San Diego Housing Market News and Analysis

...for to go with that last article. No explanation needed (well, none provided, anyway).

In a somewhat gruesome milestone for the beleaguered San Diego housing market, the low-priced tier of the Case-Shiller home price index has now dropped by more than half since it peaked in June 2006.

Specifically, the low-priced index was 50.4 percent below its peak value as of February, the most recent release of the Case-Shiller index. The mid-priced tier had declined by 39.3 percent and the high-priced tier by 32.6 percent from their respective peaks. The aggregate index had fallen by 41.4 percent.

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I got a lot of pushback when I wrote last month that San Diego home prices were, on the whole, back in line with their historical relationships with local incomes and rents. One of the more frequent counterpoints was the claim that while home prices might be in line with rents, rents themselves had become unsustainably high.

How to analyze such a question? My first thought was to compare how much rents had changed in comparison to local incomes. An increase in rents that was way out of line with what San Diegans were earning would suggest the rent prices had indeed become distorted by the housing bubble.

But the data I have indicates that this is not the case. The accompanying graph charts average San Diego rent as a percent of income per person. The average percentage over the entire measurement period is illustrated by the orange line.

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It seems that enough people expressed interest in attending Thursday's economic forum that they had to move to a bigger venue over at the USD campus. So if you were planning on attending, please be sure to check out the updated location info.

Moving on, I wanted to highlight some really interesting analysis recently performed by realtor and fellow panelist Jim Klinge.

I have been writing for some time about the strange mixed signals being sent by housing inventory and foreclosure activity. Housing inventory is at a level that, superficially, would indicate a fairly healthy market. Yet homes are going into foreclosure at a very rapid pace, a fact that leads one to believe that a lot of must-sell inventory could eventually hit the market.

In a recent pair of blog posts (here and here), Jim and a colleague have attempted to quantify these opposing forces.

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San Diego unemployment hit 9.3 percent in March. This is the highest level in the three-decade history of the unemployment data series.

The below chart shows unemployment trends now and during the prior two recessions. In addition to the magnitude of unemployment, the abruptness of the rise surpasses anything seen in the last two downturns.

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(Note: The KPBS These Days appearance is archived here for anyone interested).

The number of San Diego properties entering foreclosure hit an all-time high last month, as illustrated by the blue line in the following graph:

In the month of March, 4,260 homes received default notices, which are nastygrams informing delinquent borrowers that they are in foreclosure.

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Kelly and Will over at voiceofsandiego.org broke the story yesterday on a huge condo scam involving overpaying for condos with loans made to straw buyers.

What's interesting is that this all happened in the midst of the bust in mid-2008, after lending had tightened up. The scammers even paid 20% down -- but the prices were inflated by so much (sometimes more than 100%) that the 20% down was easily recouped.

What's also interesting is that the straw buyers willingly lent their identities to this guy:

This is just an investigation by some journalists -- no law enforcement agencies were involved (yet, anyway). I wonder how much of this kind of stuff has been going on out there?

You can read the whole piece here.

Before we begin, let me get a couple instances of pimping out of the way.

First, I will be on "These Days" on NPR this coming Monday, April 13, at 9:00AM.

Second, I will be on a VoiceOfSanDiego.org panel called "The Economy: Where Are We Really?" on April 23. Details can be found here. Rock star realtor and media sensation Jim Klinge will also be there, along with the Voice's Kelly Bennett and USD economist Ryan Ratcliff.

Incidentally, I always turn down "panel" invitations for a variety reasons, not the least of which is that they are fairly nerve-wracking. But since the Voice was putting this one on I figured I should be a team player and participate. So feel free to attend if you want to see me all uncomfortable and whatnot.

OK, onto the rodeo.

The size-adjusted median fell for the month, as we've all come to expect:

I will have the complete March rodeo up this week; in the meantime, I have written up (and graphed) the March size-adjusted median price figures at voiceofsandiego.org.

My friend Randy Dotinga, a freelance writer who sometimes writes for voiceofsandiego.org, dug up the following ad while researching a story:

(click the image for a large version)

In reaction to the latest Case-Shiller home price graphs, a few readers have asked how a property worth not much more than $400,000 can be considered a member of the "high-priced tier."

The answer is that there is no considering about it. Each month, the Case-Shiller price tiers are calculated by separating all sold homes into thirds by price. The high-priced tier represents not someone's subjective idea of what comprises a high-priced San Diego home, but rather the most expensive one-third of homes sold during the measurement period.

For January's Case-Shiller index, the cutoff between the top one-third and the middle one-third was $419,143. The cutoff between the middle one-third and lowest-priced one-third of homes sold was about $284,375.

The tier cutoffs, and especially the one between the high- and mid-priced tiers, used to be a lot higher.

continue reading at voiceofsandiego.org

Kelly Bennett has written several words about today's release of the Case-Shiller index for January, so I'll largely just supplement with a few charts.

Here is a look at the decline from the peak for all three price tiers:

Note that the high-priced tier once again fell hardest last month. Relative weakness in this tier is a fairly new development, as the graph makes clear.

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Based on their historical relationships with rents and incomes, San Diego home prices are now reasonable.

There. I said it.

The long-term price-to-income and price-to-rent graphs tell the tale:

February proved to be another brutal month for San Diego's job market, according to the EDD's latest estimates. The region is estimated to have lost 37,900 jobs between February 2008 and February 2009. This is a contraction of 2.9 percent.

Early in the downturn, the losses first showed up in the sectors with the most exposure to the housing bubble: construction, finance, and retail. By now, however, job losses are quite a bit more widespread. This is evident in the following graph, which shows the year-over-year change in employment for the three most bubble-exposed sectors, the remainder of the economy, and all sectors in total:

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A record number of San Diego mortgages went into default last month. 3,705 homes entered this initial stage of foreclosure, surpassing the previous high of 3,601 default notices delivered in April 2008.

Trustee sale notices, which occur later in the foreclosure process, remained well below their records, but since they lag default notices it is reasonable to expect that they will rise soon as well.

The following graph shows that the default respite enabled by a late-2008 change to state law was short-lived:

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