San Diego Housing Market News and Analysis

I can't get too specific in titles, as much as I'd sometimes like to, so let me quickly clarify the subject of this post: the non-housing-bubble portion of the economy grew on a year-over-year basis in July.  This is a significant milestone, as the last time the non-bubble private sector registered an annual increase in employment was back at the beginning of the big crash in October 2008.


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In the first month after the [insert preferred double homebuyer tax credit catchphrase here], prices as measured by the median price per square foot were pretty much flat:

The Rodeo approacheth... in the meantime, for those wondering what happened to prices in the first non-double-dip month, the answer is that they were pretty flat overall:

In my analysis of the local job market I've long singled out what I referred to as the "housing bubble beneficiary sectors."  As the name implies, these industries enjoyed huge growth as a direct result of San Diego's housing bubble.  They were, in no particular order:

• Construction, which grew enormously as a result of the scramble to build to homes.
• Finance, a sector which includes real estate and which benefitted from vastly increased real estate and mortgage transactions.
• Retail, which boomed as San Diego home owners cashed out their ever-growing home equity to finance spending sprees.

These industries flourished as the housing bubble inflated earlier in the decade, eventually becoming bloated well beyond what a normal, non-bubbly economy would call for.  I looked at this topic in a 2006 article in which I tried to relay how dependent San Diego's economy had become on the real estate bubble.  That things were out of balance was apparent in the rate at which the bubble sectors had grown during the decade to date: construction by 38 percent, finance and real estate by 18 percent, and retail by 10 percent.  For comparison, the rest of the economy had grown only 6 percent over that same period.  The housing bubble sectors accounted for 49 percent of all San Diego job growth during those first six years of the decade.

Predictably, the swollen bubble sectors deflated right along with the housing bubble itself.  And while much of economy suffered, the bubble sectors took the brunt of it.  In this article I will take a closer look at how much these three sectors contributed to the region's multi-year job loss trend in comparison to the rest of the region's industries.  Just for kicks, I am also going to break out the government sector because it accounts for a big chunk of local employment (19 percent as of June 2010) and, unlike the private sector, its ups and downs are not strongly affected by the business cycle.

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Kelly Bennett rounded up the latest Case-Shiller numbers yesterday. (Her final C-S writeup?  Sniff sniff...)  I don't have much to add to Kelly's analysis this latest release so I will just supplement with the usual assortment of charts:


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Total San Diego employment dropped between May and June -- but the decline was caused by the mass laying off of temporary US Census workers who had previously been swelling the ranks of the employed. 


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I'd say the best part of July is not the lifting of the June Gloom, but the fact that I won't have to talk about the "double dip" any more.  Well, maybe a few more times.  Like now, for instance.  You will recall that June was the last month in which first-time buyers could get both the $8,000 federal tax credit and the $10,000 state tax credit.  The Feds later extended the June closing deadline to accomodate short sales, but they didn't announce that until more recently.  Because people buying before the April deadline thought they had to close by June, the tax credit's effect should have been used up in June for the great majority of cases.

Prices

It actually appears that the effect of the double dip may have been used up even before that.  The median price per square foot actually fell in June despite the expiring stimulus.  It dropped by a giant 10.6% for condos, more than erasing last month's almost-as-wacky gain.  But even the far less volatile single family median price per square foot fell by 1.4 percent.

The economics blog Calculated Risk put up a very interesting graph last week that showed the relationship between housing inventory and home prices at a national level.  It was so interesting, in fact, that I decided to "borrow" the concept and recreate the graph for San Diego County.

It is below, but it requires some explanation...


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All three of the Case-Shiller home price tiers for San Diego rose moderately in the month of April.  The low tier was back on top with a 1.0 percent rise, compared to .5 percent increase for the middle tier and a .3 percent rise for the high tier.

These numbers followed a very unusual March in which the previously stagnant high tier registered a huge increase and the formerly robust low tier actually declined.  April's price movements were a lot more in line with what we've seen during the price bounce that's prevailed since last spring.


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As it has every month since January, according to the latest estimates from the state of California, San Diego's regional employment grew in May. 

But what (as I imagine some of the more bearish readers are thinking, and, perhaps, readying to inform me via electronic nastygram) of the effect of temporary hiring for the US Census?  It's a fair question.  The Bureau of Labor Statistics estimated that short-lived census jobs accounted for a over 95 percent of nationwide hiring in May.  Isn't the same thing going on here?

No, as it turns out.


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After the last entry on foreclosure activity, a couple of readers sent in articles with more data relevant to the topic of "shadow inventory."

A commenter at my own site linked to a May Union-Tribune article about mortgage delinquencies.  Delinquencies are defined as mortgages on which payments are late by a certain number of days (60 in this case).  The reason this figure is interesting is that it captures all currently troubled mortgages, not just those that have been served with Notices of Default.  So delinquencies are a more inclusive measure of potential shadow inventory.

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Let's check in on San Diego foreclosure activity...

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Before we begin the Rodeo, you might be interested in a piece I just put up at voiceofsandiego.org on National Froth Day, when we commemorate Greenspan's first utterance of that legendary euphemism.

Assuming you have now read the afore-linked piece, celebrated Froth Day, and eventually sobered up, let's move on the to last month's housing data.

After languishing since last summer even as the mid- and low-priced tiers rallied, the high-priced tier of the Case-Shiller home price index finally showed some signs of life.  The high tier of the index, comprising the most expensive one-third of homes sold during the measurement period, leapt 2.9 percent between February and March. 


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San Diego employment growth continued its 2010 streak by rising for another month in April.

The graph below shows monthly San Diego employment since 2007:


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