San Diego Housing Market News and Analysis
November 2010 Resale Data Rodeo
Submitted by Rich Toscano on December 11, 2010 - 3:20pm
The median price per square foot for detached homes didn't budge between October and November. This fit nicely into the "flat-to-down" home price thesis I've been advancing in recent months. The 7.4% monthly rise in the condo median made for quite a poorer fit to my theory, however.
The big move up in the condo price was enough to drag the aggregate median price per square foot up by 1.8 percent for the month. That said, the condo series tends to jump all over the place so it's never wise to make much of a single-month move there.
The plain vanilla median was actually up for both property types: 1.3% for detached homes, 8.1% for condos, and 1.9% in aggregate.
Last month sddude (I've decided to drop his extraneous u's in casual conversation) requested vertical lines on the price charts to better evaluate seasonal effects. Thanks to a timely Microsloth Office upgrade and some advice from Pigg AN, I was able to do that this month. I created a separate chart so that I could start the time series in January, making it a bit easier to visualize the seasons.
The spring bounce effect is pretty clear here. Even during the freefall era, the rate of decline slowed a bit (though this is more obvious on the Case-Shiller chart below).
The official Case-Shiller index was down again in September; the median-based estimate projects a further fall in the October CS index but then a flattening in November.
Here's a calendar-year, vertical-lined look at the CS index since just after the peak.
Closed sales declined for the month but this is a fairly typical seasonal effect.
Pending sales were also down, which is also typical for November, but the decline in pendings was quite a bit milder than that of closings.
Inventory dropped again after having risen throughout the year until September.
Months of inventory were ever so slightly up to about 6.3 months.
Aside from inventory at a level that does not portend aggregate price increases in the months ahead, the market now has rising interest rates to deal with. In the past month, per Freddie Mac, the average 30 year fixed mortgage rate has gone from 4.17% to 4.61%. Sub-5% mortgages are still laughably low, but that's a fairly abrupt jump in rates. The specter of higher rates could induce some potential buyers to pull the trigger in the near term, but to the extent that higher rates last they can only be a headwind to the market.
I firmly disagree with the idea that there is a one-to-one relationship between rates and prices, such that if rates increase a certain percent, prices should be expected to decline by that percent or anywhere near it. The historical data clearly demonstrates that there is no such correlation. However, there is no question that sustained higher rates will reduce demand, all other thing being equal, just as super-low rates have in recent times boosted housing activity above what it otherwise would have been.
Anyway, the effect of the rate increase to date remains to be seen, but even if there is no impact from rates, supply and demand levels imply further stagnation ahead.
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|* Rich Toscano is a registered representative of and offers securities and investment advisory services through Girard Securities, Inc., a registered Broker/Dealer, Registered Investment Advisor, and member FINRA/SIPC. Pacific Capital Associates is not a subsidiary or affiliate of Girard Securities. The views and opinions expressed on this site are not those of Pacific Capital Associates or Girard Securities, Inc. The information on this site should not be construed as investment advice.|