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.
Is double-dip is good when it comes from an ice cream truck?
The problem with applying “double-dip” to housing is that there is no good metric to use.
Dollars per square foot has the problem of shifts to smaller or larger homes.
Is it any good if the $/sq.ft. is going up but the number of sales is approaching zero?
Number of sales doesn’t factor in price.
Gross sales volume (number of units sold times average selling price) does not consider if selling prices are going down with total gross volume going up.
If the number of new home sales are any indication, there is definitely a double-dip…
Basing double-dip scoring on the number of sales is inherently unreliable when we’ve just had a discussion about would-be sellers and their realtors shooting their sales in the foot by becoming overconfident and overpricing. Maybe if you compared the actual sale prices of similar homes year-to-year.
I still think that Case-Shiller is the way to measure.
for the upper tier of SD, peak = 224 in 6/06, low since was 149 in 3/09.
We are now at 160, so up almost 10%.
I would be comfortable defining the double if we hit 150 again.
I think it should be noted that double-dip recession is in terms of negative growth in GDP, without respect to the level of GDP. In other words, only rates of change (first-derivative) is considered. Even if GDP is higher, but declining, then a double-dip recession can exist.
First derivative test in housing:
Similarly, if housing prices start to slide for an extended period again, even if above previous lows, would it be reasonable to suggest we have a housing double-dip?