first annual Real Estate Blogging Awards, for which the Econo-Almanac has been nominated in the "Brain Power" category. (Thanks to user bub for posting this in the forums.)

Well, he finally came out and said it outright:

NAR Chief Economist David Lereah said the data held "mixed news" but it broadly signaled a stronger housing sector with inventories and sales stabilizing.

"The housing contraction has bottomed," he said.

So there you have it -- with an apparent lack of any doubt or question, Lereah called the bottom on December 28, 2006. Remember this one for the history books, my friends.

I have installed a filter to automatically encode URLs into clickable links, so commenters will no longer have to do so manually. I am tremendously relieved to report that the filter also truncates those overly long, layout-destroying URLs we (at least those of us who use Firefox) have all come to know so well. So something like this:

...will now look like this:

One argument I hear a lot is that foreign demand for local real estate has grown substantially in recent years, and that such foreign demand will be supportive of prices in the future.

Unfortunately, this argument puts the cart squarely in front of the horse. Investors from other countries are well known to be the very last participants to arrive at the scene of a financial bubble. They are the last to hear about all the riches to be made, the last to buy in, and the last to realize that the party is over.

read more at voiceofsandiego.org

Let's check back in with the denizens of EZ-Ville for a look at how things are going after the early-December shakeout.

For starters, I wish to address one poster's comment to assert that I feel completely justified in having called the decline in the ABX "disorderly." The falling-off-a-cliff section of the graph represents a 25% increase in the cost of insuring subprime mortgage backed securities (from 316 basis points to 395 basis points, per this Dow Jones piece among others) in precisely one week. That doesn't seem very orderly to me.

That said, subprime CDS index price managed to stabilize after the decline and have since begun to ratchet back upwards, as the red line indicates:

The causes of the housing market's well-documented ills, whatever those causes may be, do not appear to include interest rates.

The average rate on a 30-year fixed mortgage has declined steadily since July and now rests near levels not seen since 2005. The average 1-year adjustable-rate mortgage (ARM) rate has likewise fallen, but still rests above its early 2006 levels.

read more at voiceofsandiego.org

I don't have a lot to add to this statement by Chuck Smiar, president of the North County Association of Realtors, as quoted in the North County Times:

"I think it's sort of a false drop, if there is such a thing in real estate," Smiar said, in referring to the single-family home sector. "If anyone is going to buy, they better buy now, because things are going to turn around. We're going to start seeing a slow increase in prices."

I just wanted to get it on record for future reference.

This article originally appeared at voiceofsandiego.org.

Last week's NY Times piece on home price metrics (login required) prompted some forum discussion on the accuracy of the Case-Shiller home price indices, which I use for all my long-term price charts. It ends up that I looked into their methodology a while back and have been meaning to write about it -- so now seems like as good a time as any!

To start with, let me quote from an old voiceofsandiego.org piece as a means of reviewing the problems with the median price:

This website's speed and reliability have not been great in recent months, but they really went to hell over the past week.

As a result, I've spent the past couple of days learning far more than I ever wanted to know about optimizing the PHP/Apache/MySQL stack and tweaking the server configuration accordingly.

I also substantially increased the capacity of the server. This of course substantially increased cost. Whereas I used to easily serve this site off a standard $5/month shared hosting setup, I am now up to $75/month and counting. The housing bubble has certainly gone mainstream.

Anyway, I wanted to bring everyone into the loop on why the server has been acting squirrely of late, why my tweaking caused it to be extra-squirrely yesterday, and why I hope that performance should substantially improve going forward.

Now, if all goes well, I may actually start generating some content. Thanks for bearing with me...

Last week, subprime lenders Sebring Capital Partners and the ironically named Ownit Mortgage Solutions abruptly bit the dust due to waning demand for subprime asset backed securities.

Just how much has demand declined? Maybe a lot. The ABX indices measure the price of credit swaps for various grades of recently-issued mortgage-backed securities. Last week, an orderly decline in the subprime ABX index turned disorderly, as indicated by the red line on this chart from the people who track the index:

There are no big surprises in the latest batch of housing stats, so I don't have a whole lot to say that the charts don't say themselves. Let's have a look.

Prices

My preferred measure of home price changes, the median price per square foot, was down on the month for both property types, with detached homes notably smacked down after the prior month's attempt at improvement:

OK, here is the whole series: home prices, monthly payments, rents, and rates, for as far back as the complete set of data goes.

The first chart displays the percent change in inflation-adjusted San Diego prices, payments, and rents since 1977. The second chart displays the same information in nominal terms. Mortgage rates are indicated on the right axis in both charts.

At this point I am clinging to a shred of hope at least a few minutes will elapse before someone asks for a followup chart.

I kid, I kid. OK, onto the good stuff: