San Diego Housing Bubble News and Analysis

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.

continue reading at voiceofsandiego.org

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:

continue reading at voiceofsandiego.org

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:

continue reading at voiceofsandiego.org

Below, please find a few tidbits to aid in any weekend procrastination you might be planning.

First, I'll be on KOGO (that would be the radio, AM 600) on Sunday at noon chatting with my buddy Scott Lewis, editor of voiceofsandiego.org, about housing and ye olde inflation/deflation debate. I know what we'll be talking about because we already recorded the segment, which was about 20 minutes long.

So tune in to hear the part where I know I have another a point to make, but I totally forget what it was, resulting some nice dead air. Smooooth.

The show should be archived here at some point.

Second, Jon Lansner of the OC Register is celebrating the 3-year anniversary of his housing blog by interviewing other housing bubble chroniclers. I'm up today.

Condos were whacked hardest again last month, at least as measured by the size-adjusted median price. That price indicator was down 6.4% for condos between January and February alone. The detached home size-adjusted median was down 3.0%, with a volume-weighted aggregate of the two down 3.8%.

Today the California Employment Development Department revealed, unsurpringly, that San Diego's job losses have been severe. The latest update included a revision to last year's data, which painted a bleaker picture of recent months than had previous releases. (This is also unsurprising, given some of the statistical jiggering that takes place with the job numbers).

The graph below shows the year-over-year rate of change for the three hard-hit sectors related to housing, as well as the rest of the economy and all sectors combined. Remember, this is a rate of change graph. So if a line turns up but is still below zero, as in the case of finance, that means that the sector in question is still shrinking, but just not as quickly as before. And if a line is below zero but flat, as in construction, that means that the sector is still losing jobs, but is doing so at a steady rate.

continue reading at voiceofsandiego.org

Well, people continue to ask questions about those home price rate-of-change graphs so I thought I'd put up a few more.

Some people wanted to see a longer-term view that showed the year-over-year price change during the boom as well as during the bust. And some wanted to see the actual price index alongside the rate of change. The below graphs offer both. In order to keep things readable I gave each price tier its own graph:

continue reading at voiceofsandiego.org

People seemed to find the rate-of-change graph in the prior post interesting so I thought I'd follow up with a look at how all the individual Case-Shiller price tiers have been trending.

The results are found in the accompanying graph...

continue reading at voiceofsandiego.org

Below are a few quick graphs of the December numbers... I will note that for the second month in a row, the high tier fell most on a month-to-month basis (-2.4%).

I should also note that the tier cutoffs keep getting lower -- moreso than would be accounted for by just price declines -- because most of the activity is concentrated in lower-priced properties. (The cutoffs, you may recall, are arrived at by separating all the home sales into thirds by price, so the tiers will drop as more low-priced stuff sells).

Anyway, here's a chart from the peak: