The C-S index has its foibles, including the weighting of sales pairs based on when the previous sale happened, and also excludes flips and any other sales that occured less than six months apart.
But I’ll agree that the San Diego C-S index reflects the approximate trend and attitude on the street, generally speaking. While the media tends to focus on the distressed sales, there are plenty of other people – in fact, the majority of recent home sellers in Carmel Valley – who probably don’t mind how things turned out.
Here’s a review of the detached sales in 92130 over the last 90 days, categorized by when the sellers first purchased their home. Excluded in the averages are the sales over $1.5 million:
CV Sales Pairs
1998 and before
1999-2003
2004-2007
2008-2011
# of resolds last 90 days
18
26
37
12
Average Gain/Loss
+$467,471
+$181,812
-$126,181
+$10,857
REOs
0
0
4
0
Short Sales
0
1
5
0
Obviously the distress is focused around those who purchased during the peak years, but for the 60% majority who purchased before or after, they should be feeling satisfied to have done OK.
On a forward-looking note, for those who are thinking of buying at the optimal point where both rates and pricing are low, here is the recent history of how the mortgages rates compare to the San Diego Case-Shiller Index:
Various interpretations are being put on the Case-Shiller numbers for August:
Bloomberg: Home Prices Fall More Than Forecast
CNBC: Home Prices Stabilize But Recovery On Hold
MoneyCNN: Home Prices Rise For Fifth Straight Month
Calculated Risk: Home Prices Increased Seasonally
The SA number for San Diego was -0.4% in August vs. July, and Y-O-Y it has changed -5.6%. Here is the local trend:
It’s annoying when virtually everyone from David Blitzer to the analysts throughout the mainstream media insist on saying the home prices went up or down. To be accurate, the index went up or down, which is full of weighted data!
Hat tip to DOB for sending this in, fromAdvisorOne:
After years of housing market decline that has weakened the economy and depressed consumer sentiment, a number of analyses are strongly suggesting that a turnaround in the beaten sector may finally be at hand.
Indeed, the market seems to be adding its endorsement to these analyses, with the SPDR S&P Homebuilders ETF (XHB) up 23% in the past month. (Even with the recent surge, the index is down more than 50% over the past five years.)
In a sweeping report titled “Housing: A Time to Buy,” JPMorgan Asset Management analysts David Kelly and David Lebovitz argue that trends in supply, demand and inventories all point to rising home prices. The two analysts offer lots of data that show how extreme the changes in the housing market have been in recent years. Their conclusion is shared by their counterpart, Citi analyst Joshua Levin (see more on Levin’s research on the next page).
Take housing starts, for example: The best month in the past years of housing crisis resulted in just half the average level of building activity over five decades. Kelly and Lebovitz present the data as follows: “In almost 50 years, from January 1959 to September 2008, the lowest annualized rate of housing starts recorded for any month was 798,000, and the average rate was more than 1.5 million units. Since January 2009, the highest rate recorded for any month has been 687,000, and the average rate has been just 575,000.”
Other stark findings include the fact that the value of home equity today totals less than half the level reached in 2006 –$6.2 trillion compared to $13.5 trillion five years ago. And the effect of the housing bust has been profound in that the fall in construction employment alone accounts for 30% of U.S. job losses in a sector that accounted for no more than 5.7% of U.S. jobs at its peak. All these and many more statistics account for today’s depressed consumer sentiment, whose current index value of 57.5 is nearly 30 points below its average of the past 40 years.
From an investment point of view, the JPMorgan valuation data is similarly robust. Kelly and Lebovitz show that the ratio of median home prices to personal income over the past 45 years has hovered over 200% (and peaked at 251%), but has fallen now to a historic low of 153%. To get back to a normal ratio, home prices would have to rise by 27%, they say. And with the fall of mortgage rates, mortgage payments for the median home have fallen to just 6.9% of personal income – a ratio of less than have the 14.4% average since 1996.
