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:
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.
January 9, 2007 @ 1:05 PM
Great graphs as always. The
Great graphs as always. The price per square foot definitely gives you information that the median doesn’t. The small spike in sales is interesting, but I agree it’s likely due to a small group of buyers that were priced out last year but now are slipping in at these prices.
January 9, 2007 @ 3:59 PM
December 2005 resale sales
December 2005 resale sales volume was off 21.2% from 2004.
December 2006 resale sales volume was off 7.4% from 2005.
December 2006 is off about 27% from December 2004.
I suppose that’s better than October 2006 which was off 33% from 2004.
January 10, 2007 @ 10:51 PM
If you want to get a feel
If you want to get a feel for the heat some buyers are feeling.. call around about renting.. I was surprised but in looking for a new place to live I’ve encountered quite a few people with desperation in their voices or grossly overpriced rent(trying to cover mortgage?).. also, quite a few ‘rent until we sell’ listings..
One lady I called was charging too much per sq ft so I told her it was out of my price range.. she then emailed me back and said ‘that she’d rather have a good tenant than charge full price, and the market is in a tough spot right now so let me know what your price range is and we can work something out”.. but the entire message was very long winded and desperate sounding plea and I didn’t bother responding since I figured it to be at least 30% overpriced..