San Diego Housing Bubble News and Analysis

April was another record-setting month for both NODs and NOTs:

Note #1: My pal Ramsey has developed what he calls a "Contagion Indicator" wherein he tracks the percentage of San Diego NOD, NOT, and REO homes with original loan amounts over $500,000. Here are the April numbers. (Please note that the phrasing on the following table has been clarified a bit from the original post to avoid confusion).

Ramsey's Contagion Indicator
NOD: 21.3% of NODs had loans over $500k
NOT: 21.9% of NOTs had loans over $500k
REO: 20.4% of REOs had loans over $500k

These numbers are a little higher than I would have expected given all the chatter about foreclosures being a low-tier-only phenomenon. It will be interesting to see how much this indicator changes in the months ahead.

There was actually a glimmer of good, or at least not-bad, news in the resale data last month.

But first, prices. As measured by the size-adjusted median price, they continue to drop: down 3.3% for single family homes, .3% for condos, and 2.3% in volume-weighted aggregate:

Earlier this month, we saw that San Diego employment declined on a year-over-year basis in March -- something that hadn't happened during the last recession (nor for 15 years, according to the U-T).

The accompanying graph shows how many jobs were added year-over-year by the top four sectors for employment growth how many were lost by the bottom four sectors. Over each bar, I have noted the average hourly wage within that sector (for some reason, the BLS site does not report government sector wages -- perhaps they consider that a little too personal).

read more at voiceofsandiego.org

Yet another crunchy beating was dispensed to the Case-Shiller-HPI last month.

When I wrote the first installment of BailoutWatch this January, I intended to post occasional updates to keep readers apprised of the ongoing housing bailout efforts. Well, the truth is that I haven't even been able to keep up.

That column wasn't even the first on the subject -- it had followed hot on the heels of this one. Since the January post, the bailout attempts have been coming fast and furious. They've also been getting progressively more irresponsible and transparent in their attempts to reward the very institutions that enabled the housing bubble in the first place.

Let's go through a selection of recent bailout-related developments.

read more at voiceofsandiego.org

San Diego employment has just decreased on a year-over-year basis, falling by 1,700 jobs between March 2007 and March 2008.

That is a very small drop in the grand scheme of things, representing a decline of just .1 percent. But it's the first time in a long time that employment has turned negative at all. The data I pulled from the Employment Development Department website goes back to the year 2000, and it shows that even during the recession and slowdown that took place at the beginning of this decade, the weakest month showed a year-over-year increase of 2,300 jobs.

So even though we are not in an officially recognized recession, San Diego's employment situation is worse than it ever got in the aftermath of the 2001 recession.

read more at voiceofsandiego.org

Just a couple quick graphs today, friends.

The latest Quarterly County Employment and Wages (QCEW) report came out this week. You may recall from a prior article on the topic that this employment survey is quite a bit more accurate than the monthly employment estimates, but that it is typically ignored because it lags by six months.

You may also recall that I advanced the theory earlier this year that the statistical adjustments employed by the agencies that put out these numbers were causing job growth to be overstated. Shortly after I wrote that article, this thesis was vindicated with the arrival of revised estimates showing that San Diego employment growth had indeed been much weaker than initially reported.

read more at voiceofsandiego.org

Our favorite housing cheerleader, Chuck Smiar, is back in the news again today with another attempt to scare real estate fence sitters into action. After issuing a warning to hesitating homebuyers that they were "in for a surprise" back in December, Chuck had this to say in a North County Times piece earlier today:

"There's a lot of buyers sitting on the fence waiting for the bottom. And I think if they don't jump in soon, they're going to be sorry."

read more at voiceofsandiego.org

Alrighty... it's time for the monthly resale data roundup. But first, a brief word from our sponsor (that would be me): I just put up a fairly comprehensive list of frequently asked questions over at the website of Pacific Capital Associates, the financial advisory firm I work with, and I thought I’d include a link here for anyone interested in what that’s all about.

OK, onto the business at hand. As I noted on Friday, February's bloodshed in the median-based price indicators was not repeated in March:

Hello all -- look for a data rodeo this weekend. In the meantime, a brief writeup on March resale prices is available at voiceofsandiego.org. The bears won't get much satisfaction this month, but after last month's brutality, do you really need it?

For years, people claimed that because San Diego was such a desirable place to live, local real estate was immune to price declines. We know how that turned out. Yet these days that same argument is often applied to San Diego's more upscale areas.

It seems, at first blush, to hold up. High-end San Diego homes have certainly weathered the housing bust far better than their lower-priced counterparts. This can be seen in last week's Case-Shiller home price graphs, which show that the high end of the housing market has fallen in price less than half as much as the low end. And the Case-Shiller high tier -- which aggregates price movements of the most expensive one-third of San Diego homes -- understates some notable resilience in swankier sub-markets such as Point Loma, Mission Hills, La Jolla, and much of the North County Coastal region.

The relative strength in these areas has led to the widespread conclusion that the high-end markets are desirable enough to be more or less invulnerable to the housing bust.

I am skeptical of this interpretation.

read more at voiceofsandiego.org

The Case-Shiller home price index for San Diego didn't get spanked as badly as it did last month but it was nonetheless down a substantial 2.5% for the month of January. This puts the total decline from the november 2005 peak through January 2008 at 21.1%.

Here's how the three price tiers have fared since their respective peaks:

The California Employment Development Department's employment estimates for February indicate that San Diego job growth has essentially flattened out. The sectors that thrived during the housing boom are now suffering through the bust, and while employment is growing outside of the housing boom industries, it is doing so barely enough to offset the housing-related losses.

read more at voiceofsandiego.org