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September 19, 2006 at 5:30 PM #7551September 19, 2006 at 5:40 PM #35896
Anonymous
GuestFinding — during the last downturn, prices remained near trough levels for a good chunk of time.
Median prices bounce up and down a bit, so I think it’s good to look at the (1) average of (2) month end medians surrounding the trough price.
Last downturn, trough pricing for San Diego resale homes occured in December 1995, at a median price of $162,500.
On average, median prices for resale homes remained within 2% (<$165,750) for five months, from September 1995 through February 1996. On average, median prices for resale homes remained within 3% (<$167,375) for 18 months, from November 1994 through May 1996. One doesn't know that a trough has occured until one has passed it. And, head fakes can occur: median prices increased each month over April through July 1996, before falling, rising, then troughing in December 1995. In this next downturn, the trough plateau may be short or it may be long. The circumstances of this downturn are clearly different, given the amount of consumer, mortgage, and Federal debt that needs to be worked through. And, there's the possibility of mass outmigration to the Midwest and South, too. Moral of the story: prices within the trough plateau remain for 5-18 months, so there's no need to hurry back in, as 'false restarts' have happened.
September 19, 2006 at 9:36 PM #35911CAwireman
ParticipantJG, keep the graphs coming! Question – how long did the trough last? can't read the fine print on the x axis….
On average, median prices for resale homes remained within 2% (
Your frowny face means: Bad the trough lasted a long time, or bad the trough lasted a short time? Other?
September 19, 2006 at 10:06 PM #35913powayseller
ParticipantGreat chart, jg!
September 20, 2006 at 7:06 AM #35927GuestNot a frowny face; cut off message.
In the last downturn, trough pricing for resale homes occurred in December 1995 ($162,500).
Median prices bounce around a bit, so I think that it's useful to look at (1) the average of (2) median prices around the trough.
Over the five months from September 1995 through February 1996, the average of the median prices remained within 2% (<$165,750) of the December trough price ($162,500).
Over the 18 months from November 1994 through May 1996, the average of the median prices remained within 3% (<$167,250) of the December trough price.
One does not know that a trough has occurred until one has passed it. And, head fakes occur: median prices increased each month over the four months from April through July 1995 before falling, increasing, then troughing in December 1995.
Moral of the story: pricing troughs last a while, 5-18 months. So, one does not need to be in a rush to get (back) into the market. And, there may be several false bottoms in this downturn, given the unprecedented amount of consumer, mortgage, and Federal debt that needs to be worked through and the potential for big displacement from California to the South and Midwest. So, keep a close eye on the leading indicators, sales and notices of default, for a heads up on when prices may be troughing.
September 21, 2006 at 1:17 PM #35982Participantjg, since median prices lag by 1-2 years, and tell us about the mix of homes sold, rather than the value of each individual home, the monthly changes in median price could simply mean that more condos sold in one month, or that San Ysidro had more/fewer sales than Del Mar. So that leads to two questions: First, is there a measurement we could use in lieu of median price, such as Rich’s median price/sq ft? Second, if we are stuck with median price, how important is that as in indicator due to the problems inherent in it? While median jumps up and down,the price of each individual house does not. So perhaps tracking the leading indicators is more important than tracking price.
September 21, 2006 at 3:45 PM #36003GuestIn all of my analyses, I use San Diego County (not the city) resale (not new) home (not condo) median (not average) price as the dependent variable.
So, mix may effect things to the extent that a home undergoes a big renovation or is torn down. But, I would guess that ‘change in mix’ affects resale homes less than it does new homes.
Like any human-related activity, and unlike, say, a chemical process, there is some inherent, inexplicable variability. That’s why I look for trends in the data, and don’t think that the first sign of decreasing NODs or increasing sales is an unchallengeable trigger point; the data clearly show some minor movement up and down, beyond seasonality.
Robert Campbell is right: one must see the data integrate for some time before one makes a decision.
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