From the S&P press release:
New York, March 29, 2011 – Data through January 2011, released today by Standard & Poor’s for its Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show further deceleration in the annual growth rates in 13 of the 20 MSAs and the 10- and 20-City Composites compared to the December 2010 report. The 10-City Composite was down 2.0% and the 20-City Composite fell 3.1% from their January 2010 levels.
San Diego and Washington D.C. were the only two markets to record positive year-over-year changes. However, San Diego was up a scant 0.1%, while Washington DC posted a healthier +3.6% annual growth rate.
The same 11 cities that had posted recent index level lows in December 2010, posted new lows in January.
Double-dip enthusiasm from Forbes.com:
Continuing its descent to the lower depths of a double-dip trough, the U.S. housing market fell even further in January, according to the widely followed S&P/Case-Shiller Home price Indexes. The 20-City Composite fell 3.1% from January 2010 while 11 of the 20 metropolitan areas (MSA) surveyed hit their all-time lows since the index began. In the words of David Blitzer, Chairman of the Index, the latest readings “bring us weakening home prices with no real hope in sight for the near future.”
Every piece of data covered by the index seemed to come in negative in January, with 13 of the 20 MSAs showing further deceleration in annual growth rates and the 10 and 20-City Composites marking their sixth consecutive month of declines. With markets back at their summer-2003 levels, Blitzer sounded his most apocalyptic yet, saying “at worst, the feared double-dip recession may be materializing.”
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Why does San Diego’s Case-Shiller Index keep holding it’s own?
Because the downturn started early here, so we’re a little ahead of the pack? Or the opposite, we’re just hanging on better before the eventual next leg down?
The constrained inventory of quality properties heightens the anxiety in homebuyers, and bidding wars are erupting regularly. But that happens in other areas too, yet San Diego is doing better.
There must be a perfect mix of qualified buyers/low inventory to keep prices buoyant?
I think I’m going to tow the party line blame the snow for all negative January economic data!
The whole concept of “double dip” confuses me. Why is it such a bad thing if the curve bounces up and down a few times while its on its way to the bottom? Or is it just that the people who panic at the mention of “double dip” still don’t get that except for simple inflation all of the supposed economic “gains” of the last decade were bogus and that in the absence of some real economic energy thngs are most likely still on their way back to 2001?
At least PART of it is that old fact that a lot of people really want to live in San Diego. And that simply holds/drives prices up.
And quality/size of housing is important to people in SD (So Cal in general). In Kansas City, the quality and size of one’s home is much less a status symbol, and less of a focus of where one spends energy/money. That equals higher prices in SD.
It seems like people are trying to make a lot more out of the relatively narrow range the market has been in for the past 2 years. San Diego has fared a bit better than most markets, but we’re talking about a couple percent. It’s not like most markets are down 10% and San Diego is really bucking the trend.
There’s not much evidence on either side to suggest that a major increase or major decrease is on the horizon. We probably continue along in this range bound market with the headlines completely out of touch with the reality of a tight range bound market.
Here’s a question from DC. How’s the economy in SD? Ours is actually growing and has done better than most of the rest of the country. As such, continued growth, continued demand, and no double dip. In fact, prices have largely returned to where they were in the desirable areas. What’s the story there? Gangbuster economy in San Diego?
My view is there’s just not enough housing available in SD to buy. To the east there’s mountains, to the west is the ocean, to the north is Pendleton, and to the south is Mexico. In between there’s not much land available to build new houses anymore.
Other cities can generally sprawl out in all directions. This creates new communities people can buy into.
Things in SD County seem to have leveled off, but there is no new source of job creation emerging. The imitation jobs of the housing bubble aren’t coming back, and the other traditional economic engine for the region – the military and defense – have already been firing on all cylinders since 2001.
Considering all the unsustainable new home construction that went on in the county during the bubble, there is if anything an oversupply of housing, except that most of it is REO, the banks won’t drop the prices down to reflect their true condition and would-be buyers aren’t willing to pay “good house” prices for gut-to-the-studs fixer/rehabs.
It would seem that DC and San Diego both share a big relationship with the Defense Industry.
I don’t know that we really went into it that much earlier than the rest of the country. Looking at the graphs all 20 metro areas pretty much went together.
Being a regional education center probably keeps a floor under rents as well.
Plus it’s just so damn nice here.
shadash – explain why San Francicso is down? They have more high paying jobs (and corporate headquarters both in tech and finance/insurance) than we do and are significantly more supply constrained than SD is.
Here’s the seemingly important case shiller data.
June 2006 pretty much marked the peak of Case shiller data
LA = 273.22
SD = 249.60
SF = 218.12
March 2009 basically marked the low
LA = 160.89
SD = 144.58
SF = 117.71
Jan 2010 was last year
LA = 172.97
SD = 156.95
SF = 135.63
Jan 2011
LA = 169.88
SD = 157.03
SF = 133.37
Peak (June 2006) to Low (March 2009)
LA = -41.11%
SD = -42.08%
SF = -46.03%
Peak (June 2006) to Now (Jan 2011)
LA = -37.82%
SD = -37.09%
SF = -38.85%
Low (March 2009) to Now (Jan 2011)
LA = 5.59%
SD = 8.61%
SF = 13.30%
YoY
LA = -1.79%
SD = 0.05%
SF = -1.67%
Each of the 3 major CA markets have some strengths and weaknesses based on the time frame you use but they are really close in the grand scheme of things.
