November Case-Shiller Chart Extravaganza

Submitted by Rich Toscano on January 27, 2009 - 11:44am

I've thrown a lot of words at Nerd's Eye View readers over the past week; this week I'll try to stick mostly to pictures. Mostly.

What follows is a roundup of charts depicting the latest (that would be November) Case-Shiller home price data for San Diego.

First, the decline from the November 2005 peak:

continue reading at voiceofsandiego.org

(category: )

Submitted by peterb on January 27, 2009 - 1:55pm.

Thanks Rich. So, nominally, we're back to 2002 to 2003 pricing for all home catagories. And depending on how one calculates the purchasing power of the US$, a bit lower still.

I wonder if there's a way to find out who's buying the lower tier homes? I've heard a lot of investor activity at this level rather than owner occupied purchases.

Submitted by nostradamus on January 27, 2009 - 2:32pm.

Thanks Rich, great charts and I like the table at the end.

Submitted by sdrealtor on January 27, 2009 - 3:12pm.

Lots of 1st timers trying to buy on the low end but many times the investors get them because they are better qualified. On my low priced listings, the demand appears to be much higher (5 to 10 buyers for each property) than the supply that is capable of meeting the demand. Much of the supply is very encumbered by banks inefficient disposition processes. Effective upply is pretty low across low and middle tiers.

Looking at high tier nominal prices, in my area (NCC) we seem to be at Fall 2003 pricing right in line with Rich's table.

Submitted by Bokolis on January 27, 2009 - 5:10pm.

If a 60-word sentence can be concise, that was it. At the risk of re-hashing...

Being back at 2002-2003 pricing* means that we're approaching the point where job losses will have a more noticeable effect on the price declines. Soon enough, the bubble people will have been largely weeded out.

Up until now, the high-tier could afford to ride out the bursted bubble. That a large part of the low-tier set couldn't even afford to pay its taxes is, in no small part, indicative of why it caved first.

But, as you imply, in the next round of job cuts, more middle managers figure to get clipped, vs. non-management types in the 2008 go-around.

* - I prefer nominal pricing because inflation does not factor into cost basis.

Submitted by robson on January 27, 2009 - 7:31pm.

Hi Rich, I noticed when looking through your data that is isn't showing as large an inflation adjusted hit as my data. It looks like you are using US CPI while I am using SD CPI.

I'm curious why you use the US dataset, as SD inflation is generally higher and intuitively seems like it would be more accurate when measuring SD real estate.

Using the SD CPI we are not up 25.6% from January 1989 (155.47/211.49)/(70.96/121.2)=1.26
but rather are only up 16.5% (155.47/242.4)/(70.96/128.9)=1.165

The SD CPI data only comes semiannually so I apply the H1 data to Jan-June and H2 to July-Dec. Maybe this is why you use US #s?

Submitted by Rich Toscano on January 27, 2009 - 8:29pm.

"The SD CPI data only comes semiannually"

That's exactly it...

Rich

Submitted by ibjames on January 28, 2009 - 10:11am.

edit: post deleted for stupidity

Submitted by ocrenter on January 28, 2009 - 11:09am.

we're starting to look at the issue of deminishing returns as we anticipate future losses, where the magnitude of the loss would be less and would be more drawn out. this is especially true for folks looking at the lower tier. as for people that are looking at higher tier homes, let the lower tier be your guide.

Submitted by cr on January 28, 2009 - 11:13am.

Rich, I want to say you've done this before somewhere, but what about an analysis of employment vs. price over the last 20 years or so? I've know you've done income and population but employment seems like it would be somewhat of a leading indicator for housing prices.

Comparing this bubble to the 80's-90's cycle might provide some insight into how much further we have to fall.

Maybe it means just looking at the unemployment number and the corresponding trend in prices. If you could go far enough back I'm sure patterns would emerge.

