San Diego Housing Bubble News and Analysis

As with every month so far in 2009, more existing San Diego homes went into foreclosure than were sold. Just barely, though -- the ratio of home sales to default notices (the initial stage of foreclosure) was just gnat's eyelash below one-to-one. The ratio was .997, to be exact. That's the best sales-per-default ratio all year.

But it's still terrible. The following graph shows that while the sales-per-default ratio is above the lows set earlier in this downturn, it's still well lower than it was at any time during the two decades or so that preceded the current housing crash.

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The Case-Shiller index of San Diego home prices notched up its second monthly gain in June. Wait -- wasn't June, like, two months ago? And given that the index is based on the preceeding three months' worth of data, doesn't this give a better idea of the price movement in May (the middle month of the three) than June?

Yes and yes. Such lagginess is what we hate about the Case-Shiller index. What we love about it is the fact that it is an apples-to-apples comparison based on subsequent sales of the same homes. This provides a much more accurate view of home price changes than indicators like the median price, which measures how much the typical buyer is paying but doesn't account for what he or she actually got for the money.

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The California Employment Development Department released the latest job estimates today. According to these estimates, July saw San Diego hit its highest year-over-year rate of job loss in the downturn to date. Between July 2008 and July 2009, the region lost 55,100 jobs, a decrease of 4.2 percent.

The following graph shows how many jobs were gained or lost in the three housing bubble-related sectors I like to highlight -- construction, finance, and retail -- along with all other sectors. While the trouble started in the housing-beneficiary sectors, the growth of that green bar shows that losses have mounted outside those sectors over the past year.

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There was a bit of divergence in the size-adjusted median price of San Diego homes sold in July. By this measure, single family home prices were up a robust 3.7 percent from June, whereas condos gave back most of June's explosive gain with a subsequent 6.0 percent decline.

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I noted earlier in the week (and incessantly before that) that home prices have a seasonal tendency to rise in the spring and summer even during the midst of a multi-year price decline.

That sounds like a good enough excuse to make a chart.

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For the first time in nearly three years, the Case-Shiller index of San Diego home prices increased from the prior month. The index rose .4 percent between April and May, the latest data available.

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Last week we took a look at the fact that more homes have been going into foreclosure than have been selling during 2009. I wrapped it up on this circumspect note:

For all the relief that the spring-summer rally has brought to the real estate bulls, it seems a bit premature to uncork the champagne before that orange line climbs out of the abyss.

The orange line in question appeared on a graph tracking the ratio of monthly home sales to monthly homeowner default notices. To save you some clicking, here it is again:

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Last week we learned that the region lost almost 55,000 jobs between June 2008 and June 2009. The chart below indicates how largest San Diego sectors fared over that time period:

That chart looks a lot different from older versions in which the bubble-related sectors were the only ones racking up the big losses.

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The local unemployment rate hit 10.1 percent last month, according to the latest estimates from California's Employment Development Department. The below graph shows that June's unemployment rate was notably worse than anything seen in the prior two recessions -- not that anyone was suggesting otherwise.

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I am the first to admit that I don't know exactly how this whole shadow inventory thing is going to play out. But I am certain that it is a legitimate area of concern.

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This is all becoming a bit routine. I write about how little housing inventory is currently for sale in San Diego. Then I write about the apparent mountain of "shadow inventory" -- homes that have entered foreclosure, or may yet do so, but that are not yet on the market. And then I go on and on about the irony, market distortions, and general analytical weirdness that result from having so much shadow inventory looming alongside so little genuine inventory.

In my defense, sometimes I reverse the order in which I write about these things.

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Nothing too exciting happened in the latest release of the Case-Shiller San Diego home price index. Unless the lack of a noticable decline qualifies as exciting. Which I suppose it kind of does, given the context.

The aggregate price index for San Diego County declined a mere .1 percent between March and April, the latest month measured. The stabilization is no big surprise considering the strength in other price measures and the run on inventory currently underway.

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Frequent readers know I've spilled a lot of virtual ink on the concept of "shadow inventory" -- the fairly vast category of homes that are in foreclosure but not for sale. This overhang of potential but not-yet-actual inventory contrasts with the very low levels of inventory currently for sale.

The title of this post refers to a recent entry describing how current inventory is even lower than it seems. That prior article contained a graph showing that the amount of current inventory is unusually low compared to the number of sales, even before taking account of the reverse-shadow inventory effect.

But while sales are numerous in comparison to available inventory, homes in foreclosure are quite numerous in comparison to sales.

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Between May 2008 and May 2009, according to the latest estimates, the San Diego economy lost 52,200 jobs. This 4 percent year-over-year decline is the fastest we've yet experienced during the current downturn.

The below graph shows the rate of job loss for the overall San Diego economy in orange. As usual I've also included the three sectors -- construction, finance, and retail -- that I have long contended grew unsustainably large as a result of the housing bubble. The green line indicates changes in employment outside the three bubble sectors:

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Yes, it's a word. I think.

Another California anti-foreclosure measure went into effect this week. It's called the "California Foreclosure Prevention Act," and it puts a 90-day moratorium on certain qualifying foreclosures. The name "California 90-Day Procrastination on a Subset of Foreclosures Act" was apparently deemed too unwieldy.

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