San Diego Housing Market News and Analysis

After a pretty steady rise for the year to this point, home prices (as measured by the median price per square foot) largely flattened out in July:

It was more of the same last month, as months of inventory remained very low:

The recent increase in San Diego home prices has begun to show up in the (always lagging) Case-Shiller index. 

Between January, the month for which I last updated the C-S data, and April, the aggregate San Diego home price index has risen by 2.0 percent.  This increase was enjoyed entirely by the high- and mid-priced tiers, up 2.4 percent and 2.5 percent respectively.  The low tier actually declined by .7 percent, although that entire decline took place in February and the low tier has risen since then.


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Apologies for the tardiness of this month's rodeo.

I'll start with the chart I've been watching most closely -- months of inventory (inverted) in blue, and annualized monthly price change in red:


Months of inventory is now at the lowest level in many years, and as foreshadowed by the above graph, prices have been on the rise.

Inventory has remained super tight, and as the historical relationship depicted in the following chart would have predicted, prices have been on the rise:

My company, Pacific Capital Associates, has recently completed the third-party examination of our investment track record for 2011.  (For background on this, see my inaugural explanation of these annual performance updates).  Here it is, in chart form... you can click on the chart for more detail and loads of fun disclosures:

Due to time constraints I am going to do a graph-only version of the rodeo this month.  Except for this part, I guess. 

I will quickly note the following:

1. The median price per square foot did rise last month, as the low months-of-inventory figure suggested might happen
   
2. Months of inventory (final graph) is 30% lower than last year, and the lowest it's been in at least 6 years (as far back as my data goes for this series)
3. If the typical historical relationship between months of inventory and prices is still in place, inventory at these levels strongly suggests near term price rises
4. Housing bears please note the use of the phrase "near term" before flaming me in the comments
   

I've often discussed how the three industries that I refer to as the "housing bubble beneficiary sectors" took the brunt of the recessionary job losses.  In this post, I have updated some graphs showing the enormous degree to which this is the case.

The bubble beneficiary sectors, so named because they grew like weeds as a result of the housing boom, are: construction, finance (which includes real estate transactions), and retail (not directly related to housing like the other two, but a bubble beneficiary nonetheless as a result of vigorous home equity-financed consumer spending).  In the graphs below, I have grouped these three sectors together as the "Housing Bubble Sectors" and charted the change in their size alongside that of the non-bubble private sector industries and government.

I took these graphs all the way back to the beginning of 2007 because the bubble sectors started to deflate alongside the housing bubble even before the recession officially began in December of that year.  In order to avoid seasonality problems, I started and ended the graphs on the same month (January 2007 through January 2012).

This first graph shows the number of jobs lost in each of these three categories:


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According to the Employment Development Department latest estimates, seasonally-adjusted employment in San Diego is estimated to have dropped between December and January, and then to have rebounded somewhat February:


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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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The median price per square foot was mixed last month, with single family homes up 2.0% but condos walloped for 4.3%.  In aggregate, prices by this measure were mildly up simply because a lot more single family homes than condos sell each month.  In any case, the single family series tends to be smoother and a more reliable indicator of what's really going on, so I'd say February was a mild win (or at least a tie) for prices:

The Case-Shiller index of San Diego home prices declined across the board in December:


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The median price per square foot of sold San Diego homes dropped once again in January:

The latest Case-Shiller data, released last week, provided a not-very-clear picture of home price trends.

The overall index fell by .9 percent between October and November.  There was some serious divergence amongst price tiers, though: the high tier fell by a mild .4 percent, the middle tier was whacked for 1.7 percent, and the low tier was actually up by .4 percent.


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I have bought a house in San Diego.  I'm also going to start putting up guest posts by Ted McGinley.

This (the house buying part) shouldn't be a huge shock for people who've been reading the site of late, because I've talked a lot about how it makes sense to buy in certain situations.  That said, I will briefly outline my thought process here.

After the recent leg down in interest rates, monthly payments are the lowest compared to incomes and rents than they've been in the history of the data, and are quite dramatically below their median historical levels: