San Diego Housing Bubble News and Analysis

After last week's note on the topic of dramatically disparate buyer interest in different property types I thought I should update the stats on which zip codes have seen the biggest increases in sales activity. To change it up a bit this time, I sorted the list of zip codes based on January 2009 median price instead of sorting zips by growth in sales volume as I had previously. (The median price is a flawed indicator, for reasons often discussed here, but it's the only thing available at the zip code level and besides, it is good enough for gauging the kinds of broad trends we are looking for with this study).

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Housing sales volume has been improving of late, as I noted last week. But now that foreclosure activity has bounced back after a temporary lull that resulted from a change to state law, the number of existing homes going into foreclosure each month is once again higher than the number being sold. That was the case in December, anyway, when DataQuick recorded 3,004 existing house and condo sales compared to the 3,315 mortgage default notices recorded by the county. Default notices dropped to 3,055 in January, but while the January DataQuick numbers aren't out yet, other data indicates that sales will also be lower than they were in December.

Here's an update of a chart we've looked at from time to time as the housing bust has progressed. The orange line on the graph divides the number of single family home sales in a given month by the number of mortgage defaults that same month. The idea is to get a rough idea of how demand stacks up against potential "must-sell" supply. (Condos are excluded from the chart simply because I could only get my hands on historical sales data for single family homes, so the trend changes in this ratio are more important than the absolute number.)

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A while back, just for giggles, I put a little Redfin price per square foot widget up near the lower right of the Econo-Almanac. Lately I've noticed an interesting pattern... that asking prices have turned up noticably even as selling prices continue to nosedive:

San Diego resale housing activity logged its strongest January in three years:

And inventory declined somewhat, leading to a months-of-inventory figure that was just about half of what it had been in January 2008...

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3,055 San Diego homes entered the foreclosure process in January. This is down from last spring's record-setting levels, but not by much in the grand scheme of things.

The continued onslaught of mortgage default notices makes it clear that the three-month plunge seen in late-2008 was the result of new foreclosure rules, not of any sort of market improvement.

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The new year began with another step down in the size-adjusted median for both property types:

Few would have believed, back in the boom days, that a 1.6 percent monthly decline in the median price per square foot for homes sold in San Diego County would be considered a pretty good month. But here we are.

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(data rodeo coming soon)

Humor me for a couple more graphs so that we might expand on last week's post on employment.

First up is a graph showing how the various employment sectors (not just the housing-related ones that I like to single out) fared in the year 2008:

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Continuing with this week's attempt to be light on words and heavy on pictures, here is a look at year-over-year job growth for each month over the past two years, ending with the most recent estimates as of December:

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I've thrown a lot of words at Nerd's Eye View readers over the past week; this week I'll try to stick mostly to pictures. Mostly.

What follows is a roundup of charts depicting the latest (that would be November) Case-Shiller home price data for San Diego.

First, the decline from the November 2005 peak:

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Over at VoiceofSanDiego.org I've put up a two-parter explaining why I believe a protracted period of deflation is an exceedingly unlikely outcome.

No Deflationary Spiral Forthcoming, Part 1
No Deflationary Spiral Forthcoming, Part 2: Counterpoints

(These articles comprise a very slight retooling of the "US Government Won't Choose Deflation" piece linked to at the upper right of this page -- so if you've already read the original one, there's no need to slog through these too).

As discussed in previous installments, a recent change to California state law inserted an extra 30-day waiting period at the beginning of the foreclosure process. Sure enough, mortgage defaults plummeted when the law went into effect. But a couple of months came and went without a commensurate rise -- was something else at work?

Apparently not...

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The size-adjusted median price was down again last month for both property types, with a decline of 2.6% for single family homes and 7.8% for condos. The condo median price per square foot has now fallen over 50% from the September 2005 peak, forcing me to extend the Y axis downward in the chart below:

I will get a data rodeo going in the next couple of days, but in the meantime here's a chart of size-adjusted median resale prices for December, with accompanying writeup to be found at voiceofsandiego.org:

As I noted a couple weeks back, the Federal Reserve will be conjuring money out of thin air to buy "large quantities" (their words) of mortgage-backed securities. The mere anticipation of this flood of freshly-printed cash into the mortgage market has been enough to increase the demand for mortgages and thus lower rates.

continue reading at voiceofsandiego.org