An excerpt from the sddt.com:
Alan Nevin, director of research at MarketPointe Realty Advisors, noted that the average and median home prices in the county have stabilized.
“However, when the median is substantially different than the average, then there’s something wrong in the market,” he said. “Because, in a strong market the median and average should be very close. Here we’re showing a differential of over $100,000.”
Data from the S&P/Case-Shiller Home Price Indices released on May 31, which more closely measures changes in home values, showed that San Diego homes in March had depreciated 0.8 percent on a monthly basis, and 4 percent on an annual basis.
“We’re basically doing better than the other 18” cities measured by the Case-Shiller Indices, he said.
Through the first five months of the year, total home sales in the county have declined 7 percent to 12,476. Over the same period, total foreclosures in the county have declined by 11 percent, to 5,416.
Since foreclosed homes represent such a large percentage of the current for-sale inventory, Nevin said it’s noteworthy that sales activity has held up to a more pronounced decrease in foreclosure activity.
“It’s showing that when you factor in the major decline in distressed sales, that is basically showing that the market is really strengthening, if they can do almost the same volume with fewer distressed sales,” he said. “That’s an indication that there’s life out there.
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Alan said that in a ‘strong’ market, the median and average sales prices should be very close.
For the 470 NSDCC detached sales between April 1st and May 31st:
Median SP: $854,000
Average SP: $1,086,723
For the 385 NSDCC detached sales between April 1st and May 31st under $1,500,000:
Median SP: $771,419
Average SP: $808,964
When you take out the 85 homes that sold over $1,500,000 (in two months, a strong signal in itself!), the median and average are pretty close. It’s been a strong market around here lately – will it hold up?
From Credit Suisse for May for San Diego:
San Diego, CA
(2,270 single-family permits in 2010, 53rd largest market in the country)
Traffic below expectations. Buyer traffic fell short of expectations in May, as our traffic
index fell to 22 from 30 in April, short of a neutral reading of 50 (readings lower than 50
point to traffic below agents’ expectations). 65% of agents said traffic was below
expectations, 26% said it was in-line with expectations, and 9% said it exceeded
expectations.
Lower prices, higher incentives. Homes faced additional pressure in May. Our price
index fell to 29 from 36 in April, below a reading of 50 (readings below 50 point to
sequentially lower prices). 50% of agents said prices were lower over the past 30 days,
42% said they were unchanged, and 8% said they were higher. Meanwhile, incentives
were higher in May, as our incentive index came in at 40 (from 50 in April), short of a
neutral reading of 50 (readings lower than 50 point to increased incentives). 80% of agents
said incentives were unchanged and 20% said they were higher.
Length of time needed to sell a home increased – a negative indicator for future
pricing trends. Our time to sell index came in at 28 in May (from 38 in April), remaining
below a neutral reading of 50, pointing to an increased time to sell over the last 30 days
(readings short of 50). 48% of agents said the time to sell increased, 48% said the time to
sell was unchanged, and 4% said the time to sell decreased. We view the longer time to
sell as a negative indicator for future pricing trends.
Comments from real estate agents:
? “Confidence in the economy is low. Buyers are holding off.”
? “There is a strong anticipation of lower prices in the future.”
Standard Pacific and D.R. Horton have the greatest exposure. Standard Pacific has
the most exposure to the San Diego market, as it represents approximately 4% of the
company’s sales. San Diego represents 2% of sales for D.R. Horton.
Housing Tracker has the following for SD County;
June 2011 Inventory = 15,722
June 2010 Inventory = 15,753
Asking prices are down around 4% but the lower tier is exactly the same number year over year.
http://www.deptofnumbers.com/asking-prices/california/san-diego/
It will be interesting to see what stable gas prices do and inevitably when the national employment numbers are revised upwards for May. Still, all this bad news lately has put a big chill on this summer market.
I don’t see why the median and average should be the same. Clearly, the distribution of home prices is not symmetrical. There are many more low priced homes than $1m+ homes. So, if all homes sold at the same rate, the median will always be below the average.
Jim’s method of throwing out the +$1.5M houses should remove some of the bias in the average.
In a limited area where incomes are all about the same, you might not have the asymmetrical distribution of home prices. In that case, homes at all prices selling at the same rate would lead to the median and average being about the same.
MikeR
It is impressive, or shocking, that the 85 homes JTR tossed out of the sample over $1.5mm represent 18% of the total sales…
think about that for a minute, 18% over $1.5mm is a staggering number when you think about the reality of 99.9% of people’s lives and checkbooks.
