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Jim Klinge
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Posted by on May 29, 2012 in Market Conditions, Sales and Price Check, Same-House Sales, Thinking of Buying?, Thinking of Selling? | 6 comments | Print Print

Case-Shiller San Diego March ’12

Reader JRB left this comment:

Jim – with inventory this tight and plenty of buyers, wouldn’t you expect prices to start going up? Do you think more stringent appraisals are keeping a lid on prices?

The other day I said that I thought the pricing trend for detached homes around NSDCC has been slightly downward, but it really depends on how you slice it.  Whether you look at the average $/sf or median $/sf, the year-over-year prices are either +1% or -1%, and then if you take out Carlsbad, they improve a tick or two as well.

But there is more variance depending on the sample  – see the Redfin charts in the right column for three different local zip codes.  You really can’t make a general statement that accurately applies to all areas.

If you want today’s sound bite, the San Diego Case-Shiller Index for March is slightly UP:

CSI-SD Non-Seasonally Adjusted

Feb. 2012: 149.07

Mar. 2012: 149.68

CSI-SD Seasonally-Adjusted

Feb. 2012: 151.47

Mar. 2012: 151.65

It is quite a phenomenon that society is so obsessed with the direction of “prices”.  We are so addicted to the sound bite that we only want or need to hear that prices are ‘up’ or ‘down’, and any further explanation gets ignored.

But I’ll try anyway.

I think prices will be trending upward, but at a slower pace than during the frenzy era:

1. Buyers have all the recent sales at their fingertips, and are using them very cautiously. 

Back in the frenzy era, buyers didn’t have the easy access to sales history, and were much more dependent upon realtors when determining values.  When Zillow began in 2005, it kicked the doors open for the do-it-yourself appraisals, and today there is little respect, and even some disdain for the realtor’s opinion, especially if it doesn’t concur with the buyer’s lower opinion.

Buyers don’t mind paying a little more today, because the lower-rates-plus-the-end-the-frustration combo seems to compensate.  But a few higher sales here and there aren’t enough to create a trend.

2.  For there to be steady appreciation, there would need to be additional higher-priced sales to cause pricing momentum.  Expect that appreciation rates will coincide with the number of sales, and today’s NSDCC sales are 30% to 40% below those in the peak appreciation years of 2002 and 2003.

3. I haven’t had any trouble with appraisals.  There are always going to be an occasional appraiser with a big ego who delights in squashing a sale.  But as long as appraisers are told the sales price in advance and only need to hit it, appraisals won’t be keeping a lid on prices.  Same with mortgage underwriting; it isn’t going to get any tougher (and could get a little easier in areas that were previously declining), so we’ll be fine there too.

4. The number of short sales (and thus, the number of fraudulent short sales) are subsiding.  The biggest purveyor of fraudulent short sales in NSDCC has had his production clipped substantially.

The media will continue their drubbing of real estate (see today’s C-S headlines) so that will thwart some momentum.  But the trend in your local area is what will most likely prevail.


  1. Jim – if the appraiser only needs to hit the purchase price, what value is an appraisal? Any 4 year old could do the same thing. Is that another $400-500 waste of money in the sale/purchase process, along with the title insurance?


  2. The only reason for an appraisal is to complete the file so it can be sold to Fannie/Freddie.

    It is like title insurance – it sounds good and is a requirement for loan to be sold, but is it reliable? Hopefully you’ll never have to file a claim, and find out the hard way.

    BTW, most title insurance companies do their lien research from India.


  3. From our friend Nick at the WSJ:

    It is a sign of the housing slump’s severity that a flat index is something to cheer about. Five cities—Atlanta, Chicago, Las Vegas, New York and Portland—still saw average home prices hit new lows since the financial crisis. Home prices in Atlanta fell the most over the year at 17.7%, while Phoenix posted the most growth at 6.1%.

    However, the data raise the hope that the current quarter—the all-important spring selling season—has lured buyers confident that a bottom has been reached. Last week, the National Association of Realtors reported that sales of previously owned homes—or existing home sales—increased 3.4% from a month earlier.

    “The worst is over,” said Christopher Mayer, a real estate professor at Columbia Business School.

    Research and forecasting firm Capital Economics echoed that sentiment, saying, “U.S. house prices have now found a floor.”

    Indeed, sellers willing to list their homes at prices down sharply from their peak six years ago are finding it easier to sell those homes than it was a year ago. Last fall, “nothing moved,” said Jeff Pintar, a real-estate investor in Dana Point, Calif., who resells foreclosed properties that he buys from banks in five Southern California counties. But that has changed, he said, with most homes now selling within one week.

    “The market is stabilizing,” Mr. Pintar said. “Prices have continued to fall and fall and fall, but right around December buying activity and renting activity really picked up at a pace we haven’t seen in several years.”

    Economist Robert Shiller was cautious, pointing to the European crisis and the uncertainty of government’s continued role in guaranteeing mortgages. “There is a good chance we’ll be down for a year,” he said. “There’s too much uncertainty.”

    Low inventories will put a floor under prices, but they aren’t a cure-all. Some deals are falling through because appraisers say a home is worth less than the price agreed upon by buyers and sellers.

    Katie and Sean Kirsch made unsuccessful offers on four properties in the San Jose, Calif., area this year, including one that sold for nearly 18% above its asking price of $489,000. “There aren’t very many homes for sale, and so a lot of them are selling way above the listing price,” said Ms. Kirsch.

    The Kirschs finally won on their fifth offer this month, when they agreed to pay the $480,000 asking price on a four-bedroom home in Livermore, Calif. The home appraised for $475,000, prompting them to put down more money at closing.

    They secured the winning offer after writing a letter to the seller. “We feel like we’re the all-American family, and introducing our family would help us get a better look,” said Ms. Kirsch, whose husband is in the U.S. Air Force and has served in Iraq and Afghanistan.


  4. Jim, how accurate is RF’s data? I’m watching it, and I can’t believe the movement lately.

    For example, look at the rocket ship that is listing price per sf for city of san diego. Admittedly it gets skewed by the product mix, fewer lower priced listings, leaving OPTs, but, stunningly up 25% in a few months.

    Also look at # homes for sale in SD, down from ~6k to ~2k in two years. Are things really that bad?


  5. This is the same graph from March 26th, so at least it looks consistent:

    Compare houses only, and you’ll see that the average-list-price-per-sf has gone up from $311/sf to $334/sf in the last 60 days! (7.3% increase). In January the low point was $274/sf, so yes, a 22% increase in list priceos in 5 months.

    The sold price is up from $240/sf to $254/sf, a 5.8% increase in 60 days, and a 7.2% increase since the end of February!

    Redfin has had an occasional problem in the past with these graphs, but with no other entity conducting measurements locally, so who knows if it is precise. But it wouldn’t surprise me.



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