February Housing Data: big jump in prices; inventory approaching early-2013 lows

Submitted by Rich Toscano on March 20, 2017 - 12:09pm
The median price per square foot surged in February:



This level of price increase is in some sense what should be expected given the pretty severe lack of inventory, but to see prices go up so much in a single month is unusual:



Here's a summary chart for the month, showing that price per square foot for single family homes (much more reliable than condos) popped by 4%:



Note that months of inventory is 13% below last year's already-pretty-low level.  Here's how that metric looks over the past few years:



This is less a results of sales volume, which is healthy but very normal for recent years:



...and more a result of the severe lack of homes for sale:



In fact, in terms of active inventory, we are approaching early-2013 levels of scarcity. 





And we know what happened then!  (In case your memory needs jogging: SD Case-Shiller rose almost 19% between January and September of that year).

If more supply doesn't hit the market soon, things could get interesting...

More graphs below:





















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Submitted by bewildering on March 20, 2017 - 4:01pm.

Case Shiller inflation adjusted: We might hit the nominal peak from 2005 by the end of the year.     I much prefer the Case-Shiller index adjusted for inflation:Case Shiller inflation adjusted: We might hit the nominal peak from 2005 by the end of the year. I much prefer the Case-Shiller index adjusted for inflation:

Submitted by XBoxBoy on March 20, 2017 - 6:02pm.

Rich, Thanks for doing this. That lack of inventory is indeed rather unsettling. Interestingly, from what I see, the top end of the market (over 3 million) is actually much slower. Few houses going pending and price increases have come to a halt. Inventory is not that tight either. I doubt that changes much of anything for those under 1-2 million. (And alas, I can't provide real data to back up my observations like your charts so who knows maybe I'm completely wrong.)

Submitted by spdrun on March 20, 2017 - 8:48pm.

Sentiment here is 90% bullish -- does this mean the market is going to turn ... :) When the shoeshine guy starts talking about investing, perhaps it's time to run...

Submitted by wcvarones on March 21, 2017 - 7:01am.

North County coastal has been WAY above 2005-07 peak for a year or two already.

Submitted by biggoldbear on March 21, 2017 - 1:04pm.

Is the main difference between your numbers and the median price discussed in the following article, that yours takes into account ppsf, instead of just median?

http://www.sandiegouniontribune.com/busi...

If there were more smaller, "starter" homes, which I think have had a disproportionately higher increase, that could explain part of the jump/noise?

Submitted by Rich Toscano on March 21, 2017 - 2:38pm.

biggoldbear wrote:
Is the main difference between your numbers and the median price discussed in the following article, that yours takes into account ppsf, instead of just median?

http://www.sandiegouniontribune.com/busi...

If there were more smaller, "starter" homes, which I think have had a disproportionately higher increase, that could explain part of the jump/noise?

Yes on both counts...

Submitted by gzz on March 21, 2017 - 6:44pm.

Wow great news, thanks for compiling and graphing all this data.

About half the price spike seems to be just correcting the unexplained lack of growth in Q4 2016. Even then, we are now above the trend line of the past three years.

These strong February prices will be useful in setting higher comps for the spring and summer selling season.

The bonkers price spike of 2012-13 started when inventory was double current levels.

Submitted by Onateag on March 22, 2017 - 12:01am.

I can't wrap my head around it ... why is inventory so low now? I am going to guess that 5-6 years ago there weren't that many units being built either. Population has mostly always been on a rising trend - or not?. Is it short term rental explosion? Higher rate of out of state immigration? Foreign buyers? I believe it's been a few years of about 30% investor bought units, perhaps post bubble investor racked up a ton of units? Help?

Submitted by bewildering on March 22, 2017 - 1:14pm.

Onateag wrote:
I can't wrap my head around it ... why is inventory so low now? I am going to guess that 5-6 years ago there weren't that many units being built either. Population has mostly always been on a rising trend - or not?. Is it short term rental explosion? Higher rate of out of state immigration? Foreign buyers? I believe it's been a few years of about 30% investor bought units, perhaps post bubble investor racked up a ton of units? Help?

"Lower inventory begets lower inventory; a downward pressure cycle continues. If one cannot find properties to move up to, they will not list or sell their current homes."

There are a list of reasons in this article: http://www.inman.com/2015/04/02/why-is-h...

1. Exceeding capital gains exclusion on primary residence.
2. Sustained low-rate environment for almost 7 years.
3. Value disruption/reset after 2008. Cash buyers are holding on to lucrative rental properties.
4. Values not at peak levels across the country. A portion of homeowners are still underwater in San Diego in 'real' value.
5. Sense that values will continue to climb. Why sell now when prices will rise?
6. Where would I go?
7. Stunted new development since 2007.
8. Investor bought units

Also - from that other thread. Some numbers on San Diego wealth increases (in real value) that shocked me:

From 2010 - 2015, detached housing in San Diego county grew by just over 8800 units.

In that same period, households in San Deigo county making more than $200K/yr grew by 15,400 households. Household making $150K-$199k grew by 8900 households.

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