Its another world in part of SD.
For the life of me, I can’t understand how anybody without an axe to grind (NAR, CAR & OCAR, etc) can paint a bullish case for real estate.
It’s because they look at facts like these psoted above and see beyond the pre-conceived ideas.
Please feel free to look for yourself.
P.S. He’s another stalker.
Home prices will come down till rental yield = or greater than mortgage payment.
There is still a long way to go especially in the NSDC area.
RE: Housing Tracker.
The shine is off the apple with them, because I don’t know where they get those numbers.
As of this morning, there are 12,799 active MLS listings of detached, attached, mobile-homes, and 2-4 unit properties.
They say that they include FSBOs, but most of those are listed with discount agents and I don’t see that many of them anyway. FSBOs are typically less-motivated, and come out when times are good.
But agreed, not much has changed with the inventory in the last year.
JtR,
Any comments on this article about agents taking what’s basically a payday loan against escrow accounts? I’m floored.
http://www.signonsandiego.com/news/2011/jun/09/real-estate-agents-needing-cash-turn-advances/
The folks who were waiting for rental yield = or greater than mortgage payment beginning in the early 90’s recession for NSDC coastal SFRs are still waiting.
Heck, maybe the govt. will subsidize and pay us so that mortgages will be a negative 5% interest rate over 30 years in nominal terms. Could happen then.
Or maybee the govt. will require 80% down in order to get a mortgage. Could happen then too.
I agree with clearfund about the disconnect. For most people in California (or elsewhere), $1,500,000+ for a house is an impossible dream. Even if you could afford it, why would you want to tie up that much capital or income unless you were worth several times that?
Gotta always wonder about the sources.
I commented on Tanya’s article a couple of posts back. I’m surprised, because I like her and think she’s a good agent.
We are facebook friends, so I checked out what she was saying, and apparently it’s no big deal.
She had this there though:
Yes!!! Encinitas Local Legends WALLY WORLD will be coming out of the cave to play a FREE SHOW @ Bar Leucadian!!!
THIS IS TRUE ENCINITAS TRADITION!!
If you have not witnessed this display, check out this video!!!!
http://www.youtube.com/watch?v=IS2EKA_THWE
http://www.youtube.com/watch?v=vYNzPKmMCgc
Joining Wally on stage will be the band BEDLAMS EDGE!! These guys are an up & coming young group of AMAZING hard rock & metal musicians!!! Check em out!!
https://www.facebook.com/pages/Bedlams-Edge/362742474178
If you live in the Encinitas area, you gotta see this!!!
Kingside,
you will be surprised how fast the prices will come down to match rental yields once the people stop believing / buying on the premisses of asset appreciation only and the banks start requiring min 20% down payment which is nothing extraordinary.
No one is buying on the premise of asset appreciation now, and prices aren’t dropping fast around here.
More mumbo-jumbo.
Realtors (capital R) are your friends.
I don’t know Casanova,
What I do know is that I bought a NSDC coastal house with 20% down payment in 1993 and the mortgage payment then was greater than the rental value.
I still live in that house, and today the mortgage payment is about 40% of the rental value, even after I refied into a 15 year fixed.
Glad I didn’t wait.
Yep I bought in ’97 with a 15 yr FRM and will burn my note in less then a year!
If you look at most current listing in NSDC, houses that sold for 1million in 2000 are back on the market for 2million, asking 100% more on average.
One has to wonder what justifies that price increase as most houses I have looked at have not seen significant renovation compared to 10 years ago, rents and income are stagnant, just the house is 10 year older and in need of some work most probably.
Why would a buyer pay double price 10 years later – I still have to hear a reasonable answer to that question.
Because they don’t live in the past. They need a place to live, and have the money to buy.
BTW, there have been 165 homes closed over $2,000,000 in SD County this year, at an avg $631/sf. Don’t fight it, just go with it.
“Because it makes them happy!!”. Do not want them to be happy?
Hi Kingside,
I am really bored at hearing the year 1993 stories of how smart i am buying during those tough times, even though it rent vs. buying didnt make sense at that time.
Here is the scope.
1993: Rent vs. Buy didnt make sense. But salary compared to sales price (3X times) made sense.
Avg. software engg: 40-60K
Avg. 2100sqft home: 300K
2005: Rent vs. Buy didnt make sense. Salary to Sales price (5x-6x times ) didnt make sense.
Avg. software engg: 70-80K
Avg. 2100sqft home: 600K + Mello.
