San Diego Housing Bubble News and Analysis

Earlier this week, Kelly Bennett gave us the lowdown on the Case-Shiller home price data for November.  I'm going to just add a couple of things.

First, I have updated the requisite post-peak chart...

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Recent months have seen a fairly steady improvement in the year-over-year rate of job losses for San Diego County.  That annual rate of change was still firmly negative -- just less so than it had been previously.

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Well, I thought the old "Shambling Toward Affordability" title for this series of articles was a bit pithier but it just doesn't quite work now that home prices have been rising for the better part of a year.  In any case, regardless of the what we want to call it, it's time to check in on San Diego housing valuations as of year-end 2009.

The 2009 home price rally reversed the direction of the shamble, but it didn't really change the overall picture, which is that San Diego home prices (in aggregate, of course) are still at middling levels of valuation.

Here's the price to per capita income ratio:

The San Diego housing market managed to squeek out another gain in the median price per square foot as 2009 drew to a close:

It feels like I've been writing about "shadow inventory" -- homes that are in foreclosure but haven't hit the market yet -- forever.  Yet no flood of foreclosures has yet inundated the market, and as a matter of fact, inventory has been quite scarce lately.  Is there anything to this shadow inventory concept?

As Kelly Bennett documented in a recent blog entry, the answer is yes.  Kelly noted as of Tuesday, there were 19,453 San Diego homes that were in foreclosure but that were not yet listed for sale.  That, my friends, is your shadow inventory.

For purely illustrative purposes, let's try to understand what the effect would be if all these homes in foreclosure were to suddenly hit the market. 

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The latest release of the Case-Shiller home price index showed that San Diego's home price rally continued into October.

As it did last month, the high-priced tier once again put in the weakest showing -- an increase of .2 percent for the month compared to a 1.8 percent increase in the low-priced tier.  The middle tier rose by .5 percent and the aggregate index by .4 percent.

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It wouldn't be a proper Christmas without a little holiday cheer from legendary housing bubble analyst Ramsey Su.  So pour yourself a couple buckets of egg nog and read on...

I wrote Monday about the increase in employment at San Diego businesses between October and November.  I also discussed how the year-over-year change in payroll employment, while still firmly negative, had become steadily less so in recent months.

Today we'll look at the other job survey I've been writing about of late... 

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Employment at San Diego businesses dropped on a year-over-year
basis, according to the latest estimates from the EDD.  But the
trend we've seen in recent months of consecutively smaller annual job
declines strengthened once again.

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November saw the 7-month rally in San Diego home prices, as measured by the median price per square foot, come to an end:

Last month I wrote about some mixed signals in the data from two different job surveys.  While the rate of job loss at San Diego companies was improving, the rate of loss among San Diego's residents -- regardless of where they are employed -- was hitting new highs.  The graph accompanying this article shows that this gap widened further in October.

I asked local economist Kelly Cunningham what he thought of the disparities between the two job surveys since the recession began. 

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After rising for seven months in a row, San Diego resale home prices finally took a breather in November. The median price per square foot actually rose by .9 percent for condos, but it dropped by 1.3 percent for single family homes, of which many more are sold.  A volume-weighted aggregate of the two dropped by .7 percent for the month, ending the streak that began in April.

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Readers may have noticed that I don't make the kinds of sweeping predictions about the housing market that I used to.

There are two reasons for this.

The first is that housing prices are no longer at an extreme. This can be seen in a semi-recent update to my price-to-income and price-to-rent charts, which show local home valuations returning from orbit and heading back to earth over the past several years. It's pretty easy, when homes are stunningly overpriced, to forecast that they will eventually reach something quite a bit closer to their fundamentally justifiable values. But once the valuations go from "extreme" to "somewhat reasonable," you just don't have that same analytical wind at your back.

The second reason for the dearth of forecasts is more specific to this particular time, place, and subject matter.

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The Case-Shiller index numbers for September are in. As had been suggested by the median price data, the aggregate Case-Shiller index ended up rising for another month.

There was an interesting divergence, however. The aggregate index rose by .9 percent between August and September, while the low and medium price tiers each rose by 1.8 percent. But the high-priced tier actually dropped by .9 percent. This is the first drop in any of the index tiers since the price bounce began in early 2009.

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The annual change in the number of people employed at San Diego companies improved again last month. Between November 2008 and November 2009, local companies shed 52,200 jobs, a decline of 4.0 percent. Which, as miserable as it may sound, is the best year-over-year job number in six months:

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