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: ‘Same-House Sales’
After it looked like we were heading for flatsville, the July reading of the San Diego Case-Shiller Index experienced a big spring-like pop of 1.14% month-over-month. Here are the San Diego NSA changes for 2015:
Statistics like these are going to bounce around, so making a decision based on one month’s reading is ill-advised. But the trend this year has been positive!
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.
Price-wise, the selling season cooled off quickly this year, with our San Diego Case-Shiller Index staying about the same in June.
Here are the San Diego NSA changes for 2015:
From the S&P press release, by David Blitzer:
A quarter-point increase in the Fed funds rate won’t derail housing. However, if the Fed were to quickly follow that initial move with one or two more rate increases, housing and home prices might suffer. A stock market correction is unlikely to do much damage to the housing market; a full blown bear market dropping more than 20 percent would present some difficulties for housing and for other economic sectors.”
Wondering what CSI-SD will look like for the remainder of 2015? Here are the non-seasonally-adjusted numbers from last year – let’s call it flat:
For those interested in the seasonally-adjusted numbers, the San Diego index in June declined by -0.23% month-over-month, and was +4.59% year-over-year.
Here is the SA graph – click to enlarge:
Case-Shiller Index cumulative changes since 2000:
Here are the San Diego NSA changes for 2015:
“Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate,” Blitzer said.
Buying decisions that caused closings in early 2015 were stimulated by mortgage rates in the mid-to-high threes. Now that rates are back over 4%, and NSDCC inventory is about 18% higher than it was at the end of April, we should see the appreciation rate flatten out for the rest of the year.
Here are the San Diego monthly changes for 2015:
“Home prices continue to rise across the country, but the pace is not accelerating,” David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said in a statement.
The Case-Shiller Index for San Diego was flat for the last three months of 2014.
But when rates dropped back into the 3.50% to 3.75% range in January, the market surged and both sales and prices picked up.
Here are the San Diego readings for 2015:
The Case-Shiller Index is a lagging indicator, and its reflection of buying decisions made in December-February seems like ancient history today.
“Home prices are currently rising more quickly than either per capita personal income (3.1%) or wages (2.2%), narrowing the pool of future home-buyers.
All of this suggests that some future moderation in home prices gains is likely,” he said. “Moreover, consumer debt levels seem to be manageable.”
The January reading for San Diego was +0.71%, and we almost matched it in February with a +0.72% increase. The year-over-year change was +4.7%.
Downer Dave said,
“Home prices continue to rise and outpace both inflation and wage gains,” said David M. Blitzer. “The S&P/Case-Shiller National Index has seen 34 consecutive months with positive year-over-year gains; all 20 cities have shown year-over-year gains every month since the end of 2012. While prices are certainly rebounding, only two cities – Denver and Dallas – have surpassed their housing boom peaks.
“A better sense of where home prices are can be seen by starting in January 2000, before the housing boom accelerated, and looking at real or inflation adjusted numbers. Based on the S&P/Case-Shiller National Home Price Index, prices rose 66.8% before adjusting for inflation from January 2000 to February 2015; adjusted for inflation, this is 27.9%, or a 1.7% annual rate.
The highest price gain over the last 15 years was in Los Angeles with a 4.3% real annual rate; the lowest was Detroit with a -3.6% real annual rate (San Diego is +4.12%). While nationally, prices are recovering, new construction of single family homes remains very weak despite low vacancy rates among both renters and owner-occupied homes.”
The S&P/Case-Shiller’s 20-City Composite gained 5 percent year-over-year in February, compared with a 4.5 percent increase in January.
Denver led the gains with a 10-percent increase in home prices in the last 12 months, marking the first double-digit gain for the city since August 2013. San Francisco, where values appreciated 9.8 percent from February 2014, saw the largest acceleration in prices.
Only San Diego, Las Vegas, and Portland saw the pace of increases slow from the previous year.
This chart of annual changes shows how the frenzy has tapered off since 2013:
After declining four out of the last five months, the Case-Shiller Index for San Diego rose in January by 0.71%. The year-over-year change was 5.1%, which is pretty hefty considering how high prices already were at the beginning of 2014.
Dave rains on the parade, as usual:
“Despite price gains, the housing market faces some difficulties. Home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback,” said David M. Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices.
The previous reading of the San Diego Case-Shiller Index was +0.29%, and the latest gave almost all of that back. December’s reading was -0.24%, making it four out of the last five that were in negative territory. But the three-month above shows that the end of 2014 was flatsville.
Bob Shiller should be checking in later with his usual whamsy-pamsy remarks, and Dr. Blitzer continues to be focused on what’s wrong – he has to be a lot of fun at parties:
“The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence.