San Diego Housing Market News and Analysis
~Welcome to the Econo-Almanac~
I started this website in mid-2004 to chronicle San Diego’s spectacular housing bubble. The purpose of the site remains, as ever, to provide objective and evidence-based analysis of the San Diego housing market. A quick guide to the site follows:
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Submitted by Rich Toscano on June 12, 2006 - 8:23pm
The party is officially over. This is no great surprise, and we've seen it coming for months. But what's different now is that there is no longer any question that the home price downturn has begun.
At the beginning of 2005, we were in a situation where prices had been flat since the summer, inventory had risen substantially, and sales volume was down. Things didn't look terribly promising for the market. But rates remained fairly low, and lenders tried to drive more volume by pushing non-traditional mortgage products that lowered initial monthly payments. The resulting bump in demand fed a little spring rally, and the spring of 2005 actually saw a bit of a rise in median home prices.
Submitted by Rich Toscano on June 11, 2006 - 12:51pm
Last week featured a couple of interesting housing articles in the local press.
At voiceofsandiego.org, Will Carless has dug up some really compelling info for an article on mortgage resets. Specifically, an estimated 50% of all San Diego mortgage debt has been borrowed at an adjustable rate that will reset by 2010. If rates don't stay nice and low over the next four years all these resets will make a bad situation worse. (This is another clue that the 2010-2011 timeframe might be a good time to start buying San Diego homes hand over fist).
Submitted by Rich Toscano on June 6, 2006 - 10:16am
(Click here for an audio version of this article).
The upward surge in mortgage rates has continued, and as of now both fixed and adjustable mortgage rates are sitting atop their multi-year highs:
Submitted by Rich Toscano on May 31, 2006 - 3:36pm
Tomorrow's voiceofsandiego.org column, a link to which will be available on the upper right of the page*, concerns the shortcomings of the median price as a gauge of broad pricing power.
The executive summary is that the median price does a good job of measuring how much people are willing to spend on housing, but there is a margin of error in translating that to changes in the market price of a given property. Depending on the dynamics involved, this error can go either way: the median price overstated price growth until 2003, after which time it began to understate actual price growth. As has been discussed in the forums, we seem to be getting back to a situation where median prices are once again overstating housing market pricing power.
Submitted by Rich Toscano on May 28, 2006 - 10:17am
Update - May 30 - It looks like the resource usage issues are still occurring. The site may go down from time to time in the near future until I can work with my ISP to figure this out... please bear with me. The original message follows.
Upgrades to the Site
We had to shut down last week because the site was putting tremendous load on my ISP's server. Because there was no concomitant spike in traffic, I believe the excess load was either due to a denial-of-service attack or some sort of memory leak or other bug with the content management software I use. The ISP applied all security patches on their end and it kept happening, so the only thing left to do was to upgrade to the latest and greatest version of the content management software and see if that fixes the problem, be it security- or performance-related.
Submitted by Rich Toscano on May 23, 2006 - 4:31pm
Check out The Big Picture for a good take on why the "it's ok because interest rates are low" gambit is so ridiculous. In short, it is because it is the directional change in rates from the time you buy the asset, and not the actual level of rates at which you buy the asset, that matters:
Submitted by Rich Toscano on May 15, 2006 - 8:57pm
Who spiked the water cooler at the Union-Tribune office? Or, maybe, who stopped spiking it?
Ah, I kid because I love. But seriously, their latest piece on the sharp rise in mortgage defaults is unusually somber. And it has some cool graphs.
Submitted by Rich Toscano on May 10, 2006 - 8:54am
Señor Risk has published an interesting chart showing that Californians' rush into real estate as a career is still going strong. There is still optimisim aplenty out there.
Submitted by Rich Toscano on May 9, 2006 - 10:11am
Will Carless at voiceofsandiego.org wrote a piece yesterday on San Diego's rising foreclosure rate. That's certainly an ominous sign, as a surge of "must-sell" inventory is the most likely catalyst to drive prices substantially lower at some point. But foreclosures are rising off their "everyone has a huge equity cushion"-lows and are still fairly contained, from a historical perspective. So while the directional growth trend is bad news, the amount of foreclosures is not as of yet a big problem.
Submitted by Rich Toscano on May 7, 2006 - 4:27pm
The market is starting to give us a more conclusive view of what's to come. This month's report will check in on the widely-expected spring rally and will use the resulting conclusions to forecast where things may go from here.
Submitted by Rich Toscano on May 1, 2006 - 6:07pm
I found an interesting tidbit on the Housing Bubble Blog. A researcher looking at historical California inventory levels found that once the supply of homes hits 9 months worth of sales, median prices fall "on a consistent basis." This is a statewide stat, but it at least gives us some general insight as to the location of that line in the sand past which increased inventory starts to push prices south.
In regard to price declines, what's more important than the overall inventory level is the amount of "distressed" inventory supplied by owners who have to sell at whatever price they can get. But those two numbers tend to trend up and down together.
As I will discuss more in the monthly housing report (which is coming very soon, and will include new data sources to provide a more current read on the market than is supplied by DataQuick) the combined condo and SFR inventory in San Diego is currently a little below 8 months.
Submitted by Rich Toscano on April 24, 2006 - 11:16am
It's been an exciting month in the credit markets—that is, if you are the type of person who considers anything that happens in the credit markets "exciting." Sadly, I am just such a person, so without further ado let's have a look at everything that's happened since last month's report.
Submitted by Rich Toscano on April 19, 2006 - 8:34am
Will Carless at voiceofsandiego.org has written a piece about an apparent exodus of wealthy investors from San Diego real estate. It has an interesting bit of data: 18% of San Diego home purchases last year were made for investment purposes. (This is out-and-out investing, not the stealth speculation I discussed last week).
Elsewhere in the article, various financial advisors tell us that it may be a good time to unload those alligators. "If you have an investment property, this is a wonderful time to get the heck out," counsels one. I completely agree... though I would posit that last year would have been an even more wonderful time.
Submitted by Rich Toscano on April 17, 2006 - 9:23am
The Union-Tribune recently issued a piece about last month's housing numbers. As is usual in the media these days, the tone was "cautiously optimistic." In other words, things have seriously slowed down, but the median price is still hanging in there... so things are going to be fine, right? Karevoll illustrates the sentiment nicely:
Submitted by Rich Toscano on April 13, 2006 - 8:45pm
The 10-year Treasury yield just busted through 5% for the first time in almost 4 years. Is the global liquidity party finally starting to wind down? Whatever's going on, it bodes poorly for the housing bubble.
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