Price changes in perspective (log style!)

Submitted by Rich Toscano on May 22, 2021 - 5:42pm
Here's that rather alarming price chart from the prior post. The rampup this year looks absolutely huge!



The price increase has been quite large, but the graph exaggerates this effect. This is because the Y axis is on a linear scale... when you are looking at a long-term compounding series like home prices, a linear scale will have the effect of making the later moves look bigger and the earlier moves (off of lower levels) look smaller. Here's a simple example: a 10% increase on 50 is 5, while a 10% increase on 500 is 50. On a linear scale, the 50 will look a lot bigger than the 5. But they are both just a 10% increase.

This can be addressed by using a log scale, in which the numbers on the Y axis increase exponentially. This will make a 10% increase always look the same, regardless of whether this entails an increase from 50 to 55 or from 500 to 550.

Here are San Diego detached prices (pr/sqft) on log scale. Unfortunately Excel kind of sucks at making nice looking log axes (or maybe I suck) but it gets the idea across:



This puts the recent move in better perspective. For instance -- in the first chart, the recent move looks significantly bigger than the 2011-13 move. In fact, the current move is actually smaller than 2011-13 (in percent terms, but that's what we really care about).

The recent price increase is substantial. But it's not as big as the linear graph made it look. Going forward I'll be doing both linear and log charts for the long-term price graphs. Here's a log graph for Case-Shiller:



Another way of comparing to the 2013 boom is by looking at the year-over-year price increase:



In nominal terms, we are at just about the same annual increase as the peak (in terms of annual increase) of the 2013 boom. However, in inflation-adjusted terms, we are still below the 2013 rate of change.

The concern now is that the recent price surge began at a much higher valuation level than the 2013 one. More on valuations in the next post. 

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Submitted by deadzone on May 28, 2021 - 9:02pm.

sdrealtor wrote:
deadzone wrote:
sdrealtor wrote:
Another anecdote. Ran into agent friends that sold nearby neighbor house and one around the corner. Nearby neighbor had 9 offers on house with big lot and pool. Week after that house around corner had 13 offers. I asked if buyers who lost out on house one moved onto house two. Answer was no, all completely different buyers. I asked where buyers were coming from. Answer was nearly all from Bay Area. Buyers of first house coming from San Jose. Buyers of second from Santa Clara. They are lined up behind them waiting for the next one. Purely anecdotal but this is pretty solid evidence of what's going on up here. This time next year we will likely have tract homes routinely selling in the $2m's. There's one coming soon that should be the first in next week or two

So given the small sample size and record low inventory you can't draw any conclusions from this. However, regarding the Bay area folks buying in SD, it would be interesting to know, are they actually up and moving to live here, or buying 2nd, 3rd home etc. for investment? If they are moving, why are they choosing to live in NCC san diego over San Jose or Santa Clara?

And of course the relevant data which would be hard or impossible to know, are there more Bay area people moving to San Diego (in real numbers) than before? Are there more people moving to SD from Bay Area than vice versa?

Its hardly a small sample size and you can choose to ignore it. However, a few things. Right now we have a minimum of 15 folks looking to buy homes in my neighborhood from the Bay Area probably more. They are moving here to live in primary residences with families or to retire or whatever. They are moving here for nicer weather, nicer homes for a fraction of the price up there, beaches, better schools, new homes, bigger homes, wonderful outdoor spaces to enjoy and more. Ive been here 22 years. I know tons of people here. I sit on board committees and review architectural changes to homes. I see what they are doing and spending to improve the homes they buy here. If I wasnt bound by confidentiality I could share unbeleievably frivilous changes people are spending massive amounts of money on.

In all those years Ive seen nothing like this. We did not have many coming from there in prior years. People's values and job situations have changed through this pandemic. Not everyone but enough to radically change this place. They will love it here as much as my friends that came here two years ago do. Its not going back. They are not going back. No how, no way.

But the fact remains RE is going up like gangbusters all over the Country. So keep believing it is only San Diego, enjoy living inside your bubble.

Submitted by sdrealtor on May 29, 2021 - 8:48am.

Never said that but keep believing I did while your rent climbs. Real estate is local. It’s different everywhere. I only care what is happening locally. What happens elsewhere? It’s not my problem

And you are staying with the personal attacks again

Submitted by an on May 29, 2021 - 3:06pm.

sdrealtor wrote:
Never said that but keep believing I did while your rent climbs. Real estate is local. It’s different everywhere. I only care what is happening locally. What happens elsewhere? It’s not my problem

And you are staying with the personal attacks again


Yep, I buy one house on one street, not a San Diego house or California house. I can't tell the seller of a house on a premium lot that... But houses nationally only went up 19%.

Submitted by deadzone on May 29, 2021 - 3:12pm.

sdrealtor wrote:
Never said that but keep believing I did while your rent climbs. Real estate is local. It’s different everywhere. I only care what is happening locally. What happens elsewhere? It’s not my problem

And you are staying with the personal attacks again

What personal attack? You are living in a bubble, you just admitted as much by saying you don't care about anything outside San Diego.

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