San Diego Housing Market News and Analysis

The Case-Shiller home price index for San Diego was up a mild .4 percent overall in June.  Hidden in that increase, however, was a drop in the high-priced tier (composed of the most expensive one-third of homes sold during the April-through-June measurement period).

This continues the general (though recently dormant) trend in which the rebound has been far stronger in the low-priced than the high-priced tier, with the mid-priced tier splitting the difference:


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I can't get too specific in titles, as much as I'd sometimes like to, so let me quickly clarify the subject of this post: the non-housing-bubble portion of the economy grew on a year-over-year basis in July.  This is a significant milestone, as the last time the non-bubble private sector registered an annual increase in employment was back at the beginning of the big crash in October 2008.


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In my analysis of the local job market I've long singled out what I referred to as the "housing bubble beneficiary sectors."  As the name implies, these industries enjoyed huge growth as a direct result of San Diego's housing bubble.  They were, in no particular order:

• Construction, which grew enormously as a result of the scramble to build to homes.
• Finance, a sector which includes real estate and which benefitted from vastly increased real estate and mortgage transactions.
• Retail, which boomed as San Diego home owners cashed out their ever-growing home equity to finance spending sprees.

These industries flourished as the housing bubble inflated earlier in the decade, eventually becoming bloated well beyond what a normal, non-bubbly economy would call for.  I looked at this topic in a 2006 article in which I tried to relay how dependent San Diego's economy had become on the real estate bubble.  That things were out of balance was apparent in the rate at which the bubble sectors had grown during the decade to date: construction by 38 percent, finance and real estate by 18 percent, and retail by 10 percent.  For comparison, the rest of the economy had grown only 6 percent over that same period.  The housing bubble sectors accounted for 49 percent of all San Diego job growth during those first six years of the decade.

Predictably, the swollen bubble sectors deflated right along with the housing bubble itself.  And while much of economy suffered, the bubble sectors took the brunt of it.  In this article I will take a closer look at how much these three sectors contributed to the region's multi-year job loss trend in comparison to the rest of the region's industries.  Just for kicks, I am also going to break out the government sector because it accounts for a big chunk of local employment (19 percent as of June 2010) and, unlike the private sector, its ups and downs are not strongly affected by the business cycle.

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Kelly Bennett rounded up the latest Case-Shiller numbers yesterday. (Her final C-S writeup?  Sniff sniff...)  I don't have much to add to Kelly's analysis this latest release so I will just supplement with the usual assortment of charts:


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Total San Diego employment dropped between May and June -- but the decline was caused by the mass laying off of temporary US Census workers who had previously been swelling the ranks of the employed. 


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The economics blog Calculated Risk put up a very interesting graph last week that showed the relationship between housing inventory and home prices at a national level.  It was so interesting, in fact, that I decided to "borrow" the concept and recreate the graph for San Diego County.

It is below, but it requires some explanation...


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All three of the Case-Shiller home price tiers for San Diego rose moderately in the month of April.  The low tier was back on top with a 1.0 percent rise, compared to .5 percent increase for the middle tier and a .3 percent rise for the high tier.

These numbers followed a very unusual March in which the previously stagnant high tier registered a huge increase and the formerly robust low tier actually declined.  April's price movements were a lot more in line with what we've seen during the price bounce that's prevailed since last spring.


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As it has every month since January, according to the latest estimates from the state of California, San Diego's regional employment grew in May. 

But what (as I imagine some of the more bearish readers are thinking, and, perhaps, readying to inform me via electronic nastygram) of the effect of temporary hiring for the US Census?  It's a fair question.  The Bureau of Labor Statistics estimated that short-lived census jobs accounted for a over 95 percent of nationwide hiring in May.  Isn't the same thing going on here?

No, as it turns out.


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After the last entry on foreclosure activity, a couple of readers sent in articles with more data relevant to the topic of "shadow inventory."

A commenter at my own site linked to a May Union-Tribune article about mortgage delinquencies.  Delinquencies are defined as mortgages on which payments are late by a certain number of days (60 in this case).  The reason this figure is interesting is that it captures all currently troubled mortgages, not just those that have been served with Notices of Default.  So delinquencies are a more inclusive measure of potential shadow inventory.

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Let's check in on San Diego foreclosure activity...

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After languishing since last summer even as the mid- and low-priced tiers rallied, the high-priced tier of the Case-Shiller home price index finally showed some signs of life.  The high tier of the index, comprising the most expensive one-third of homes sold during the measurement period, leapt 2.9 percent between February and March. 


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San Diego employment growth continued its 2010 streak by rising for another month in April.

The graph below shows monthly San Diego employment since 2007:


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Here's something we haven't looked at for a long time: San Diego population growth and migration patterns.

This was a favorite topic of mine back in the day when San Diego's housing bubble cheerleaders implied some sort of population explosion via their favorite catch-phrase, "Everyone wants to live here."  In fact, San Diego's population was growing quite modestly at the height of the boom.  And San Diego's supply of housing was growing faster than its population.  And domestic migration was firmly negative, meaning that more Americans were moving out of San Diego than moving in.  The mild population growth was in fact due to foreign immigration and, moreso, to new San Diegans being born.  (My little joke at the time was that even Countrywide wasn't yet making home loans to fetuses).

But I digress.  The point is that this once-popular topic has lately been neglected here at Nerd's Eye View.  Let's have a look at the latest numbers:


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Since the second half of 2009, the general trend has been for the low-priced tier of the Case-Shiller home price index to rise strongly, the high-priced tier to drift mildly downward, and the mid-priced tier to split the difference with a more tempered increase. 

February bucked that trend.


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Late last year I wrote a series of posts comparing two sets of available San Diego job surveys.  The first was the "establishment survey," which polls local employers and attempts to measure the number of people working for San Diego businesses regardless of where they live.  The second was the "household survey," which polls San Diego residents in order to find out how many residents are working, regardless of whether they work in the county or not.  The household survey also includes the self-employed, while the establishment survey (as we'd expect from a survey of businesses) does not.

At the time of these articles, the two surveys were providing mixed signals...


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