Comparing mortgage payments to rental rates, the JP Morgan analysts show that “home prices would have to rise by 35% just to get back to their average relationship to rents.” Kelly and Lebovitz also compare prices to the cost of construction – “a sort of price-to-book ratio for the housing market” – and find that housing today costs just 26% more than the cost of rebuilding compared to an average 55% premium since 1975.
The JPMorgan analysts also look at home inventories, which remain high, but they show these inventories in rapid decline – a conclusion shared by their counterpart, Citi analyst Joshua Levin who, in a report highlighted by Business Insider, calls the lowest inventory of homes for sale in September since 2005 “the most interesting thing you may not know about the housing market.” Business Insider’s Joe Wiesenthal has also reported on still another uber-bullish case for housing by Harvest Capital, which similarly points to favorable valuations, declining inventories and increased demand.
JPMorgan’s Kelly and Lebovitz bring much more data in their analysis, but they distill their points in the conclusion of their report: “Home prices, housing demand and home building are very low, but they all seem set to increase. Housing inventories remain too high, but they are on a downward trend. And while the attitudes of both home buyers and home lenders remain very cautious, they should become less so in the years ahead.”
Their bottom line is that just as the peak of the home-buying euphoria five years ago was a time to rent, current data suggest that housing today is a strong buy.
The Federal Housing Finance Agency, which oversees mortgage finance sources Fannie Mae and Freddie Mac, said it was easing the terms of the two-year-old Home Affordable Refinance Program, which helps borrowers who have been making mortgage payments on time but have not been able to refinance as home values have dropped.
To help underwater borrowers, or those whose loans are worth more than their homes, FHFA said it will scrap a cap that prohibits any homeowners whose mortgage exceeds 125 percent of the property’s value from participating in HARP, which is targeted at loans backed by Fannie Mae and Freddie Mac.
“Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets,” FHFA’s acting director, Edward DeMarco, said in a statement.
More and more people are jumping on this bandwagon about the housing market finding some floor, a topic we’ve covered a lot.
Citi’s Josh Levin writes:
The Most Interesting Thing You May Not Know About the Housing Market — Amidst the continuous stream of housing data points and housing headlines, we think one has been overlooked: the inventory of existing homes for sale has been declining on a y/y basis for the past eight months and now stands at a multi-year low.
According the National Association of Realtors (NAR), in September there were 3.48 million homes listed for sale. Although it is still high when considered over the long-term, September’s 3.48 million homes marks the lowest inventory of homes for sale in the month of September since September of 2005.
Given the seasonality associated with home sales and the fact that the NAR does not seasonally adjust its inventory figures, investors should focus on y/y changes when thinking about housing inventory.
Even then, we would note that over the past five years, only four months showed a lower inventory of home for sales than September of 2011 and each of those months was either December or January, the low points in the year for home sales activity and inventory listings.
Interestingly, we have had no discussions with investors about this topic and have seen almost no media coverage of it.
It’s worth noting that the homebuilder ETF — XHB — is up over 31% since early October (it’s currently at 16.02 up from an October 3 bottom of 12.21), so while most media isn’t covering it, the market has picked it up.
The mainstream media won’t know what to make of those numbers, but I’ll give my opinion. It helps show that there is demand for well-priced homes, and virtually all of those have sold.
This is the time of year when we’re looking at the OPT leftovers – the ones that didn’t sell during the regular selling season, and whose owners are still reluctant to lower the price.
The fact that inventory is down is probably a result of the combination of fewer elective sellers in general, distressed sellers getting their price right, and OPTs cancelling their listings well before the holidays.
In SD County today there are 10,408 detached and attached active listings, which is among the lower counts – this needs to be updated, but a historical look:
Sorry about the length of this youtube, but this house deserves a good look:
Tom has listed the home with JtR. We’ll both be there on Sunday, October 23rd from 1-3pm for those who want a closer look – and possibly buy it! Click here for the MLS listing with the full photo gallery.
