San Diego Housing Bubble News and Analysis

The Case-Shiller HPI numbers for December were released today. The low-, mid-, and high-priced tiers were respectively down 3.8%, 3.3%, and 3.1% from the prior month. The aggregate index was down 3.4%. The pace is picking up for the correction on the high-end -- December represents the first monthly decline of over 2% (let alone over 3%) for that tier.

The tally for calendar year 2007 was: -23.1% for the low tier, -16.0% for the middle tier, -8.6% for the high tier, and -15.0% overall.

Over at VoiceofSanDiego.org, I just put up a piece on the January 2008 sales-per-default data. Conclusion: if potential must-sell housing supply was overwhelming demand back in the protracted downturn of the 1990s, it is now 3.5 times as overwhelming.

I've been updating the FAQ list and I thought it would be interesting to denote the start of the Econo-Almanac on a chart of home valuations (ie, CPI-adjusted prices) and sales. I used the beginning of 2000 as the start date because I like round numbers:

Sitting back and looking at this graph, a couple interesting observations jump out at me.

Well, better late than never, I guess, for this month's resale data roundup.

We already saw that the size-adjusted median held up pretty well in comparison to the drubbings inflicted in recent months. It was down 1.1% for single family homes, which isn't great but is a lot better than December's 4.6% smackdown. And it was actually up for condos, by 1.3%.

From last January, however, this price measure is down by about 14%.

My old pal Ramsey Su is back with an analysis of the recent REO auctions held here in San Diego by REDC. He's drawn some very interesting conclusions based on the info he's been able to piece together from the auctions. If you'd like to read more after you're done with this one, the search function will meet all your Ramsey-related needs.

REDC AUCTIONS
by Ramsey Su

REDC has conducted four REO auctions in San Diego during the last 8 months, the most recent being January 26 of this year.

I have extensive data on 3 of the 4 auctions. Here are some of the findings:

Peak/Trough Analysis – currently down 37%

Properties that went to auction likely represented the group that was purchased or refinanced at the peak and sold at the low of what the current market offers.

As regular Piggs know, I routinely chart out either the size-adjusted median home sale price (which is timely, but not too accurate) or the Case-Shiller home price index (which is more accurate, but not very timely). In this post I'd like to highlight a couple of folks who have been making an effort to better measure home prices without such a lag.

First, our very own forum participant "esmith" has collected the data and written the code to roll his own version of the Case-Shiller methodology, except that he uses the most recent month's sale prices and is able to break out some San Diego submarkets. He recently posted his January data -- have a look at the charts and accompanying discussion, and if you need an introduction to his technique you can find it here.

Second, Bruce Henderson at "And Still I Persist" has written an application that models prices by mining the MLS. Bruce uses MLS asking prices instead of sale prices, which may introduce some noise but also allows the price data to be captured pretty much in realtime (because a closed sale represents a price that was agreed upon 1-2 months earlier). The aforelinked article is chock full of charts showing his results for various SD submarkets.

As if often discussed here, no single indicator is perfect, but being able to look at a whole bunch of them at least allows us to narrow down what's actually going on. So thanks, Bruce and esmith, and keep that data coming!

The Case-Shiller HPI for November (which includes home sales from September, October, and November) took a veritable beating. Prices for the high tier held up best, as usual, falling by 1.8% from the prior month. But the middle tier dropped by 3.9% and the low tier by 4.8% in a single month -- yikes!

The size-adjusted median resale price was absolutely crushed in December:

I'm going to get the whole December resale data rodeo up very soon. In the meantime, here's a quick look at the pummeling taken by prices (as measured by our imperfect indicators, of course).

For the month of December, the size-adjusted median price was down 4.6% for single family homes, 5.8% for condos and 5.0% overall. That's right, for the month. The graph below shows the declines from the peak.

The plain vanilla median fared even worse, for what that's worth, down 6.4% in a single month. More to come...

The aggregate Case-Shiller HPI for San Diego declined by 2.6% in October -- the steepest one-month decline to date and the worst single-month drop among all the cities tracked by Case and Shiller. Here's a look at how the different price tiers have fared since the decline began:

The local housing market was thoroughly abused last month, at least as measured by the size-adjusted median price:

The high-priced tier dropped in September, as expected, but the low tier was positively abused:

Jim the Realtor put up a post on Zillow over at his excellent blog, and I took the opportunity to ask about something that's always stuck in my craw. To wit:

Here's something that always bugged me about the zestimates. If you look at any SD property's price history (or that of SD as a whole), it basically shows the price going pretty steadily up through 2003-4 and then skyrocketing in the first 6-9 months of 2005.

This isn't how it happened at all, though... the Case Shiller indexes (and pretty much all other data sources too) indicate that the parabolic blowoff phase happened in early 2004, not early 2005. And yet, Zillow has always showed this obviously incorrect pricing history. Anyone have an idea as to what's going on there? Since they seem to be talking up their accuracy, why have they made no attempt to fix this obvious and quite substantial inaccuracy?

Just for kicks I put together a chart to show what I was talking about:

There were 2,228 NODs and 911 NOTs delivered last month. The latter is an all-time high; the former is second only to August's NOD count. Here is a long-term look at the number of monthly NODs and NOTs, adjusted for labor force growth (as a proxy for population growth, though labor force has actually grown faster than population):

Well, that was a weird coincidence. Less than a week after I wrote about the idea of trying to track different market segments, S&P announced that they will now offer three Case-Shiller indexes for low-, medium-, and high-priced San Diego homes (in addition to the original aggregate index). This will be far better than whatever I would have done because Case and Shiller use same-home sales for their comparisons.

Watch this space for a possibly excessive collection of new charts.