May 2009 Resale Data Rodeo

As I wrote a few days back at voiceofsandiego.org, we may just be experiencing a geniune spring fling:

In the month of May, the size-adjusted median price for single family homes rose 3.3% for detached homes and 2.9% for condos. This makes for the second consecutive month featuring an increase in this price indicator.

The plain-vanilla median featured some of its trademark wacky volatility, rising 3.0% for single family homes and — are you ready for this? — 10.7% for condos!

The Case-Shiller proxy, based on the detached home size-adjusted median, enjoyed its first rise since 2007. It remains to be seen if the actual Case-Shiller index will rise for May, but Pigg esmith (who calculates such things based on actual same-home sale prices, as opposed to guessing based on the size-adjusted median like I do) has projected a May increase over at his website.

As I wrote in the prior article, I suspect that this is a legitimate price increase as opposed to a 2007-style head fake based on the fact that supply and demand are so much more favorable right now. (That’s current supply and demand — shadow inventory etc. may be a long term issue without necessarily affecting the current level of for-sale inventory). Inventory just keeps marching down, as seen in this next chart:

Inventory is about 2/3 of what it was this time last year. And this doesn’t address the fact that so there are a substantial number of short sale properties sitting out there with offers on them that have been counted as active inventory, but aren’t really actually available in the traditional sense. The MLS has a new category for properties with offers on them, so can look into that more next month. Even without considering that, inventory is quite low.

Sales, meanwhile, were once again better than last year, though the gap is narrowing:

As you might expect, the months’ worth of inventory was quite low:

The disparity between inventory of condos and detached homes keeps growing, with their months of inventory at 6 months and 4 months respectively. This is a pretty huge difference considering how well they’ve tracked in the past. Perhaps a greater proportion of condos falls into that new status category — we will see.

As always, the above graphs lump the whole county together and while they are of interest by themselves, we always need to keep in mind the big disparities between different areas of San Diego. For instance, I just put this table up voiceofsandiego.org — it shows a continuance of the trend wherein the more expensive areas have fallen less in price but are stagnating volume-wise, while the cheaper areas have had bigger price declines but are enjoying a huge surge in activity.

I ended the afore-linked Voice article with about as good a summary of my view on the market as I’m going to come up with, so I will just wrap up by repeating it here:

…until the more-accurate but lagging Case-Shiller index can settle the question, I am going to wager that we are seeing a legitimate rise in home prices. But that doesn’t mean the bear market is over. As I pointed out last month, spring-to-summer price rallies are common even in multi-year housing busts.

That said, there are certainly some positive, if disclaimer-laden, factors in support of housing. They are: reasonable home prices (though only in certain areas); extremely low mortgage rates (though artificially so, and at risk to rise enormously in the years ahead); healthy demand (though heavily dependent on continued low rates); low inventory (not counting foreclosed "shadow" inventory); and unfathomable amounts of government stimulus aimed directly at propping up home prices (okay, I admit that’s not likely to stop any time soon).

But given the huge overhang of current and potential future foreclosures that will likely need to be sold into the market, not to mention all the parenthetical disclaimers in the paragraph above, it’s going to take more than a two-month spring rally to convince me that the bottom is in.