Submitted by Rich Toscano on January 28, 2009 - 12:56pm.

cooprider wrote:
Rich, I want to say you've done this before somewhere, but what about an analysis of employment vs. price over the last 20 years or so? I've know you've done income and population but employment seems like it would be somewhat of a leading indicator for housing prices.

Comparing this bubble to the 80's-90's cycle might provide some insight into how much further we have to fall.

Maybe it means just looking at the unemployment number and the corresponding trend in prices. If you could go far enough back I'm sure patterns would emerge.

Actually I haven't... peterb has commented about this relationship frequently but i've never looked at the data myself. I would like to though.

The BLS unemployment data for San Diego only goes back to 1990... anyone know where I could get a longer data set? peterb, where did you get your data?

thanks,
rich

Submitted by peterb on January 28, 2009 - 2:34pm.

Yes, I have studied many factors relating to RE prices in CA since the 1960's. I found that while many factors play a role, such as mortgage interest rates and net migration, etc... unemployment had the strongest and most consistant correlation of any one factor. I got the idea from Carlos Royal, a RE investor in SoCal years ago. His thesis was that any unemployment rate above about 7% meant prices flattening or declining in CA. After studying the charts, I came to the same conclusion. It's simple, yet I believe it to be the most important indicator as to a recovery of price growth and/or stabilization. Unemployment needs get below 7% and stay there for a while or better yet, go lower for prices to rise in CA RE.

I gleaned this data from BLS, State of CA, Bruce Norris, Carlos Royal and general google searches to get verifying data from all kinds of other sources. Since no one had really put it together in an analytical comparison, I had to get the data and then just overlay it and chart some of it myself. I've since lost all the work I've done on it. But it's out there for anyone that wants to prove it to themselves.Which in todays world, is probably a good idea.

Submitted by equalizer on January 28, 2009 - 5:26pm.

Rich Toscano wrote:
cooprider wrote:
Rich, I want to say you've done this before somewhere, but what about an analysis of employment vs. price over the last 20 years or so? I've know you've done income and population but employment seems like it would be somewhat of a leading indicator for housing prices.

Comparing this bubble to the 80's-90's cycle might provide some insight into how much further we have to fall.

Maybe it means just looking at the unemployment number and the corresponding trend in prices. If you could go far enough back I'm sure patterns would emerge.

Actually I haven't... peterb has commented about this relationship frequently but i've never looked at the data myself. I would like to though.

The BLS unemployment data for San Diego only goes back to 1990... anyone know where I could get a longer data set? peterb, where did you get your data?

thanks,
rich

Only found data for CA and LA county from 1976.
http://www.labormarketinfo.edd.ca.gov/?p...

and

http://research.stlouisfed.org/fred2/cat...

Submitted by peterb on January 29, 2009 - 11:45am.

I never had specific data to SD county or LA. Just CA.

Submitted by patientrenter on January 29, 2009 - 8:02pm.

Rich, on your chart it looks like the pace of decline is easing up. But that appearance might be misleading. Every incremental 1% decline in your chart is 1% of the peak price, but a greater % of the current lower price.

For the purpose of seeing trends, a logarithmic scale on the y axis might be helpful.

Thanks for the excellent chart and blog.

Submitted by 4plexowner on January 29, 2009 - 8:42pm.

"looks like the pace of decline is easing up"

only low and mid price range - looks to me like top end decline is gaining steam

Submitted by Rich Toscano on January 29, 2009 - 8:51pm.

patientrenter wrote:
Rich, on your chart it looks like the pace of decline is easing up. But that appearance might be misleading. Every incremental 1% decline in your chart is 1% of the peak price, but a greater % of the current lower price.

For the purpose of seeing trends, a logarithmic scale on the y axis might be helpful.

Thanks for the excellent chart and blog.

Thanks PR. That would be interesting to see, but I have had poor luck with Excel's log charting as it's pretty finicky. I will mess around with it when I get a chance.

rich

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