The housing market gave us some mixed signals this month. Below I will attempt to interpret the various—and sometimes conflicting—messages provided by price levels, price breadth, sales volume, and inventories.
Prices
Condo prices weakened somewhat this month, while the median SFR price actually shot up to equal its all-time high from back in July:
SFR breadth improved as well, meaning that the home price strength was fairly uniform throughout the different regions of San Diego County. Condo price breadth told a different story altogether:
Despite the fact that the median condo price was barely down, the number of zip codes exhibiting year-over-year condo price gains declined rather dramatically. Only 52% of San Diego zip codes had a higher median condo price than they they did a year ago—meaning that 48% of zip codes sported condo price declines. The number of zip codes with notable declines (5% or more) in the median condo price also increased significantly:
As the graph shows, 30% of zip codes have seen their year-over-year median condo price comparison decline by at least 5%.
These breadth figures indicate regional instability in the condo market. Certain high-flying areas are still increasing, thus keeping the countywide median aloft, while other areas are seeing condo price decreases. This lack of uniformity indicates that demand is starting to weaken significantly in some areas of the county. In other words, when it comes to condos, the bubble has begun to burst already—but only in certain neighborhoods.
SFRs, on the other hand, are hanging in there just fine. Unlike condos, their prices are for the time being uniformly stable throughout the large majority of the county.
Sales
Sales were actually strong for both SFRs and condos alike, though moreso for the former. As a matter of fact, SFRs and condos turned in, respectively, their 4th and 2nd year-over-year sales increase in the past 12 months:
SFR volume was especially strong—up 40% year-over-year and, despite the traditional seasonal slowdown, the second-highest sales volume all year.
Given the broad-based rise in SFR prices, it’s not surprising that the there was a heavy sales volume bolstering those prices. But how does the increase in condo volume jibe with the lousy breadth? The same applies to this disparity as applies to the disparity between the flat-ish price and the plummeting breadth: some zip codes are doing well and some are doing poorly. For those wondering which zip codes fall into which category, I will be publishing a list of all the zip codes sometime this week.
Inventory
As is usual for this time of year, for-sale inventory declined:
From November to December of 2004, inventory decreased by 11%, whereas it declined only 9% from November to December of 2005, despite the brisk pace of November 2005 sales. So there is still plenty of supply on the market—45% more than this time last year, to be exact.
Downtown inventory is down as well, but it still remains at about twice the level of this time last year:
Conclusion
The theme we’d seen up until last month has re-asserted itself: SFRs are uniformly pretty stable, whereas the condo market is strong in some areas and weak in others. I must say that if we keep getting volume spikes like we saw this month, I will have to re-examine the idea that this market still has some life left in it. For now, though, I think it’s more likely that the volume spike was due to the interest rate volatility of the past few months, which I imagine scared a lot of would-be homebuyers into pulling the trigger. We will see in the coming months. However, until the market proves otherwise, the evidence still points to the conclusion that the decline has already begun in the weakest areas of the market and could start to spread to the remainder of the market soon.