November 2011 Resale Data Rodeo

Submitted by Rich Toscano on December 7, 2011 - 10:28am
The median price per square foot of San Diego resale homes took a bit of a hit last month, down 2.5% for single family homes, .3% for condos, and 1.9% in aggregate.  (The single family home price series is tends to give a more dependable read on the state of pricing power).  On a year-over-year basis, the median price per square foot was down 8.9% for single family homes, 4.4% for condos, and 7.5% in aggregate.



The Case-Shiller proxy, which based on a three-month average of the detached home median price per square foot, fell by an even 1.0%.  That's down 6.0% from last November.  Recall that the "official" Case-Shiller index hit a new inflation-adjusted low as of September -- it looks like we've fallen a couple percent further since.



Below are versions of the above graphs gridlined and aligned with calendar years in order to help elucidate the effects of seasonality.  Clearly, we are in what tends to be the weak season.





Closed sales dropped by 3.4% for the month, a smaller decline than we've seen in recent Novembers.  They were up 10.1% for the year.



Pending sales fell by a scant .8%, which is also better than the typical November drop.  Pendings were up 8.4% from a year ago.



Inventory was down by 4.7% for the month and down 13.6% from a year ago:



That left 5.1 months of inventory, down 3.9% for the month and 20.3% from last November.



This is actually a fairly healthy level of inventory, comfortably below a level at which the market could be considered "oversupplied."  It's interesting that prices have been weak in spite of the reasonable level of supply and the unreasonable lowness of mortgage rates.  We are of course in a time of year in which prices tend to get pressured lower, all other things being equal.  The market also has a lot of foreclosure inventory and a fairly anemic economy to contend with.

The negatives have gotten the upper hand lately, but I don't think a serious decline is in the works barring a major change in macro factors such as rates and employment.  A slow, unsteady grind towards lower housing valuation seems to be the more likely outcome for now.

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Submitted by desmond on December 7, 2011 - 2:50pm.

Could you add a chart that makes housing prices look good?

Submitted by Rich Toscano on December 7, 2011 - 3:32pm.

desmond wrote:
Could you add a chart that makes housing prices look good?

Here you go:

Submitted by desmond on December 7, 2011 - 3:44pm.

To funny.

Submitted by sdrealtor on December 7, 2011 - 3:50pm.

Take out the 2008 lines and the graphs all look pretty much the same. Looks like 3 years of relative stability to me. Don't think we are going anywhere anytime soon and are just building another stable base of new owners who had to qualify for their homes properly.

Submitted by desmond on December 7, 2011 - 4:19pm.

"Looks like 3 years of relative stability to me"

Dec 7 2011.

"The sky is clear we can go to lunch"

Dec 7 1941.

Submitted by ShawnHCRW on December 8, 2011 - 9:55am.

"Take out the 2008 lines and the graphs all look pretty much the same. Looks like 3 years of relative stability to me."

Why stop there? Take out all the data after 2008 and we can stay in the bubble for ever! 2007 prices will look good again and we can get back to the way things are supposed to be, right?

Submitted by Rich Toscano on December 8, 2011 - 10:05am.

Guys, sdr's interpretation is completely legit. The crash phase happened in 08/09, since then the market has just kind of gone nowhere as nominal valuations move sideways, real valuations slowly decline, and the new stock of homeowners is much more financially able to service their debt. What's so objectionable about what he posted?

Submitted by sdrealtor on December 8, 2011 - 11:56am.

desmond wrote:
"Looks like 3 years of relative stability to me"

Dec 7 2011.

"The sky is clear we can go to lunch"

Dec 7 1941.

Thats timely and funny but irrlevant. That was a surprise attack and everyone is watching what is happening now. Expect those graphs to look the same for another 3 to 5 years while we add course after course of bricks to our foundation.

Submitted by Jazzman on December 8, 2011 - 11:57am.

Not sure 2.5% decline is moving sideways. The trend is more down than sideways in my view ...and as the above graphs seem to indicate. Home price are still way over-valued in many places, and shouldn't be confused with affordability based in historically low rates. I do think however, that it is becoming a case of put up or shut up since 'willingness to pay' has never been in short supply in Bubblefornia. What is lacking in that innate sense of value for money, which has become an anachronism. You can argue the stability case until you are blue in the face, but for many buyers it remains a deep source of frustration. Arguments that favor 'what should be' are still relevant.

Submitted by sdrealtor on December 8, 2011 - 12:14pm.

Lately the trend is down as it almost always is seasonally. In Spring it will most likely shift up a bit as it always does and that wont mean the market is improving either.

The arguments that favor what should be absolutely are relevant to what should be. Just not necessarily to what is.

Submitted by Rich Toscano on December 8, 2011 - 12:30pm.

Jazzman wrote:
Not sure 2.5% decline is moving sideways. The trend is more down than sideways in my view ...and as the above graphs seem to indicate. Home price are still way over-valued in many places, and shouldn't be confused with affordability based in historically low rates.

