Prices

It was another down month as measured by the size-adjusted median price:

By this measure, San Diego home prices in are now down about 9% from last September’s peak. As we’ve often discussed, no aggregate measure is perfect, but this gives a rough idea of what’s going on price-wise. If anything I think this measure probably understates the declines because it does not take incentives into account.

Of course we must address the plain-vanilla median, as that is what the media will focus upon. The median price for detached homes actually rose last month, after being flat the month before, and stands at only 2% below last December’s number.

This will undoubtedly lead some shills to call the bottom yet again. But there are two problems with that thesis. The first is that the size-adjusted median indicates that while the typical detached home buyer may have spent more in December, he or she got more bang for the buck in November. Pricing power is, in other words, still declining.

The second is that the condo median is down over 12% from a year ago. One can hardly take comfort in that number, though I’m sure the permabulls will try to ignore it. The fact is that the scary condo number is as meaningless as the comforting detached number — they are both the result of an abnormal December 2005 in which detached prices spiked lower and condo prices spiked higher. Thus the year-over-year comparison was rendered "easier" for single family homes and "harder" for condos. Both moves were temporary so more normal year-over-year comparisons will emerge again next month.

Since the aggregate median price peak last November, the detached median is down about 6% and the condo median about 10%.

Supply and Demand

Well, how about that. Sales volume actually staged a decent rebound, with combined sales coming in at 7.4% below last year’s number. This compares to recent year-over-year declines of 20-25% so represents a substantial improvement.

At the same time, for-sale inventory dropped …

…with the end result that months of inventory declined pretty noticably:

Conclusion

My guess is that buyers have begun to return to the market due to declining rates and to the bottom-calling propaganda campaigns by national and local shills alike. We are likely witnessing the dead-cat bounce that afflicts all asset bubble corrections.

It’s possible that the trend will continue for a while, but I think it’s more likely that an impending flood of inventory — and, more importantly, an increase in "must sell" inventory due to mortgage resets and housing industry unemployment — will soon enough relieve buyers of the idea that the worst is behind us. In the meantime, with real estate valuations still completely out of whack with the fundamentals, it will probably take more than a weak surge in volume to stem the price declines.