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  1. bibsoconner
    April 15, 2014 @ 9:50 AM

    Rich (or others),
    Can you

    Rich (or others),

    Can you comment on your last line, “upward pressure on prices immediately ahead”. Specifically, what time frame did you have in mind for “immediately ahead”? 1 month, 1 year, 10 years? Or, in case you are tempted to write back, “What am I a fortune teller? How the heck would I know.”, let me answer the question in as slightly different way that might illicit a response:

    Given the low inventory, how long might it take to get back to normal inventories? Is their historical precedents to look at? Or evidence of massive home construction programs that will provide relief? Why is the inventory low to begin with? As far as I know, the population of San Diego has not noticeably increased in the last 10 years.

    This is not just of academic interest to me. I have a house to sell or rent out and am staying up nights trying to figure out what to do. Clearly, a nice problem to have, but a problem nonetheless (see my post on the subject if you are interested).

    Thanks and keep up the analysis! It’s appreciated.

    • Rich Toscano
      April 15, 2014 @ 5:44 PM

      Hi Dave — No, it’s a
      Hi Dave — No, it’s a reasonable question.

      “immediately ahead” = the next few months or so

      I don’t really know the answers to your sub-questions, but fwiw, this is how I look at it.

      – The months of inventory data has typically been a pretty good indicator of the direction of prices immediately ahead, ie, within the next few months. But as soon as the supply/demand situation changes, the price pressures could change. So it tells you nothing about what will happen past that immediate timeframe… it just tells you whether supply/demand favors buyers or sellers right now.

      – Looking into the distant future, ie several years or more, I think the valuation charts are probably a good indicator… that is to say, if valuations are high, they are more likely to drop, and if they’re low they’re more likely to rise. (Of course, valuations could eg drop without prices dropping, if prices just stagnated while the fundamentals caught up, but you get the idea).

      So I’m pretty comfortable making forecasts on these two timeframes:

      1. months of inventory gives an idea of which direction prices will move, and possibly to what degree, over the next few months
      2. valuations give an idea of which direction valuations will move, and possibly to what degree, over the coming several years

      What happens in between, I have no fricking clue.

      Right now #1 says price pressure is to the upside, but that doesn’t really impact a decision of whether to sell or not. #2 says homes are pretty overpriced, but not nearly as badly as in the bubble. (Click through to the valuations link for a lot more detail on that…)

      Hope this helps…


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