Nominal prices have gone absolutely nowhere for over 2 years. That's sideways. What happens in a single month in a volatile data series doesn't impact that conclusion whatsoever.

I don't know what metric you are using to determine that home prices are overvalued in many places, or what places you are talking about. I do agree that some pockets of SD still seem overvalued. But in aggregate, San Diego homes are actually undervalued based on historical relationships with rents and incomes. (This has nothing to do with interest rates... if you factor in rates, payments are at all time lows compared to rents and incomes).

Submitted by AN on December 8, 2011 - 12:52pm.

Rich Toscano wrote:

I don't know what metric you are using to determine that home prices are overvalued in many places, or what places you are talking about. I do agree that some pockets of SD still seem overvalued. But in aggregate, San Diego homes are actually undervalued based on historical relationships with rents and incomes. (This has nothing to do with interest rates... if you factor in rates, payments are at all time lows compared to rents and incomes).

This is why I'm hoping you can update your shambling toward affordability charts *wink* *wink* :-D

Submitted by desmond on December 8, 2011 - 1:49pm.

For the last year "nominal prices" have been decling and that trend is continuing down, seasonal or non-seasonal. At least that is my interpretation, relevant or not..........

Submitted by pencilneck on December 8, 2011 - 2:29pm.

"For the last year "nominal prices" have been decling and that trend is continuing down, seasonal or non-seasonal."

I'm seeing the same thing Desmond.

Submitted by AN on December 8, 2011 - 2:37pm.

desmond wrote:
For the last year "nominal prices" have been decling and that trend is continuing down, seasonal or non-seasonal. At least that is my interpretation, relevant or not..........

Jan 09-Jan 10, nominal prices was up. Jan 10-Jan 11, was basically flat. Jan 11-Jan 12, it's down. So, over the last 3 years, it's basically flat. Where we'll be in Jan 13? Who knows. We all can guess, but over the last 3 years, it seems pretty flat to me.

Submitted by sdrealtor on December 8, 2011 - 2:44pm.

Whatever trend we see out there is very small. The ec onomic news seems to be getting better including employment. A little good news could bounce things up a couple percent as easily as a little bad news can drop it down a couple percent. Changes this small are just noise in the over all data series. If we go down its not gonna be far. If we go up its not gonna be far either. We are trading in a narrow range and have been for a few years. Some sellers get lucky and get above market prices. Some sellers blow it and get below market prices. Overall we have relative stability. Like it or not.

Submitted by Jazzman on December 8, 2011 - 3:26pm.

Rich Toscano wrote:
Jazzman wrote:
Not sure 2.5% decline is moving sideways. The trend is more down than sideways in my view ...and as the above graphs seem to indicate. Home price are still way over-valued in many places, and shouldn't be confused with affordability based in historically low rates.

Nominal prices have gone absolutely nowhere for over 2 years. That's sideways. What happens in a single month in a volatile data series doesn't impact that conclusion whatsoever.

I don't know what metric you are using to determine that home prices are overvalued in many places, or what places you are talking about. I do agree that some pockets of SD still seem overvalued. But in aggregate, San Diego homes are actually undervalued based on historical relationships with rents and incomes. (This has nothing to do with interest rates... if you factor in rates, payments are at all time lows compared to rents and incomes).

Absolutely nowhere. I don't think so. We saw flatness over the selling season and declines thereafter. We are still seeing declines as your graphs very clearly illustrate. A decline is a decline however small it might appear.

Over-valued is an understatement. I don't need metrics Rich. I have been around long enough to know what is good value and what is not.

Submitted by AN on December 8, 2011 - 3:35pm.

Jazzman wrote:
Over-valued is an understatement. I don't need metrics Rich. I have been around long enough to know what is good value and what is not.

Really? So your age trumps the data?

Submitted by Jazzman on December 8, 2011 - 3:39pm.

AN wrote:
desmond wrote:
For the last year "nominal prices" have been decling and that trend is continuing down, seasonal or non-seasonal. At least that is my interpretation, relevant or not..........

Jan 09-Jan 10, nominal prices was up. Jan 10-Jan 11, was basically flat. Jan 11-Jan 12, it's down. So, over the last 3 years, it's basically flat. Where we'll be in Jan 13? Who knows. We all can guess, but over the last 3 years, it seems pretty flat to me.

Am I missing something here. Look at the graph. Whichever line you pick, it went up after the tax credits and went down when they expired. If flat means we are more or less back to where we were. That doesn't mean RE is flat. It means we are back to where we were. There is a difference. A 1% decline in one month on $1m home is more than most make in a month. If the median went down 2.5% ...that is down, not flat. Whichever fancy way you want to tell it, prices are still headed down, which is where they should be headed. Long may it last, since many homes are still over-priced. Period!

Submitted by Jazzman on December 8, 2011 - 3:46pm.

