The U-T Makes It Official: Prices Are Falling

Submitted by Rich Toscano on July 12, 2006 - 1:30pm

The Union-Tribune reports that, as predicted here last week, year-over-year medians have gone negative. As of June 2006, the median price of a San Diego home was down 1% from a year prior. The median was down 6% since its peak last November, representing a loss of $30,000 on the median priced home.

Get ready for all the pundits to claim victory on their "soft landing" forecasts. Prices are down 1%, and that's a soft landing—get it? Of course, this interpretation requires you to pretend that prices have fallen as much as they are going to, despite the lack of any evidence to that effect.

The U-T story was surprisingly upbeat as compared to last month's "Home Prices Take a Tumble" piece. They even trotted out a real estate agent to assure us that now is a great time to buy. The media seemed to fixate so much on the year-to-year median when it was the only price metric still in positive territory, I expected a little more pomp and circumstance when it went negative. I imagine a more in-depth piece is on the way; I will be interested to gauge its level of concern.

Just to head off some comments: as I've stated before, I do not believe that the U-T or any other mainstream paper is "in the pocket" of the real estate industry, that they are afraid to anger their advertisers, and so on. The mainstream press has been totally wrong about housing, not due to corruption, but simply because mainstream news outlets are always highly reflective of the dominant mainstream thinking, which was itself totally wrong about housing. It's no more complicated than that.

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Submitted by Jim Brubaker on July 12, 2006 - 3:27pm.

I think with the newspaper industry, you have two separate enities: Advertising and News. Survival depends on advertising. In some ways, the ad department can exert pressure to where certain words would not be used like "panic selling." This tendency might make the paper seem far more conservative than it really is.

Submitted by davismx on July 12, 2006 - 3:39pm.

i swear i'm going to puke if i hear the words "soft landing" one more time. i think that mere months after the apparent peak of the largest residential real estate run up ever that it's a bit too soon to call it a "soft" or "hard" landing. i think that in three to five years we might be able to say something meaningful about the nature of the downturn, but right now is very premature.

Submitted by powayseller on July 12, 2006 - 6:18pm.

Bob C's last real estate report made the internet rounds, and he was contacted by several newspapers for interviews. Neither was the U-T.

I e-mailed several U-T editors and business writers with his report. It will be amazing if they continue chosing to ignore what he says. One of the writers of today's story, Roger Showley, is a person that I e-mailed many times with facts about the housing bubble, each time giving him Rich's name as a good person to interview. They choose to keep their head in the sand.

Submitted by kiki on July 12, 2006 - 10:50pm.

they already are mentioning that price is 6% down vs Nov05, what is going to happen in Dec06 when Nov06 numbers come? Are they really expecting median priece to rise back 5 full points.

Market is slowing, we know this, but even if prices and median stay flat this year, i just cannot see how these people will justify calling softlanding a 6% median price drop.

Submitted by Bugs on July 13, 2006 - 8:45am.

I think it depends on how we define a bubble. The long term trendline is comprised of ups and downs. Any changes within that typical range would be considered a typical change.

In my opinion the permabulls would be justified categorizing a total decline of up to 15% as a soft landing because that kind of swing would still be within the standard deviation on a long term trend. At these prices it's when the declines start exceeding 20% that the landing can become catastrophic. Lots of people could recover from a $75,000 loss on a $600k home, but not that many wage earners here could recover from a $150k loss without going bankrupt.

Submitted by murray on July 13, 2006 - 10:34am.

What's the big deal? Throw out "new home" (condo conversions) sales and sfr median is still up 2% yoy. A 1 month decline of only $4k from an all time RECORD HIGH?! This is all you can muster to cry wolf about the housing market, lol!

"The median price for single-family homes, which represent a significant share of the housing market, reached $565,000, down slightly from May's record price of $569,500, but up nearly 2 percent over a year ago June".

Submitted by rockclimber on July 13, 2006 - 11:10am.


Submitted by powayseller on July 13, 2006 - 11:38am.

Read my other post in the U-T thread I started, at almost the bottom of the page, where I harp on the disservice that is done by the median. It's a crime, really, for NAR and DataQuick to use this to tell us the market information.

Submitted by murray on July 13, 2006 - 12:17pm.

Challenge the median figures but I don't see anything alarming.