Thanks cali for your work!
“It would seem that DC and San Diego both share a big relationship with the Defense Industry.”
I wish I’d saved the link, but a while back somebody published an estimate that put the percentage of SD County’s economy that depended on public sector funding (military, defense contractors, state and local governments and publicly-funded universities) at something like 60-65%. That’s probably pretty similar to the DC metro area.
“Explain why San Francicso is down? They have more high paying jobs (and corporate headquarters both in tech and finance/insurance) than we do and are significantly more supply constrained than SD is.”
SF area prices shot up during the subprime period because it is so supply-constrained and there wasn’t nearly as much new construction possible to fill the unsustainable subprime demand as there was here. There actualy wasn’t all that much job growth up there in the last decade because much of the VC that might have funded another new tech boom was siphoned off to easy money investments in defense (which doesn’t have much of a presence up there anymore), big oil and mortgage-backed securities, but there was a lot more pent-up demand from techies who had managed to survive the dot-bomb and found themselves able to overborrow to get into homes they had previously thought (correctly, it turned out) they could never afford to buy.
Jim,
You keep pointing your camera at it. Ocean front or ocean views, great weather most of the time and half way decent beaches.
That combination will always have someone wanting to buy.
I think I saw an article posted about 3 months ago saying that SD was going to be one of the few area’s where home prices will increase in 2011, I don’t remember the justification for this.
And I agree , building on mountains is expensive so there is not a lot the new home industry can do to bring down the prices of new construction at this point.
I myself think that if all the stuff going on in the mid-east ever calms down (or gets boring enough everyone stops paying attention to it) we could see more demand nation wide.
Aztec, SD is no more or less desirable now than before the bubble. [And yes, I too want to live there.]
FRBR, DC is fed-gov central, and that’s the last great bubble. Don’t be near ground zero when that one blows.
shadash, the “ain’t making more land” argument? Really???
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The future will be interesting regardless, and SD even more so (especially with Jim on top of it).
Tj & the bear,
If you compare SD to other cities like Denver, Salt Lake, phoenix, etc it’s very clear that we are constrained geographically.
Sounds like the traditional bears are seeing things different now.
Mozart… careful there now, those bears just ate everyone the last 5 years. As you can see from above that SD is down 37% from the peak. That’s not walking around money, that’s a lot of home “equity” wealth effect.
What has happened is that prices did fall alot, just not as much as they should have based on historical evidence. I believe the 2 biggest compensating factors are/were the stimulus programs aimed a first time home buyers, and low interest rates which have buoyed prices. Of course, I’m not sure if the latter will peter out or continue along strong for a while… however it is important to remember that while prices remain above their long-term equilibrium point, consumer spending will be sluggish. So, while prices may be stable, they probably won’t be making any big jumps up or down. Any strength in home prices will reflect strength in consumer spending and will likely be offset then by rising interest rates. To me, it seems like we’re going nowhere fast.
Which, by the way, is perfectly fine with me.
Chuck
I wonder if we’re anywhere near to being back to a place where people buying homes to live in are concerned more about their continued employment and ability to make their payments longterm than some potential future gain upon selling.
Investors, of course, will always be thinking about ROI.
Are there any statistics about what percentage of current buyers are owner-occupants vs investors?
“Are there any statistics about what percentage of current buyers are owner-occupants vs investors?”
I don’t think anybody has a breakdown like that. You can infer something like that from downpayment information that is available. High downpayments and all cash buyers are certainly a larger portion of the market right now than they were in the past. Of course it might be rich people buying homes for themselves or for investment, we just don’t know.
I do know the allure of investment in hard assets like homes comes from an inflationary fear that the fed is creating. A lot of people think their money is better off in anything besides cash because of the money printing we are seeing from the fed. If there is a despised asset class right now it is cash. The dollar is down about 5% from when the market made a low in march 2009.
Livinincali – relating to the US $ being down. Our Japanese clients are beyond anxious to get their Yen out of Japan and into the US as the Yen is at a 16 year high against the $$….they all feel there is a Yen breakdown waiting to happen.
Yen has actually been strong in the short term as demand is high for claim payoffs and emergency reconstruction. That should dissipate over time and there will likely be a strengthening of the dollar vs the Yen after this initial surge. The dollar index is heavily skewed to how it relates to the Euro and not the Yen, so 5% weakness as the way I reported it is more a function of how it relates to the Euro. It’s really all relative in the end.
It wouldn’t come as a surprise if the dollar started strengthening relative to other fiat currencies such as Euro or Yen. Even if the dollar strengthens somewhat I don’t know that it will have much of an effect on inflation expectations initially.
There’s certainly plenty of stories about how people are buying real estate to make up for relatively weak yields in other investments People are often driven into investments because of inflation expectations. If inflation expectations were too soften you might see a little softer demand for housing from investors. That would help the potential owner occupier buyers, you wouldn’t have to compete as much with the all cash investor.