Before we begin the Rodeo, you might be interested in a piece I just
put up at voiceofsandiego.org on National
Day, when we commemorate Greenspan’s first utterance of that
Assuming you have now read the afore-linked piece, celebrated Froth
Day, and eventually sobered up, let’s move on the to last month’s
Last month, you may recall, prices and sales were actually somewhat
weak. I theorized that buyers were holding off on buying in
April, waiting instead for the double tax credit opportunity beginning
in May and accordingly putting downward pressure on April volume and
prices. If this theory was correct, the market would surge
starting in May.
And surge it did. The median price per square foot was up
3.0% for detached homes. This is a good month, but looks pathetic
next to the 11.3%(!) increase in the condo size-adjusted median.
A volume-weighted aggregate of the two was up 5.4%.
Now we all know there is noise in this data, and that it is
particularly bad in the condo series where we just have a lot fewer
data points. But numbers like that are dramatic enough to
indicate that actual prices rose last month.
This was a rare month where the plain vanilla median was actually less
volatile than the median price per square foot. The aggregate
vanilla median was up 4.1%.
Here’s a look at the Case-Shiller proxy. Composed as it is of
single family prices, the wacky 11% condo number had no effect.
Still, the index was up an unusually large 2.6% for the month.
Supply and Demand
Volume boomed as we entered double-dip season, up 17% from the
prior month and 9% from a year ago:
Meanwhile, inventory continued to creep up. Inventory was flat to
down for pretty much the entirety of 2008 and 2009, but it’s been on a
sustained rise since 2010 began. That’s something new.
Incidentally, the increase in inventory is in the active category, as
opposed to the contingent category, meaning that the increase is due to
new for-sale homes hitting the market as opposed to a backlog of short
sales caught up in the approval process.
The surge in demand far outstripped the additional supply, so the
months-of-inventory figure dropped back to near-2009 levels:
Evidence suggests that the “holding out for the double-dip
finish line” thesis is correct. If so, the market should remain
strong as we enter the second and final month of the double-dip here in
After that, I would expect weakness in July as the pressure goes into
reverse and buyers try to pull their closings forward into June.
Sometime after that, the California tax credit kitty will be run
down. Though it might not be that long at all. According to
the FTB site,
of June 1 the first-time buyer credit was already over 50% used up,
just one month into the program. At that rate the tax-credit
gravy train will have left the station before double-dip season is even
So if none of the assorted credits get renewed, we could see a serious
lull starting in July or so. But, perhaps in honor of Froth Day,
the market is partying it up in the meantime.