I love Dr. Housing Bubble, one of the best real estate doomer blogs ever, and still going strong. He did plug San Diego as the best housing market in the West, according to the latest month-over-month Case-Shiller data, but the comments erode quickly:
Category Archive: ‘Sales and Price Check’
Yesterday, the NAR reported the national home sales for August. The number was below estimates, and there was some concern about the ‘market’.
We already reviewed the August sales on September 6th, split into two categories. To update, and to pick up the eight late-reporters, here are the August sales for comparison to the last four years:
NSDCC Detached-Home Sales, August
Our local market feels a little squishy out on the street, but statistically, it looks to be in good shape. There would need to be evidence of sellers caving (SP:LP) or buyers fleeing (# of sales) to cause any major concern.
Above is a graph of the San Diego Case-Shiller Index for the last ten years.
How much higher can it go?
1. The highest reading was 251.71 in March, 2006. After that, the index dropped 42% in three years, bottoming at 145.70 in April, 2009. We have gotten about 61% of that back since.
2. Our most recent index of 210.58 is 16% lower than the peak. The no-doc funny money was probably accountable for the entire 16% difference, if not more.
3. According to the BLS, local prices only rose 0.8% in the last year, and +1.9% less food and energy. Inflation probably isn’t going to drive home prices higher in the near future.
4. It will be unlikely to see mortgage rates go down anytime soon. Expect a holding pattern in the low-4 percent range.
What could drive prices higher? Low inventory is about the only answer, and buyers are tired of hearing it. The Case-Shiller graph shows some sputtering lately, and it has only been interrupted by rates dipping back into the 3s. Without that, prices would be, and should be, flat at best.
Statistically, our local market is holding up. Average and median pricing will bounce around, but the number of August sales was decent.
The year-over-year sales increased on the lower end, but the total month-over-month decline was sharper this year. Last year the total August sales were 9% lower than July, and this year they were -17%.
NSDCC Detached-Home Sales, August – Under $1.2M
NSDCC Detached-Home Sales, August – Over $1.2M
The affluence is astonishing – 926 houses have sold this year over $1,200,000!
The OC Register is reporting that million-dollar sales in Orange County are down 12% this mid-summer. We’re watching the sales counts closely, because we know that is the leading indicator for the market.
How about our north county coastal region?
The OCR only looked at zip codes that had a $1,000,000 median sales price, which in our case, excludes all four zips in Carlsbad.
Here are the stats on the Encinitas-to-La Jolla sales over $1,000,000 (where 91% of the active listings today are over $1M) between July 13th and August 11th:
Our $1M sales count was up 9% YoY, instead of down – yippee! But nobody in this market should get giddy about pricing in general – it is flat, at best.
Let’s describe the frenzy era…..so far:
2012: Rev the engines, we have liftoff.
2013, first half: Full tilt boogie, prices going up as fast as they can.
2013, second half: Mortgage rates rise 0.75% to snuff out price rally.
2015: Rates dip under 4% to begin the spring selling season, sparking a rally.
If the Fed does raise a rate this year, it won’t be much – maybe 0.25%. We will survive a similar bump in mortgage rates, and it might be a relief for it to have finally happened.
My thoughts on interpreting last month’s sales count, and the future:
Last month’s sales blew the doors off – more sales at higher prices!
But notice how pricing has been leveling off:
July Detached-Home Sales between La Jolla and Carlsbad
I tweeted this last week but Nick re-tweeted today so it must be pertinent to something. Note his comment section too:
Median prices of new homes have hit records, both in real and nominal terms. This also reflects the mix of sales: Home builders are selling fewer than half as many homes as they were in 2006, when the old records were reached. Instead, they are selling a much larger share of luxury homes with bigger floor plans than before, which has pushed the median price higher and higher.
The Federal Housing Finance Agency’s repeat-sales index is unit-weighted, so that inexpensive homes sold in Kansas count the same as pricier ones in California. The FHFA index shows prices are around 7% below their prior high, but adjusted for inflation, they’re around 19% lower.
Read full article here:
This summer’s 3-mo moving averages look quite different from last year.
In 2014, the list-pricing started to falter as summer approached, and stumbled along until this spring. But since then, we’ve been on a tear!
How can it be explained? The lower-end buyers are more affected by rising rates, so maybe they are scrambling to buy anything affordable while they can?
According to the MLS, the San Diego County detached-home sales are 7% higher for the first seven months of 2015, compared to last year! Summer sales this year are hotter than the 2013 frenzy levels in the graph below.
Any decent houses-for-sale have been gobbled up so quickly that the inventory appears bleak to casual observers who only see low numbers and lousy offerings left behind by the more-motivated buyers.
The casual buyers and sellers will check out once school starts – leaving the rest of this year to the motivated players on both sides.
When is the best time to buy? When everyone else isn’t!