San Diego Housing Market News and Analysis
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I started this website in mid-2004 to chronicle San Diego’s spectacular housing bubble. The purpose of the site remains, as ever, to provide objective and evidence-based analysis of the San Diego housing market. A quick guide to the site follows:
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Submitted by Rich Toscano on June 28, 2009 - 7:34pm
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.
Submitted by Rich Toscano on June 21, 2009 - 9:16pm
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:
Submitted by Rich Toscano on June 18, 2009 - 3:15pm
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.
Submitted by Rich Toscano on June 15, 2009 - 4:06pm
San Diego housing inventory dropped again last month, but supply may be even tighter than it appears. I'll talk about that more below, but first, let's have a look at the data.
The number of existing San Diego homes for sale last month was 32 percent lower than the same time last year, while the volume of sales was 19 percent higher. These two trends combined to make for the lowest supply of for-sale housing in years.
Submitted by Rich Toscano on June 11, 2009 - 12:53pm
Three weeks ago, according to quasi-government mortgage giant Freddie Mac, the average rate for 30-year fixed mortgages stood at 4.82 percent. This week, the average rate was 5.59 percent.
Submitted by Rich Toscano on June 8, 2009 - 6:45pm
As I wrote a few days back at voiceofsandiego.org, we may just be experiencing a geniune spring fling:
Submitted by Rich Toscano on June 5, 2009 - 11:56am
San Diego has just experienced a second consecutive month of solid gains to the size-adjusted median home sale price. It would appear that the Spring Rally is more or less official.
Between April and May, the size-adjusted median price rose 3.3 percent for detached homes and 2.9 percent for condos. The accompanying graph chronicles the declines from the peak in this price measure.
Submitted by Rich Toscano on June 2, 2009 - 6:32pm
I'm back from my vacation and ready to clog up the Internets with some bandwidth-hogging images. Kelly put together a nice overview of the latest Case-Shiller home price data last Tuesday, so I will just put up some charts to add color.
Each price tier's decline from its respective peak:
Submitted by Rich Toscano on May 25, 2009 - 11:07am
I will be out of town this week, so you all will be able to enjoy a few days without being assailed by charts and graphs. First, let's wrap up the series on San Diego rents.
A couple months back, I wrote a blog entry maintaining that San Diego home prices in aggregate had finally become "reasonable" in comparison to local incomes and rents. Several readers replied by arguing that while the ratio of home prices to rents might be back in the middle of its historical range, rents themselves had become unsustainably high as a result of bubble-era economic distortions and were likely to fall substantially.
Now underway is the fourth in a series of blog entries in which I've tried to determine whether or not San Diego rents became unmoored from their fundamental underpinnings as the housing bubble took place. The first installment compared rent levels with local per capita income; the second measured rents against median household income. Both comparisons indicated that rents were pretty well in line with incomes after all. The third entry compared San Diego's housing availability to its population and determined that, as of 2008 anyway, the rent to income ratio was quite reasonable considering the number of San Diegans vying for the region's supply of homes.
The purpose of this exercise is to determine whether the housing bubble somehow caused rents to become unsustainably expensive. If we find that 2008 rents were in line with their fundamentals, that doesn't mean that rent prices couldn't drop in the future due to a recession-induced deterioration of those fundamentals. But this is a different question from whether rents were overpriced to begin with.
That latter question is the one I've been trying to answer, and so far, the answer has been that as of last year, rents appeared reasonable in comparison to San Diego incomes. The last topic I want to look at is to what extent incomes themselves might have been distorted by the housing bubble.
Submitted by Rich Toscano on May 22, 2009 - 11:56am
According to the California Employment Development Department's latest estimates, San Diego's year-over-year rate of job losses hit a new low last month. Between April 2008 and April 2009, according to the EDD, San Diego employment declined by 45,300 jobs or 3.7 percent. The orange line on the graph below shows that this is as steep a rate of decline as we've seen this downturn. Also included on the graph are the three sectors that most benefited from the erstwhile housing boom as well as the job market exclusive of those three sectors:
Submitted by Rich Toscano on May 15, 2009 - 1:45pm
Let's pick up where we left off in our effort to figure out whether San Diego rents are at fundamentally justifiable levels.
The first two articles on the topic (here and here) compared aggregate San Diego incomes and rents using a couple different approaches and data sources. The conclusion in both instances was that rents, while having occasionally been cheaper in the past, were pretty well in line with their historical relationship to incomes. (The usual disclaimers about the heavy-handedness of averaging together the entire county apply).
That the rent-to-income ratio is within a normal range is a good first step, but it is not conclusive. We also have to figure out whether it should be within a normal range -- or whether market conditions warrant a rent-to-income ratio that is substantially different from the norm. Candidates for two such conditions include changes in incomes and changes in the relationship between population and housing supply.
This article puts the supply of available housing in the crosshairs. That big old housing bubble spawned quite a boom in the homebuilding industry. If the supply of available San Diego homes were to grow substantially in excess of population, the oversupply could put downward pressure on rents and justify a lower-than-normal ratio of rents to incomes.
But the following chart of San Diegans per housing unit -- San Diego population divided by housing supply, per SANDAG's data-- indicates that this is not what's going on at all. As of 2008, in fact, the number of people per home hit its highest level in three decades:
Submitted by Rich Toscano on May 13, 2009 - 6:08pm
3,673 San Diego mortgages went into default last month -- not quite the fastest pace on record, but close enough.
Submitted by Rich Toscano on May 8, 2009 - 5:27pm
As noted in the prior post, the size-adjusted median actually experienced a bit of a monthly bump for the first time in 2 years:
Submitted by Rich Toscano on May 5, 2009 - 9:12pm
The Compleat Data Rodeo will be up shortly, but in the meantime, I've written a post at voiceofsandiego.org about the fact that the size-adjusted median actually increased last month for the first time since May 2007:
Submitted by Rich Toscano on May 1, 2009 - 9:37am
Back to the topic of local rents and their relationship to incomes, I found some historical data on San Diego's median household income at the Census Bureau website.
The median household income is better than per capita income, which I used in the prior article, because it is a median while per capita income is an average. A median is the middle value in an ordered set of data, and unlike an average it is not thrown off by extreme outlier values (per the "Bill Gates problem," in which Mr. Gates walks into a dive bar and the average net worth of all bar patrons skyrockets into the millions). So the median makes for a better indication of what the typical San Diegan household, and especially the typical San Diegan renter household, earns.
The Census site also had data on the median San Diego rent, which is also good. The downside is that the Census data only goes back to 2001 and is current through 2007. So we don't get the same long-term view as in last week's article, but it's worth taking a look at this alternate set of numbers.
With all that said, here is a chart of the median rent as a percentage of median household income for San Diego:
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