San Diego Housing Market News and Analysis

Home price data that is more timely than the Case-Shiller index has suggested that San Diego prices, on the whole, may be undergoing a bit of a spring thaw.  So I don't make too much of the fact that February's Case-Shiller index (which is calculated based on sales that took place in December, January, and February) declined by 1.3 percent in aggregate.

It is interesting, however, that the low-priced tier of the index dropped as much as it did.  After weathering the recent fall/winter lull better than the other tiers, the low-priced homes were spanked for 2.7 percent in February.  The middle tier was down 1.4 percent and the high tier by .5 percent for the month.


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Remember when housing started to falter back in 2006, and the mainstream economists' version of bearish tough talk was to predict that prices might just go up slightly less quickly in the future?

Tim of the always amusing Seattle Bubble blog recently dug up a prime example of that very thing, wherein Forbes magazine sternly informed readers:

"Get used to it--the seller's market is closing up shop."

...and:

"Now the question is more how hard is it going to land..."

Wow, that's some fairly bearish-sounding rhetoric.  I guess that's why Forbes' teamed up with Moody's to determine that prices would... pretty much just keep going up. (Fun graphs after the jump...)

Pacific Capital Associates, the investment advisory firm of which I am co-owner, has just completed the independent verification of our investment performance through 2010.  The chart below indicates returns for our average discretionary managed portfolio since mid-2004, when we first got the ability to start tracking these numbers in a verifiable manner:


The thing that I am most pleased about with the 2010 performance is not the fact that we slightly outperformed the market (as measured by the S&P500) for the year, but that we did so while taking substantially less risk (notably, the average client account was down less than half as much as the market during the big Q2 correction).  More numbers and statistics, as well as loads of fun disclosures, can be found in our official investment track record.

More background on the above chart or the firm can be found in the post imaginatively titled My Day Job.

Things I am obliged to mention:
- Returns include reinvestment of all income. 
- Past performance is not indicative of future results.
- Investment advisory services and securities offered through Girard Securities, Inc., member SIPC/FINRA.

March was good to San Diego's job market, according to the Employment Development Department's latest estimates. 

San Diego employment was estimated to have risen by .8 percent for the month, which the following chart shows is actually fairly brisk for recent times:


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The median price per square foot for San Diego homes rose for the second time in a row in March.  This price measure was up .3% for detached homes, 4.8% for attached homes, and 1.6% in aggregate.  The detached home series is the most reliable of the three, so any actual price increases were probably muted -- nonetheless, prices look to have increased for a second month in a row.

As always, the Case-Shiller index of home prices arrives with a fairly major lag... 


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Because the January and February job numbers were released so close together, I decided to just cover them both in one update.  I'm going to jump right in with the seasonally adjusted data, because unadjusted January employment is always very distorted due to temporary holiday jobs disappearing.

Total seasonally adjusted San Diego employment increased slightly in the two months since December, growing by 5,700 jobs or about .5 percent during that time.


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Last month, the median price per square foot of existing homes sold in San Diego rose notably -- by 2.2 percent for single family homes, 2.5 percent for condos, and 2.4 percent in aggregate:

Last week I discussed housing valuations -- how expensive local homes are in comparison to their historical relationship with rents and incomes.  To sum up the conclusions, San Diego homes in aggregate are right in the middle of the valuation range that has prevailed for the past thirty-odd years.  However, due to super-low mortgage rates, monthly payments on San Diego homes are substantially below their typical historical levels.

This article will deal with whether it makes sense, financially speaking, to buy a home in a market characterized by middle-of-the-road prices alongside dirt-cheap monthly payments.

I know I said my next piece would discuss the circumstances in which it makes sense to buy a house.  I need to stop promising that I'll discuss something in the "next" blog entry, because often a quicker and newsier topic intervenes.

In this case that would be the latest release of the Case-Shiller index, which takes place on the last Tuesday of each month.  (Yes, I really should have seen this coming before declaring what the next topic would be).


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It's time for some valutions.  The charts below show San Diego housing valuation ratios updated through year-end 2010.

Let's start with the price-to-income ratio.  The decline in home prices since the summer brought this ratio back down to 7.6 -- right in the middle of fair value territory per these ratios.  In fact, it's 5% below the median price-to-income ratio over this entire period (which incidentally is 8 on the nose).

Well, it's 2011, and yet I am still lacking the following:

• laser eyes
• hyper-evolved glasses-wearing chimp assistant
• self-aware email client
  
• minotaur
  
• huffable bacon
  
• tank full of precogs to help me match my outfits

Someone please tell science to get on it.  For now, we'll have to make do with the January resale data.

The median price per square foot took a bit of a beating last month: down 3.0 percent for detached homes, 7.2 percent for condos, and 4.5 percent in aggregate:

At the OC Register, Jon Lansner has put a brief Q&A with me and blogging and the housing market. Perhaps some Piggs will find it interesting:

Blogs keep real estate media honest

Just a quick update on the November Case-Shiller numbers.  After the surprisingly abrupt decline in October, the aggregate index flattened out in November:


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The San Diego job market went more or less nowhere in 2010.

This is clear from the chart below, which measures seasonally-adjusted employment over the past several years.  The year 2010 began on a positive note, first and foremost because the exceedingly rapid job losses that had characterized the prior two years finally came to a halt.  The stabilization of the job market was itself good news.  On top of that, local employment managed to grow -- albeit quite slowly -- for the first half of the year.  (The blip up and then back down in May was the result of temporary census hiring, but without that distortion employment increased through June).


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