Submitted by LA_Renter on July 13, 2006 - 1:21pm.


The decline you are pointing out really is not a big deal, if it holds right there. The significance of the YOY median price decline is that we are now obviously past peak, and we are past the statistical glitch that show median prices going up. If prices hold steady right here for the balance of the year we will show a 6% YOY price decrease by November. That would be approximately a 9% decrease in real dollars. It is alarming because inventories are at all time record highs, foreclosures are picking up alot of steam and sales are soft. You have HB's out there that will have to move inventory and the only way they can do that in this environment is by lowering prices. The significance is that a downward trend in price is being established that could last years.

I am always open to hearing analysis from a different point of view. Please feel free to make your case.

Submitted by SD Realtor on July 13, 2006 - 3:19pm.

I am a Realtor here in San Diego and I am continually amazed at the depth of misconceptions in our industry. I have usually abstained from postings on line but in the past few months, usually after listing appointments, I have felt more and more compelled to do so. Two months ago I was interviewed by Will over at the Voice of San Diego and had some unflattering views of San Diego Realtors. What the hell...

Lots of debate about the characterization of our decline; is it soft or hard? First let's look at the source of data which is Dataquick, who in turn gathers numbers from the sold entries that realtors like me enter into the MLS. Rule 1, when you enter a sold price, you DO NOT subtract credits. Now, in todays sales, I would estimate, due to declining conditions, that credits and rebates, are present in 30-50% of home sales. So right off the bat, the dataquick numbers are not even accurate, you should scratch 1-2% from the numbers.

Second, on line housing comparison and estimators like Zillow, Home Insight, even continue to propogate INCOMPLETE information. Consumers go to ALL of these sites to value thier home. Well do any of you readers know how these sites make thier valuations? They simply use the MLS information. However how far back to they go? Listen guys, most of my listing appointments consist of trying to demonstrate what the market is doing. That entails reversing peoples opinions that they are entitled to a certain price of thier home because that is what the house down the street sold for in 2004 or that is what Zillow told them. When I ask them how Zillow came up with the valuation they do not know. When I ask them how many expired, cancelled and withdrawn listings are in thier mapcode they do not know. Having a degree in electrical engineering has made me totally anal about data. If you do not use accurate data, your analysis is flawed and soon becomes pointless.

As for the run up in prices and who is to blame... That is EASY...The buyers are to blame. YOU DO NOT HAVE TO BUY A HOME. As far as I know nobody has ever held a gun to a buyers head and forced them to sign a contract. Don't blame appraisers, realtors, mortgage brokers, or even Uncle Sam. In the past 3 days I have gone to 3 listing appts... All speculators who bought a few months ago and want to spin the properties. In each case I simply showed them the stats of thier neighborhoods. In each case they were all severely disappointed. One guy got a 4/2 in Escondido for 525k after it had been on the market for 70 days back in March. It was listed at 525k to 610k. (Obviously a Prudential listing) So when he tells me he wants to get 625k for it (and he did some nice work inside) and I tell him I can price it at 625k, but I don't think it will sell, he doesn't understand why... Well if nobody touched it at 525k for 70 days what does that tell you. When I asked him why he didn't try to get it at 475k he said they wouldn't do that because it would have been a short sale. So what? Let it foreclose and buy it then.

I lost A TON of money on stocks in 2001... I could have blamed my money manager, I could have blamed Wall Street, I EVEN INVESTED IN ENRON. It was simply stupidity and greed on my part. Nobody forced me to do these stupid things. Bad decisions are usually motivated by emotions such as greed or paranoia. Generally they are not motivated by hard analysis, patience, and/or data. Yes through the past 10 years most realtors told you if you don't buy now you may never get in... but you didn't have to buy. I have no sympathy for overextended homeowners. Is it to much to simply put a budget on paper BEFORE you buy? Most buyers I work with have already been on line looking for homes for weeks and even months before they contact me. When I ask them if they have written up a budget for thier financial future that would include a mortgage, property taxes and insurance over 90% of them say NOT AT ALL.