2010: Rent vs Buy didnt make sense. Salary to sales price (4x-5x) is still not making sense.
Avg. software engg: 75-82K
Avg. 2100sqft home: 500-550K + Mello
Your 93 story is valid in few areas like : chulavista, san marcos, temacula, riverside, ..etc..
Not valid pretty much every where else..
BootyJuice and Kingside,
You are lucky to be able to stay at your house long term and didn’t have to sell. That’s the ideal situation for owning a house.
However for a lot of people, employment opportunity is the driver for moving every 5 years or so and that’s when bad timing can make owning a house so aversive to many.
KD, yeah if you have to move that often owning a home could be a sketchy proposition and I personally would just rent fer sure! I’m also no fan, obviously, of perpetual house payments – I’m happy to live in a house semi below my means, i.e., 20% plus down and a 15 yr note. Next Feb drinks on me!
I remember hearing Nevin speak in 2006 and 2007 saying the market wouldn’t crash. He has an agenda b/c he’s a builder. He’s a salesperson and lacks credibility IMO. Kind of like the shills at NAR and CAR.
casanova,
You’re not going to like this:
http://www.cnbc.com/id/43354714
The gall!
(hat tip clearfund)
Dont worry Casanova
That yr 2000 home that was a mill and is now 2 mill – will be much closer to the 2000 price than the current price. Have faith. Believe what you know is correct. All bubbles pop. Some just take longer than others.
There is lots of money out there for sure. I have absolutely no issue with that, if people one to pay 100m for a home and have the money , so be it.
What I have issue with, is people borrowing the money and having taxpayer backed fanny insure their reckless speculation and when things turn sour, the same people return the keys to the bank and we as taxpayer end up footing the bill.
And no Jim, I am not living in the past, but I have lived in your future and can see the train wreck slowly coming.
I am sure you could say that for people buying in 2006 too.
People who have 2million to spend on a house that was worth only 1million 10 years ago don’t NEED a place to live. They are playing with others people money, or got it the easy way or simply are stupid and have no clue about money and investment.
or they have so much money that they just don’t care…
Right now there’s certainly a few people with money that fear what Ben Bernanke is doing with the printing press and fell like holding assets is better than holding dollars. Others think that fear is over blown and are wiling to trade assets for dollars. Somebody will be right and somebody will be wrong by varying degrees over a time frame. Certainly if we see deflation in the short term the seller is going to be happy if we see high inflation or hyper inflation the buyer is going to be happy. If it just muddles along maybe both will be happy, or maybe both will be happy because they both got what they want. One got the freedom to move the other got a house they love.
When I say I have lived in your future, I mean it. I was for 15 years in Japan after the RE bust there. RE prices are still trying to find a bottom in Japan 20 years later. We are following on japanese foot steps almost identically and hoping for a similar outcome actually as the best scenario out of all horrible possible outcomes.
Bill Gross got caught standing on the wrong foot when he bet against US treasury and sold a bundle of US bond a few weeks ago. Instead of going up as he predicted the interest rate went down. It just shows his guess is as good as mine.
KD, Gross is betting that when QE2 ends (the Fed stops buying it’s own bonds in order to keep long term rates low) that rates will rise and prices fall. The Fed will not end QE until spending an additional $50BB USD through June, so the assumption that Gross is wrong is just silly.
“However, when the median is substantially different than the average, then there’s something wrong in the market,” he said. “Because, in a strong market the median and average should be very close.”
This is wrong in some interesting ways. As MikeR already pointed out, all the comparison of the mean versus the median shows you is how skewed (i.e., non-symmetrical) the distribution is. Whatever market Alan Nevin is talking about, apparently it is a very symmetrical market with few expensive homes. That’s not the case in North County, as JtR already noted.
For example, consider Jim’s experiment comparing the mean vs. median when he excluded the expensive houses. As you’d expect, the median and mean became closer, because you’re throwing away the non-symmetrical part of the distribution. Applying that to what Alan Nevin said, that implies that Nevin would consider our market to be stronger if *no* expensive homes were selling, which is silly.
A more accurate take would be:
* Mean and median near same: Expensive houses are selling slowly relative to cheap houses. Says nothing about overall sales numbers (market strength)
* Mean much greater than median: Expensive houses are selling quickly relative to cheap houses. Says nothing about overall sales numbers (market strength)
* Overall sales numbers: Independent of the difference between median and mean, and the better way to judge market strength
@ JtR #13.
Thanks, I’ll go back and look for the article again. I must not have had enough coffee the other day. 🙂