Last month, home sales weakened even further…
…while inventory crept upward…
…resulting in a nice pop in months of inventory:
Here’s some perspective on that rise. Months of inventory is still quite low versus the pre-Covid era, and lower than it got in 2022, but up quite a bit from earlier this year:
So the standoff does continue, but the sellers have definitely gained some ground in terms of supply and demand. With that said, they’ve definitely lost ground in terms of monthly payments — it’s no wonder the supply of buyers is drying up:
Prices have leveled out over the past couple months…
…and based on the recent relationship between inventory and prices, we will likely see more pronounced weakness if months of inventory continues to rise:
More charts below!
Seeing real payments slightly above the 2006 bubble peak is a little concerning at first. However, real per capita GDP has increased by almost exactly 20% since then, and local real wages probably even more than this 20%.
https://fred.stlouisfed.org/series/A939RX0Q048SBEA
My new small town midwestern house I am really enjoying, 195k for 2700sf 5/3, in good shape but very outdated and no garage. It would easily rent for 2000 a month, maybe 2400. The purchase market is tight but not as bad as SD since prices are so much lower so high rates are less of an issue. But the rental market is much, much tighter. It’s just shocking to see a rural county of 40k surrounded by 10k counties have rents similar to San Diego circa 2005, e.g. $1100 for small renovated one-bedrooms, $1700 for 1300sf townhouses with attached garage or older 3/2 homes. The bottom of the market are 600sf jr one bedroom apartments for about 900, and they are snapped up within 2 days.
I’ve also enjoyed your data and insights on the San Diego housing market. I just published this short article on LinkedIn with some of my thoughts, which I thought your readers may enjoy.
Very nice graph of the correlation between the monthly changes in inventory and monthly changes in prices, Rich!
Looks like interest rates are finally causing price drops.
There were 2,101 home sales last month, according to CoreLogic data released Tuesday, the lowest ever recorded for a September in records dating to 1988. It wasn’t just low for September — usually a big sales month — but the eighth-lowest sales month ever recorded with a 20 percent drop from August.
This is from https://www.sandiegouniontribune.com/business/story/2023-10-31/san-diego-home-sales-nose-dive-median-price-drops
Anyone notice wages are still rapidly increasing?
I am a laboratory technician in a hospital.
I just got a raise up to $65.34 per hour up from $60.57 per hour.
That is a 7.3% increase for 2023
The previous year my salary increased from $54.90 per hour up to $60.54
A 9.3% increase in 2022
My wages have definitely been going up faster than inflation as a healthcare worker.
That has to have some effect on the San Diego market when middle class healthcare workers are making $200,000 a year with overtime.
Seems like a repeat of the late 70s, but not to the same extent. i.e. Wage inflation will keep RE nominal prices high or rising.