The local housing market was thoroughly abused last month, at least as measured by the size-adjusted median price:
By this measure, condo prices were down 3.0% and single family homes prices were down 3.6% between October and November. Ouch — that’s more than many real estate boosters said prices could ever go down at all, let alone in a single month.
Here’s a graph starting from the peak of the series:
How does this stack up against the Case-Shiller HPI? The HPI only measures single family home prices, and each month’s figure actually includes sales data from the last three months. So to do a proper comparison, we should compare the HPI with the 3-month moving average of the size-adjusted median single family home price:
As you can see, these two series have tracked reasonably well on a month-to-month basis, the exception being the false median price spike in the first half of 2007 caused by the abrupt tightening for subprime borrowers. This indicates further drops to come for the Case Shiller index, not that this should be remotely surprising to anyone.
The plain vanilla median was its usual wacky and useless self: up 1.9% for single family homes (in contrast with the drubbing indicated by the size-adjusted median), but down 4.4% for condos:
Sales volume was up marginally from the prior month but still down 30% year over year:
Here’s how 2007 sales activity has stacked up against 2006:
Inventory dropped for the month but is still elevated over last year’s level, with the inventory buildup having been a lot worse for detached homes than condos:
The abrupt inventory dropoff we saw at the end of 2006 isn’t happening this year. Back then, many sellers were taking their homes off the market with the intent to relist them when home prices began their inevitable rise the following spring. I would guess that this illusion has pretty much been crushed this time around. Also, there is a much higher proportion of must-sell inventory, including vacant properties or foreclosures, which are less likely to be delisted for the holidays.
The months of inventory figure improved slightly for the month but is still deep into bear market territory…
…and far worse than what we saw at the end of 2006:
That is a huge oversupply of homes for sale, plain and simple, and that’s before even considering that foreclosures and other must-sell homes comprise a substantial portion of that inventory. Meanwhile, homes are still quite overpriced based on rents, incomes, or pretty much any fundamental metric you can lay your hands on. Anyone who says that the bottom is near is simply ignoring these realities.
Last month marked the two-year anniversary of the peak in the aggregate Case-Shiller HPI for San Diego. Yet for as long as this downturn has been underway, it appears that it’s only now beginning to really pick up the pace.
December 9, 2007 @ 9:21 PM
Yikes! So the size-adjusted
Yikes! So the size-adjusted median is down a nominal ~16% from peak, which means it is down ~20%+ in inflation-adjusted terms. That’s quite a haircut for someone who bought at the peak. How many who bought in Sept. ’05 have any equity in their property at this point?
Now that awareness of the housing crash is going mainstream, you’ve got to believe that the down trend will get steeper for a bit before it starts to flatten out.
It will be interesting to see how much of an issue this becomes in next year’s election.
December 9, 2007 @ 9:41 PM
as always, Rich, your
as always, Rich, your analysis is insightful and poignant (poignant: adjective – being to the point)
anything above 8 months of inventory would tend to suggest declining prices and we have 12 months worth – ouch!