In response to last week’s article on historical home sales, a reader requested charts expressing the sales data in terms of dollars’ worth of homes sold instead of just the number of homes sold.
I had to cobble a few things together to make these charts. (Non-nerds may skip the rest of this paragraph). Ideally, the dollar volume of homes sold would be calculated by either just adding up individual prices of every sale or multiplying the average price times the number of units sold, which would both come out to a precise total of dollar volume. But I didn’t have historical average prices. What I did have historical data on was the Case-Shiller index, which I rebased to the median price for all homes sold in San Diego in August 2009. This isn’t exactly the same as the average price for any given month, for various reasons, but I suspect it will be close enough to get a general idea of what’s going on.
Okay, everybody back? Here is the chart of existing home sales in terms of dollars since 1990, with the requisite 12-month average to smooth out the seasonal ups and downs:
Cool. I like the comparison
Cool. I like the comparison of aggregate dollars’ worth of houses sold to aggregate dollars earned by San Diegans. It’s at least as good as my idea of pricing houses in loaves of bread.
There are those out there who publish charts of the price of an average house in ounces of silver, ounces of gold, etc. However since gold and silver were decoupled from the currency back when, they have become as prone to the vicissitudes of markets as any other ‘commodity’. They come in and out of fashion (1982? 1998?) and their price in dollars gyrates wildly as a result.
But what about the humble loaf of bread? It has a real value– its caloric value– that hasn’t really changed much for millenia. All currencies pivot around it– it is said to be worth X shekels, Y pence, or Z quatloos… but in the end I think its value is the same. Its varying price reflects the varying value of the currencies in question.
Maybe the U.S. should go on the bread standard!
Rich, nice balanced article,
Rich, nice balanced article, you know what that means, get out your helmet because the spam and ammo crowd is gonna jump you. That second chart shows a return to normal levels of the 1990’s. Most readers can write me off as living in another area that lacks relevence to their area, but you used San Diego numbers, how is that possible when all I read are tales from sticky micro markets. We just have a few micro markets for the pain train to pull into before the majority agrees the fast part of the ride is over, welcome to the “flat part” of the graph world my friends.
Thanks again Rich for all
Thanks again Rich for all your hard work. Although I seldom post, I’ve been following your work for over 4 years now. In 2005 and early 2006 I was intensely interested in the S.D. market as I had been waiting to get in for about 3 years. Even before I started to read your work (at about that time) I was fortunate to have an understanding wife when my gut caused me to back away from the market-on-fire.
My gut-check was perhaps just a lucky break since I am a geek at heart and usually depend on a more rational analysis, but I hadn’t done enough homework (nor did I know where to get the needed data until I started following your site). In late 2006 I must admit, however, that the importance of the local market faded in my mind and much of my online energy went into following more general financial blogs. I was beginning to understand why Wells Fargo had offered me such an incredible level of financing a few years earlier. Over the past 3 years of following these blogs I have come to a sad conclusion.
My point: After looking at the more general financial issues and the overall state of the U.S. (and global) economy, I can no longer base any decisions on local analyses restricted to data reaching back maybe 20 or 30 years. Anyone who restricts their attention to the data you have presented in this post will have a hard time arguing with temeculaguy, but I am no longer willing to make decisions based on local housing and jobs data for that period. The current repression (recession/depression) following the financial implosion is truly a repression. The Fed and the U.S. government, with global CB cooperation, are repressing any and all free market function directly or indirectly. Officialdom is scared to death of the consequences of letting the markets function again. I believe this fear is non-partisan based on the activities of 2 administrations in the past 12 months. This repression will continue as long as it is deemed necessary.
And the real shame of all this is that we are all now reduced to gut-checking. Many talk about the “other shoe dropping”, that shoe being any of 1. commercial real estate, 2. Alt A, 3. the China bubble popping, etc. etc. etc. All of these “theories” make for great venting and discussion, and some of these events may well come to pass, but in the end we are left with the following harsh reality:
Even in the best of times, with market information flow at reasonable levels, many problems in economics appear to me to be “ill-posed”. This simply means that one cannot really quantify all the factors involved in ultimately making a decision. (This idea encompasses, among other things, the emotional factors that often confound attempts at “rational” home-buying decisions.) During this repression, any rational analysis now seems utterly out of the question. Yes, another shoe may drop, maybe 2, maybe 3, but officialdom will respond with more repression if at all possible.
