June Housing Data

Prices

June saw a big move down in the size-adjusted median for detached homes:

And looking at the longer-term chart below, you can see that after the meager "spring fling" in 2006, the price per square foot for detached homes started down again in June of that year:

It’s June again — has the next leg down begun? Seasonality would support the idea, but there are a couple of counterpoints. The first appears in red in the above charts. Which is to say, the condo size-adjusted median experienced a surge almost as big as the detached homes’ drop.

The second and much more significant counterpoint is that a next leg down can’t really begin if the prior leg down never ended. And yet the Case-Shiller HPI would suggest that the prior leg down is still underway, or at least that it was as of April:

The HPI also experienced a spring bounce last year. It ended in June, so if that pattern repeats, then we will find that any seasonal strength has ended just about now.

The counterpoint about the HPI really speaks to the fact that the size-adjusted median has become kind of useless since the bottom dropped out of the low-end market, for reasons I’ve discussed many times.

Speaking of useless indicators, here are the raw median resale prices. Woohoo! The boom is back on! Seriously, I am pleased to note that even the mainstream media is making disclaimers about the distortions taking place in the median price. Of course, that doesn’t stop people from calling the bottom of the market every month.

Supply and Demand

Volume was at 21% below last year’s level. Legendary forum participant Bugs recently reported that 2007 volume might come in below that of 1996, which is really awful when you consider how much San Diego has grown since then.

Inventory was flattish overall, again with detached inventory higher and condo inventory lower.

Months of supply was at 7.2 months, versus last June’s 5.8 months — an increase of 24%.

Conclusion

No big changes here. I’m not going to read a lot into one month’s drop in the detached price per square foot, especially when the prior month was so strong, and when there is no corroborating drop in the condo price, and when the indicator has been useless lately anyway.

It seems to be the case that the median-based indicators are of limited utility, and that prices are probably dropping in most areas, and if they aren’t then it’s probably a bit of seasonal strength poking its head through the gloom.

Now we are getting into the tough part of the year where, all things equal, prices don’t tend to be nearly as strong. But all other things aren’t equal: mortgage defaults and REOs are much higher, demand is down 21%, and there is at least a chance that the weirdness with structured mortgage products will cause some real tightening in the mortgage market.

While the latter half of the year may get more interesting, though, the languid pace of the downturn continues for now. So slow is the correction that, from what I hear anecdotally, a lot of San Diegans don’t even think that prices are declining at all. Hard to believe, but I’ve heard this several times recently. This misguided optimism may be supporting the market to a degree. If so then such support will disappear when these folks inevitably punch in.

The timing of that eventuality is anyone’s guess. Remember, the last housing bust took 6 years to bottom out, and that was after a boom that was tiny compared to the more recent one. The best strategy right now is probably to pull up a chair and relax.