How are we going to know if we have a double dip?
What is a double dip?
Investopedia defines a Double Dip as: “When gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession.”
Let’s apply that to the real estate market.
Would 3-5 months of steady negative Y-O-Y numbers and heading for previous lows be considered double-dip-ish? If we hit previous lows, or lower, we’re double-dipping!
It’s all local, but here are the SD County detached numbers so you can see what it’ll take to double-dip. Sales tend to taper off around the holidays, so there is some seasonality to the numbers.
To be in double-dip territory, the SD County detached sales around year-end would be approaching those of late-2007 and early-2008, when they were under 1,000 per month for five out of six months (see below):
The pricing low spot was $209/sf, in March, 2009 (see below). If we get into the low-$200/sf range again, we’ll be in the dip-a-roo zone. If you want to apply it to your local area, compare to comps from the early-2009 era.
If both sales and pricing do the double-dip, we’ll call it full collapse.
Of the two, sales are the leading indicator.
This month’s sales look like they are going to be down substantially, there are only 1,308 detached closings so far with three business days to go (plus late-reporters). But those are averaging $262/sf, which is 25% higher than last year’s low.
There were 1,711 sales in June, 2007, and 1,748 in June, 2008 – the recent low spots for that month. With the federal tax-credit wrapping up, we should exceed those, but not by much.