Yes I represent sellers but also homebuyers and yes I encourage them to finance thier purchases with standard 30year fixed rate mortgages. When they cannot afford the payment my first sentence to them is, maybe you should wait until you can afford the payment rather then buy now. Yet that statement is more then likely met with deaf ears. The response to that is, what about some of these new loan programs I hear about. So I point them to a mortgage broker and let them do thier thing... In all cases I do review thier loan program and sit down with them to point out the risks of what thier payment will be in 3, 5 and 7 years. I tell them I don't LIKE those vehicles but as long as THEY KNOW the possible outcomes then I will not feel I acted improperly. In theMy name is Adam Rappoport and my brokerage is G & R Realty. We are found at Please don't hesitate to call or email me at 858 736 4778 or

Finally my read on the market is that we will continue to stay flat with single digit depreciation in low and mid range housing for the next few years. A wild card may be an impending recession that I feel should come upon us soon and we may see a cash infusion into the economy as soon as next summer. The other wild card is stagflation which may be an ugly reality as it would force the rates to stay high and that would definitely accelerate home depreciation.

Submitted by rockclimber on July 13, 2006 - 4:39pm.

"This is all you can muster to cry wolf about the housing market, lol!"

Murray, clearly you are new to this site. Median prices are a lagging indicator. This site is all about interpreting leading indicator data, and using that data to generate the probability of future outcomes. Wolf was cried long ago on this site based on those leading indicators. Basically, the leading indicators showed it was very probable there would be a significant price decline. So seeing the median slipping is confirmation that the leading indicators were leading us to the right conclusions, the magnitude is yet to be seen and much better viewing than anything on cable programming depending on your RE position.

The small decrease in y-o-y median as a whole is also significant, because, as the kind Professor has done such a good job of pointing out, this bubble is not based on fundamentals. It's based on irrational exuberance. Since the median price is what the public uses to gauge the health of the market, we can expect the exuberance, which has turned to caution, start the shift to despondence and finally panic (still TBD, but probable based on the sheer magnitude of this bubble… again, excellent prime-time viewing.)

To cry wolf is only a bad thing if there is no wolf.

Submitted by powayseller on July 13, 2006 - 5:22pm.

SD Realtor - you are awesome. Say it like it is, that's what I like! I hope you come to the piggington group get together this weekend. Would love to meet you.

rockclimber - I love that point about the leading indicators. Median price is a 12-18 month lagging indicator for housing prices, just as unemployment rates are a 12-18 month lagging indicator for GDP growth.

murray, have you heard of the leading indicators in real estate? They are inventory/demand, also known as months suppply and 2) HAI. These tell you the direction of the market long before DataQuick publishes the median price.

Let me try again to explain the median, since some are simply not getting it (impatience showing...)

Say you've got 3 CEOS each buying $2mil, $3mil, and $3 mil homes, and you've got 2 engineers buying a $300K home and a $500K home. The median is $ 3mil.

Last year the median was $500K, because we had 20 people buying $500K homes.

Does everyone get it now? The rich are still buying, because their income is not dependent on wages, and they don't care if interest rates go up and housing prices go up.

But know this: the $3 mil house was worth $3.8 mil last year, and the $2 mil house was worth $2.5 mil last year. It's all going down, but the distribution is changing.

I hope I don't have to explain this again. I'm getting too old for this...

Submitted by San Diego Lasik... on July 13, 2006 - 11:59pm.

For a good take on this latest news, see this new blog post by a San Diego top real estate broker. It really tells it all:

San Diego Lasik surgeon

Submitted by Lickitysplit on July 14, 2006 - 8:45am.

SD Realtor - loved your post. My feelings exactly.

Submitted by SD Realtor on July 14, 2006 - 11:08am.

Powayseller nailed it... I have a client who sold thier home two months ago. It was in a very high end neighborhood. In four days we had 5 offers. At a certain price/income level you do see an immunity to the market forces. The same client is now shopping for a home in a different premium neighborhhod. Furthermore that client is a cash buyer.

Another thing... remember the recent June numbers represent escrows that began in May and April. I can tell you that at least in my case, April was better then May which was better then June.

Guys where is the piggington get together at?

Submitted by powayseller on July 14, 2006 - 2:26pm.

July 22nd, 4:00 PM is the chosen time for the Forum Meetup.

The meetup is at Todays Pizza and Salad in Encinitas.

The menu and directions can be found here,

Submitted by superfly19 on July 14, 2006 - 2:48pm.

Here's a good explanation of Median and Mean:

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