AN wrote:
Jazzman wrote:
Over-valued is an understatement. I don't need metrics Rich. I have been around long enough to know what is good value and what is not.

Really? So your age trumps the data?

My age tells me one thing and the date presented in these graphs confirms that. The only bloggers I have a problem with on this issue are usually Realtors. Are you a Realtor?

Submitted by AN on December 8, 2011 - 3:54pm.

Jazzman wrote:
My age tells me one thing and the date presented in these graphs confirms that. The only bloggers I have a problem with on this issue are usually Realtors. Are you a Realtor?

No I'm not. AFAIK, neither is Rich. So, if I find someone who's older than you, thinks you're wrong, and think these charts agree with him/her, then you're wrong?

Submitted by AN on December 8, 2011 - 4:31pm.

Jazzman wrote:
Am I missing something here. Look at the graph. Whichever line you pick, it went up after the tax credits and went down when they expired. If flat means we are more or less back to where we were. That doesn't mean RE is flat. It means we are back to where we were. There is a difference. A 1% decline in one month on $1m home is more than most make in a month. If the median went down 2.5% ...that is down, not flat. Whichever fancy way you want to tell it, prices are still headed down, which is where they should be headed. Long may it last, since many homes are still over-priced. Period!
Why use a $1M house as an example. I can use a $100k condo and say some of us spend more than 1% of that on a TV.

Didn't I say price have been going down the last year? But I also say price was going up in 2009 and flat in 2010. Didn't I also say we all can guess where we're headed to in 2012? But no one knows for sure until it happens. Rich have shown data that many homes are underpriced. Sorry but I trust data over your age. To help you out, here are links to the graphs Rich generated. The chart only goes up to February of this year, which is why I'm hoping Rich will release an update. http://piggington.com/images/dec2010_hou...
http://piggington.com/images/dec2010_hou...
http://piggington.com/images/dec2010_hou...
http://piggington.com/images/dec2010_hou...

Submitted by Rich Toscano on December 8, 2011 - 4:31pm.

AN wrote:

This is why I'm hoping you can update your shambling toward affordability charts *wink* *wink* :-D

This weekend, I promise! ;-)

Submitted by Rich Toscano on December 8, 2011 - 4:39pm.

desmond wrote:
For the last year "nominal prices" have been decling and that trend is continuing down, seasonal or non-seasonal. At least that is my interpretation, relevant or not..........

Yes, they were goosed up by the stimulus and since have drifted back down to pre-stimulus levels... this is completely in keeping with my characterization that nominal prices having moved sideways since the crash phase ended in 09.

Submitted by Rich Toscano on December 8, 2011 - 4:41pm.

Jazzman wrote:
I don't need metrics Rich. I have been around long enough to know what is good value and what is not.

This exact comment could have been plucked directly from the keyboard of a 2005-era permabull... ignore the data at your own risk.

Submitted by Rich Toscano on December 8, 2011 - 4:44pm.

Jazzman wrote:
AN wrote:
Jazzman wrote:
Over-valued is an understatement. I don't need metrics Rich. I have been around long enough to know what is good value and what is not.

Really? So your age trumps the data?

My age tells me one thing and the date presented in these graphs confirms that. The only bloggers I have a problem with on this issue are usually Realtors. Are you a Realtor?

Let me sum up your entire argument:

1. Data doesn't matter.
2. Anyone who disagrees with you must be a realtor.

Again, substitute the word "renter" for "realtor" in #2, and you have precisely summarized the thesis that the real estate bulls used at the height of the bubble.

Submitted by poorgradstudent on December 8, 2011 - 5:43pm.

Of course, ~3 years of relatively flat nominal prices means prices have fallen relative to inflation. Probably something like 4-5%, depending how you like to calculate "real" inflation.

It will be interesting to see if months of inventory moves much in December/January. I know a lot of potential sellers take their homes off the market over the Holidays due to not wanting to show them during December. There could be a big difference in 2012's market if we see 4 months vs. 6 months of Resale Inventory in January 2012, and either seems feasible right now.

Submitted by desmond on December 8, 2011 - 5:59pm.

There is alot of effort trying to justify a "Flat or Sideways" market. I can't wait to read the justifications in 3-6 months.

Submitted by sdrealtor on December 8, 2011 - 6:30pm.

jazzman and desmond
Both you seem utterly convinced you know what is coming. I've got an open mind and will listen to reasonable argument. So how much do nominal prices have to fall?

Submitted by Rich Toscano on December 8, 2011 - 6:37pm.

desmond wrote:
There is alot of effort trying to justify a "Flat or Sideways" market. I can't wait to read the justifications in 3-6 months.

I don't find it a lot of effort to look at a chart and note the fact that prices have gone nowhere for two years. I guess I must be a coffee achiever.

My statement was that the market had gone sideways since the crash phase ended in 09. This is an indisputable fact based on what has actually happened, not a prediction about what may happen in the future. Don't make more of the statement than what it was.

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