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  1. JPJones
    February 25, 2023 @ 9:25 PM

    Thanks, Rich! I was thinking about asking for an updated valuation post after unemployment unexpectedly dropped in January. Saw a few news articles predicting more fed rate increases this year, which will pull mortgage rates up with it. It’s looking more like wages and nominal prices will meet somewhere in the middle.

  2. sdrealtor
    February 27, 2023 @ 5:58 PM

    Question for Rich. What period does the historical median represent and why was that period chosen? Was it for some specific resaon or just because that is how far the data goes back? It would seem that the way the market behaved before and after around 2000 is very different when one looks at the historical data.

    • Rich Toscano
      February 28, 2023 @ 9:05 AM

      That’s how far back the Case-Shiller data goes, 1977. The median is just the median over that entire history. It’s just there for reference, not to suggest that it’s the “right” level or anything.

      • sdrealtor
        February 28, 2023 @ 11:22 PM

        Thanks for clarifying that

  3. barnaby33
    February 28, 2023 @ 9:26 AM

    What is the “right” level? I wonder if there is a blended average of price/interest rates where we see the market come into balance. Of course you’d have to make an assumption of what that is, 2 months inventory, 6.

    • Rich Toscano
      February 28, 2023 @ 12:00 PM

      “What is the “right” level?”

      I’ll let you know in 30 years…

  4. gzz
    February 28, 2023 @ 5:17 PM

    My bearishness is growing daily.

    Like most owners with locked in low rates and property tax, I would never sell. But I still like my zestimates to go up.

    California’s Prop 13, high construction costs, and state level cap gains really holds back supply. But when I look at other sunbelt areas like Austin, inventory is surging and looks like some serious additional price declines are in the cards.

    Can we have 7% mortgage rates and 11% car loans and not have a recession? Probably not. The tardy and long awaited China Reopening is good for demand but will fuel inflation.

    I added to my RE shorts. Reshorted BXP after covering a while ago, added to AVB.

    As general recession shorts, I shorted TSLA, WING, WMT, and TR. Also SPY puts.

    I am not a fan of all these new suburban infill state laws. But they always seem to be more scary in theory than practice. Anti-developer city govs and zoning definitely do hurt supply. However, high construction costs and now high finance costs are bigger problems. Construction employment is just not going to go up enough to significantly increase new RE supply. And the YIMBYs can’t help themselves, they put burdensome affordable housing mandates in their “deregulation” laws.

  5. markmax33
    March 1, 2023 @ 1:28 AM

    I think the old assumption 6 months of inventory is a stable market is no longer valid. The invention and access to web search tools has lowered the friction in the market and decreased search times. When a buyer can drill down to an area and neighborhood in 1 hour versus 4 months of house tours and scouting the friction is less. You can additionally research schools, restaurants, activities with the internet and understand the area much better than when that 6 month metric was coined 30 year ago. I would estimate stable supply for San Diego is around 2.5 months and anything over is a glut and prices will drop. This market is going to get crushed. It takes 3 doctor salaries to afford the median priced home with 20% down. Sell sell sell, buy back at 50% off when it gets foreclosed on in 3 years.

    • sdrealtor
      March 1, 2023 @ 7:24 AM

      The problem is there are not and won’t be excessive selling. If i sold and bought back at 50% peak values my taxes would still be nearly double what they are. Id have to pay taxes on a capital gain of more than $1m. I’d have to move and I hate moving. I’d have to rent some place not as nice. There are so many problems with your suggestion. I’ll just stay here, that’s fine takes. And stay off my lawn!!!

    • sdduuuude
      March 1, 2023 @ 2:32 PM

      The math doesn’t work this way. Just because people can spend less time finding a home doesn’t mean that there will be more homebuyers per month coming into the picture, or more sales per month. it just shifts the the sales to an earlier month.

      • Rich Toscano
        March 1, 2023 @ 2:48 PM

        I agree that 6 months of inventory is not correct any more… over the past decade, the equilibrium level seems to have been about 2.5 months of inventory (whatever the mechanism for that shift may be). See chart below.

        However, the leap from that fact to making a bearish forecast is inexplicable to me. If indeed equilibrium supply is 2.5 months of inventory, that is neither bearish nor bullish… it is just a statement how the market functions. (If anything, the fact that Jan inventory was below equilibrium is short-term bullish).

      • sdduuuude
        March 1, 2023 @ 4:35 PM

        Maybe it does work that way because houses don’t linger as long. My intuition has always told me that the change in months of inventory coincide with price changes more than the absolute months of inventory. Meaning – if prices are stable, months of inventory could be stable at 2.5 months of inventory or 6.0 months. Seems like Rich ran those numbers once and proved my intuition wrong. I wonder if you include the times when 6.0 months meant “stable” and now when 2.5 months means stable then it would come out differently.

  6. sdrealtor
    March 1, 2023 @ 3:26 PM

    And the bottom line is so few are selling that it doesn’t matter. Ok prices drop. Good luck being the guy to get the one house that is for sale

  7. sdrealtor
    March 3, 2023 @ 2:04 PM

    March, April and May are traditionally the peak listing counts each year. Not looking that way. So very quiet

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