San Diego Housing Market News and Analysis
September-October 2013 Housing Data Rodeo
Submitted by Rich Toscano on November 23, 2013 - 3:24pm
Folks, sorry this has taken me so long. When urbanrealtor starts offering to buy me booze just to get the monthly charts up, I know I've been a huge slacker even by my own lofty standards of indolence.
So without further delay, let's do this. Starting with the median price/square foot, we see that the rapid price apprecation we've seen all year finally took a breather over the past couple months, with prices by this measure flattening in September and then falling in October.
Same thing from the peak:
Here's a look at the Case-Shiller index in blue, and then an estimate of same over the last couple months in red. Due to the 3-month smoothing employed in this calculation, this price indicator was still rising as of October.
Sales volume has actually been pretty good... not quite as high as last year (which lead into this year's price ramp) but not too bad considering the big jump in rates. That said, you can see that rates did seem to have an effect, because volumes were at multi-year highs right up until rates really started to bite:
Inventory flattened out, but given that this time of year typically seen a decline, I would interpret that as indicating some upward pressure on inventory.
And if you take away contingent inventory and just look at active, it was still rising over the past couple months, though not as fast as previously. However, this is quite a bit different from recent autumns:
So you can probably make a pretty good case that inventory is coming out of the woodwork now and has probably bottomed. It must be noted, though, that this increase is coming off a very low base, so inventory continues to be quite low despite the recent increases.
Months of inventory is accordingly still quite low, right where we were at this time last year:
This longer-term chart shows that months of inventory is also very low historically, despite recent increases:
Here's the chart I like showing the correlation between months of inventory and price changes.
As months of inventory (the blue line, which is inverted) has come off its lows, the rate of price increases has dropped quite quickly (though is still positive since I am using the Case-Shiller index or my proxy thereof for recent months). But it should be noted that months of inventory is still comfortably above the level that has typically distinguished between upward and downward price environments. (This general vicinity is shown by the thick black line at 6 months inventory).
So while the market appears to be taking a higher-rate-induced breather from the frenzied conditions of earlier this year, the chart directly above shows that demand is still strong and supply pretty weak. The direction of the trend may have changed, but the absolute levels seem to be what matter when it comes to months of inventory -- and the current level suggests that price pressures remain to the upside for now.
The idea behind the months of inventory chart is that it gives an idea of current supply and demand, and thus price pressure. It really doesn't tell you a thing about the long-term prospects for housing or whether prices are sustainable. In my view, the better way to do that is to compare prices to the long-term fundamentals such as area rents and incomes. I'm planning to update those charts in the not-too-distant future... if urbanrealtor starts offering to buy me drinks again, I'll know it's taking too long.
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