San Diego County prices dropping 15% annually!

[patientrenter]

For marketing purposes, I made a catchy headline out of the following data from DataQuick, published in the LA Times. San Diego County SFR zip code-specific median prices per square foot dropped 1.3%* from April to May 2007. [I understand the median price controversy. If you find youself reaching for a median price knee-jerk reflex reaction, just read the method I used and think it over first. I realize my method is not perfect, and I’d welcome comments on it from anyone who understands it.]

One month alone does not make a trend, but that means the annualized rate of price decrease between April and May is almost 15%. We might finally be seeing some rapid movement in the aggregate price data.

The decrease was concentrated at the lower end. For the 10% of May sales in zip codes with the lowest median price per square foot, the one-month drop was 5%. For the next 40%, prices dropped 1.6%. For the top 50%, prices were flat.

In Orange County, decreases were concentrated in the bottom 30%, with increases above that. Corresponding changes in OC were:
Overall, +0.4%
Lowest 10%, -9.9%
Next 20%, -3.6%
Top 70%, +2.7%.

In OC, the dividing line between the bottom 30% and top 70% of zip codes was a median price per square foot of $387. For SD, the dividing line between the top 50% and bottom 50% was $298. It all fits well with the theory that a credit tightening is occurring that affects lower end buyers more. In OC, there are fewer low-end buyers, but they have to stretch more. High-end buyers seem unaffected.

*Method of calculation:
1. For each zip code, calculate the % change in DataQuick’s SFR median price per square foot from April to May.

2. Average the % changes across all zip codes, weighting each zip code by its May sales volume

[PD]

I would love to see faster reductions. Watching this bust play out is like watching ice melt at 33 degrees.

I have high hopes for this fall. I think credit is going to tighten further, the promise of a spring bounce will be gone and there will be more “must sell” inventory.

[PD]

I would love to see faster reductions. Watching this bust play out is like watching ice melt at 33 degrees.

I have high hopes for this fall. I think credit is going to tighten further, the promise of a spring bounce will be gone and there will be more “must sell” inventory.

[Bugs]

That action occurs it pieces at different times of the year. There will be more pricing movement during some months and basically no movement in other months.

I highly doubt the rate of decline here will reach a 15% pace for an entire year. A decline of 12% is pretty steep. I think a 10% decline is probably more likely. The last bust averaged less than 10%/year, but then again the last peak was 1/3 the size of this one.

Most of the homeowners in trouble will try to hang on. The prices will be sticky all the way down. I think this bust will take at least 3 or 4 more years before it’s played out.

[Bugs]

That action occurs it pieces at different times of the year. There will be more pricing movement during some months and basically no movement in other months.

I highly doubt the rate of decline here will reach a 15% pace for an entire year. A decline of 12% is pretty steep. I think a 10% decline is probably more likely. The last bust averaged less than 10%/year, but then again the last peak was 1/3 the size of this one.

Most of the homeowners in trouble will try to hang on. The prices will be sticky all the way down. I think this bust will take at least 3 or 4 more years before it’s played out.

[patientrenter]

PD,

I like your metaphor. I hope for your sake that it moves faster in the fall. But you’re in Coronado, and that’s the high that seems to be stuck at 32 degrees right now. Do you think new buyers in your area are traditional move-ups from elsewhere in CA, or are they more well-off out-of-staters? Eventually they’ll all get cold feet, but I’m afraid it might take quite a while longer.

Patient renter in OC

[patientrenter]

PD,

I like your metaphor. I hope for your sake that it moves faster in the fall. But you’re in Coronado, and that’s the high that seems to be stuck at 32 degrees right now. Do you think new buyers in your area are traditional move-ups from elsewhere in CA, or are they more well-off out-of-staters? Eventually they’ll all get cold feet, but I’m afraid it might take quite a while longer.

Patient renter in OC

[patientrenter]

Agreed, Bugs. I need to find another hobby besides watching these prices. Like PD says, it’s like watching ice melt at 33 degrees.

Patient renter in OC

[patientrenter]

Agreed, Bugs. I need to find another hobby besides watching these prices. Like PD says, it’s like watching ice melt at 33 degrees.

Patient renter in OC

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