Where is the S.D. housing bottom? I’m willing to make a stab at a rational answer if someone out there can prove to me where the bottom is for the global economy. So my advice would be to read – read until you think your head will explode – but do so with the understanding that you will ultimately have to very likely depend on your gut if you’re planning any major financial decisions (ie. home purchase) in the next 5-10 years.
Disillusioned-Rant-Off
While many of your charts and
While many of your charts and graphs show things are pretty close to “normal,” it’s disconcerting that the govt is so heavily involved in the housing market. I’m worried about what happens if/when the govt pulls back. Of course, the govt might continue down the path of dollar destruction, and the housing market might be the best place to be…but I just don’t know.
Thanks for your research, Rich!
“After looking at the more
“After looking at the more general financial issues and the overall state of the U.S. (and global) economy, I can no longer base any decisions on local analyses restricted to data reaching back maybe 20 or 30 years.”
having a big picture view is always important but at this point in time it is critical
IMO 20 or 30 years is not a big enough picture – it doesn’t even take us back to 1971 when Nixon closed the gold window – this was a default of the US dollar but the rest of the world went along with it – the international monetary system that evolved after 1971 (the current system) was NOT planned, it rose out of the vacuum left by Nixon’s action – the rest of the world was pissed off but went along with it because they had little other choice
now, by printing the US dollar without restraint, the US is in the process of defaulting on the international monetary system that evolved after 1971 – the difference this time is that the rest of the world has choices other than continuing to support the US
so, back to my point – to understand current economic activity you have to understand the change that occurred in 1971 (38 years ago) and how that affected the current international monetary system
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another element of the big picture is understanding the role that gold and silver have played throughout history – in simple terms, we could talk about a war between precious metals (honest money) and fiat currency (dishonest money) – this war is ongoing and is currently a ‘hot’ war as gold works its way higher in terms of most of the world’s fiat currencies while the central bankers and politicians print fiat currency as if their lives depended on it
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since this is a real estate site I will point to the charts / articles I recently posted inre the price of housing in silver and gold – talk about big picture! – 100 ounces of gold for the median house – 3000 ounces of silver for the median house – that’s $48,000 to $100,000 in today’s US dollar
if you want to develop a big picture view of economics try to wrap your head around that!
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other elements we could talk about inre a big picture: Kondratieff cycles, Elliott Wave theory, Fourth Turning dynamics – all of these elements suggest that we are in for a serious economic decline
anyway, just wanted to agree with you that local analysis limited to the last 20-30 years IS NOT ADEQUATE for making major economic decisions
temeculaguy wrote:…how is
[quote=temeculaguy]…how is that possible when all I read are tales from sticky micro markets. We just have a few micro markets for the pain train to pull into before the majority agrees the fast part of the ride is over, welcome to the “flat part” of the graph world my friends.[/quote]I might argue that it’s a few micromarkets that have taken the big hits and there are many others that still have a ways to go. No doubt, however, that it’s flattened out for the time being and has also extended into some of the stickier areas, but again, I’d still say there’s a big difference between Temecula Valley and San Diego.
That said, I can’t claim to know TV all that well. Do you still have plenty of properties that are still just plain stupid when it comes to price?
Thanks for indulging me. I
Thanks for indulging me. I had no idea it would take us back to the 90’s, but I had a feeling it would be interesting.
Looking at an idustry by its size in dollars just seems like an important thing to do and nobody ever does it. You saw it here first, folks.
Now, if we could just look at the whole market in terms of number of square feet sold and … just kidding.
Rich, nice balanced article,
Rich, nice balanced article, you know what that means, get out your helmet because the spam and ammo crowd is gonna jump you.
Hahahaha. Yes, very good article. Maybe I didn’t do such a bad thing buying a house at the end of August. It might go a little lower but at the rate they’re printing dollars I’m not so sure…
Thanks for doing this, by the
Thanks for doing this, by the way. I think it’s really interesting.