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We know that media types are looking to sell newspapers, and if it bleeds, it leads.  The article in the UT this morning about the San Diego Case-Shiller Index starts with this:

San Diego continued to slide down in rankings of the nation’s hottest real estate markets in October.

The article doesn’t mention the lower inventory in 2021, or offer any other explanation.  But it does use the D-word, deceleration, in their headline that everyone is using to describe the last few months.

But are home prices really decelerating?

All of the comparisons are judging the year-over-year changes, without any mention of how the 2020 numbers were rising quickly too. If we add the 2020 monthly YoY increases to those from this year, here’s what the combined 2-year increases would look like:

The indices in the last half of 2019 had flatlined, so the graph above is a pretty good visual on how our local index has been marching skyward since the pandemic started.

We can also note that the month-over-month increases are probably a better gauge of current activity – and they have picked up since we had actual deceleration:

Here’s a graph from a different article that also mentioned how price gains are slowing:

If that’s what slowing looks like, I’ll take it!

But let’s not misinterpret the recent index readings and then give potential home buyers the impression that our local market conditions are changing, because they’re not (or at least not yet).

All that matters in 2022 is inventory.  Here’s how prices will be affected:

PRICES KEEP MARCHING SKYWARD:

  • Ultra-low inventory, or
  • Moderate surge of inventory (less than normal though)

PRICE-INCREASES SLOW:

  • Big surge of inventory (more inventory than in 2019)
  • Ridiculous over-pricing of inventory (it’s a fine line too!)

PRICES FLATLINE OR GO DOWN:

  • Massive surge in inventory
  • Mortgage rates rise above 4%

We should know by March/April which way it’s going to break!

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