After getting hammered last month, the median prices for both SFRs and condos were up… the latter slightly, the former somewhat dramatically:
I’m not sure whether the "official" number (the DataQuick median) will be negative again, but I suspect it will, as the dismal performance of new homes combined with that of resale condos will likely be enough to overpower the meager strength in SFRs.
We here at the Econo-Almanac know that the median is not a very good measure of actual pricing power—however, it’s what the rest of the world focuses on, so it behooves us to look at it. In an attempt to get a somewhat better measure of actual prices, I’ve started to track median price per square foot. This still has many of the problems of the median, but at least we can abstract out the effects of people buying bigger places for less money. I only have this data going back to May. Unlike the raw median, it shows a steady deterioration of pricing power since then:
The bulls will take heart in that jump in the SFR median price, but the above graph indicates that they probably shouldn’t.
Sales volume was abyssmal, falling almost 15% and 17% for SFRs and condos respectively… from the prior month.
I expect to see sales fall off a cliff like that in January, not in July. If it’s not a one-month fluke, the steep decline in volume could indicate rapidly changing sentiment as more people decide it’s not a good time to buy. That would be bad.
Based on last month’s sales and current listings, I’ve got SFR inventory at 6.8 months and condo inventory at 8.2 months.
I expect those numbers to get a lot worse. Defaults in the second quarter were up 90% from the prior year and 21% from the prior quarter. But the default party is only just getting started, as most of the really precarious suicide loans won’t start to reset until next year. Inventory will rise, but it won’t be any inventory… it will be must-sell inventory. That’s when prices really start to take a beating, because must-sellers are forced to accept whatever price they can get.
But we’re here to talk about July. And while the bulls may try to spin it otherwise, it was an ugly month.
Update: The DataQuick numbers are out and actually more negative than my own. This is in contrast to last month, when the DQ figures were higher than mine. Different data sources are used (my numbers were taken straight from the MLS, whereas I DQ uses the county recorder), so there will inevitably be some conflicts like this, although this month’s was more dramatic than usual. In addition, as sdrealtor is fond of pointing out, none of these data sources is terribly reliable in the first place. The point is to try to ignore the noise and get a good idea of the larger directional trend (which at this point appears to be “down”).