San Diego Housing Market News and Analysis

San Diego employment was up in November, per the Employment Development Department's latest estimates:


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Below you will find updated charts showing how San Diego home prices (and, further on down, monthly payments) stack up against local incomes and rents.

Longtime readers know that I consider the price ratios to be absolutely fundamental to determining whether housing is fairly valued.  It makes intuitive sense that home prices would tend to track incomes and rents: incomes, because they determine how much money people have available to pay for housing; and rents, because rent prices reflect how much San Diegans are willing and able to pay to put roofs over their heads when there is no speculative or investment element involved.  The historical record bears out this intuitive logic, as San Diego's home price-to-income and price-to-rent ratios have tended to be strongly mean-reverting over time.

Of course, there are other factors to take into account, such as employment trends, rates, and divergences between the various sub-markets that make up the aggregate numbers.  But these ratios represent a good starting point in determining where the market stands from a valuation standpoint.

The first chart shows the ratio of the typical San Diego single family home to San Diego per capita income.  (Median household income would be better but there's less data available -- however, having charted the data that is available, there is actually very little difference in the ratios whether they are based on household or per capita incomes).  The price to income ratio is in blue, with historical mortgage rates charted in gray to provide context, and the historical median price to income ratio (what we might somewhat simplistically designate as "fair value") in red.

The median price per square foot of San Diego resale homes took a bit of a hit last month, down 2.5% for single family homes, .3% for condos, and 1.9% in aggregate.  (The single family home price series is tends to give a more dependable read on the state of pricing power).  On a year-over-year basis, the median price per square foot was down 8.9% for single family homes, 4.4% for condos, and 7.5% in aggregate.

The Case-Shiller index of San Diego home prices declined in September.  For the month, the low-priced tier dropped 1.6 percent, the middle tier 1.1 percent, and the high tier .1 percent.  The aggregate index fell by .8 percent.


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We have entered the time of year when employment growth traditionally picks up the pace.  Per the latest estimates from the Employment Development Department, that's exactly what happened last month:


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I didn't spot anything that seemed very meaningful in the October data.  In specific, both prices and month of inventory were virtually unchanged.  Therefore I offer the monthly roundup of graphs without further comment: