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Posted by on Jun 29, 2012 in North County Coastal, Sales and Price Check, Same-House Sales, Thinking of Buying?, Thinking of Selling? | 12 comments | Print Print

“Rising Prices” and Reality

From HW:

Home prices have found their floor for the most part and are even trending upward in certain markets, said Paul Diggle, property economist for Capital Economics.

Diggle said seasonal adjustments along with a high level of distressed home sales could be giving the misleading impression that home prices are strengthening in recent months. But he says even when accounting for these market distortions, “it appears that home prices have found a floor and, on some measures at least, are rising modestly.”

Diggle points out that both the Case-Shiller and CoreLogic home price indices reported gains in February, March and April. “Indeed annualized growth over that period was 6.2% and 10.9%, respectively, on the two indices—higher than our already above-consensus forecast for house prices to increase by 2% this year,” Diggle said.

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From JtR:

The psycho-babble on rising home prices is starting to ramp up. It is unfortunate that those in the media insist on publishing the tasty soundbites, without any investigation.

None of the forms of measurement are very accurate – because they are measuring different houses/people/locations/conditions during each period. At best, we might identify a trend, but those are only good for a very localized area.

Now that June, 2012 is almost in the books, let’s compare detached sales in San Diego’s North County Coastal region, year-over-year:

Data June, 2011 June, 2012 Chg.
# of Sales
251
281
+12%
Avg. $/sf
$373/sf
$377/sf
+1%
Median SP
$838,000
$879,000
+5%
Average SP
$1,090,058
$1,211,349
+11%
Average SF
3,008sf
3,152sf
+5%
Average DOM
77
78
0

Are prices going up?  It depends how you look at it. The average cost-per-sf is virtually flat, and the median SP may be 5% higher – but the average size of the houses sold this June was bigger too.

I think the environment has changed from buyers-licking-their-chops-while-waiting-patiently to let’s-try-to-get-a-decent-buy-while-rates-are-low.

A subtle change, but enough to move some product.

The whole “prices-rising” phenomenon is mostly psychological, being pushed on unsuspecting buyers and sellers through the media and by realtors with an agenda.  Don’t believe anything you hear, and only half of what you see!

12 Comments

  1. Prices are flat year over year but they are up significantly since the winter dip.

  2. “different houses/people/locations/conditions during each period.”

    Case-Shiller, at least, tries to factor out some of that. For different houses sold each period in different locations they use massive data set tracking every historic sale and using some snazzy statistics to try to evaluate how much the prices changed on the actual houses sold in a given period. It does not directly compare the lot of houses sold in the previous month to those in the subsequent month.

    I’m not sure what you mean by the conditions being different. Market conditions? Isn’t that what we’re trying to measure? If you mean the conditions of the homes sold, the CS index does try to toss out remodels or damaged properties so they won’t skew the numbers.

  3. I was thinking about the condition of each house.

    It happens regularly where a dump will close one month, and the same model but upgraded sells the next month for 5% to 10% more.

    “Prices” didn’t go up, but on paper it looks like they did.

    Bottom line – there is no good measuring stick for pricing.

  4. but they are up significantly since the winter dip.

    Yeah? How are you measuring?

    January, 2012:

    155 sales

    $308/sf avg

    $760,000 median SP

    $1,114,174 average SP

    2,607 average SF

    60 avg DOM

    But it depends how you slice it. Take the average SP and divide by the average SF:

    Jun11: $362/sf
    Jan12: $427/sf
    Jun12: $384/sf

  5. Not rising but a bottom? Bill McBride is money good.

  6. I’m a CR disciple too, and was in full agreement when he first posted his bottom call.

    It’s these media types that want to push it. Being at a bottom isn’t good enough, they want to re-start the bubble again to sell papers.

  7. Damn Jim, you are going to piss some people off.

  8. Oh well.

    The media gave a free pass to Shiller when he talked about the “animal spirits”. They didn’t bother to investigate any bit of that idea.

    But they should, because the psychological/ego aspect of real estate plays a huge role – maybe the biggest role of all – when it comes to buying or selling.

    I’m sure plenty will dispute that idea, but work the streets a while and it’s all you will see.

  9. Well put JTR, but can you clarify how these numbers are derived? Are they based on mls listings, tax records or census bureau? Just wondering if any properties or values are misrepresented.

  10. Well at minimum the price has stopped falling which is a feat of its own and nobody is disputing of.

  11. Recently China has made it difficult for chinese to transfer large amount of $$$ out of China..so the cash buyers from China is going to
    peter out soon.

  12. I use the MLS for my sales data.

    Just wondering if any properties or values are misrepresented? Yeah thanks.

    Why do you change your name?

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