Hat tip to Dennis for the cnbc.com report on July home sales in San Diego:
Their report references the DQ report from Wednesday:
Downer Diana noted that last month’s total was a three-year low, but didn’t mention that the frenzy started in the second half of 2012. As long as we are comparing to frenzy months, the 2014 totals will be lower – no frenzy now.
Let’s consider how last month’s sales of San Diego detached homes compare to previous years:
The July, 2014 sales look pretty good, given how high prices are now, and how fast they rose. Higher mortgage rates helped to cool off the frenzy too.
As a community, we should prefer a non-frenzy environment.
But the media insists that something is wrong. Diana said, “California is often seen as a barometer for the rest of the nation’s housing market. If that is the case, then housing this fall is not looking good.”
It looks good to me!
We know that when sales start declining, prices usually follow. But Rob Dawg noted this benefit here – payments are still cheaper than before:
The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,602, down from a revised $1,616 the month before and up from $1,537 a year earlier.
Adjusted for inflation, last month’s typical payment was 34.4 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 46.3 percent below the current cycle’s peak in July 2007.
In some areas we will probably see a few homes sell for less – neighborhoods where long-time owners have loads of equity and can still make out nicely at 5% to 10% under comps. But with so little pressure, it’s more likely that sellers will cancel and wait until next year, rather than dump on price.
Sales will probably keep dropping with the only folks selling are those who deserve a premium price – the turnkey homes in good locations – which in turn will slow any price declines.