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San Diego Case-Shiller By Tiers


https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

With the supply and demand so out of balance on the lower-end, it’s incredible to see that the high-end is out-performing with faster appreciation.  It looks like big money is throwing its weight around!

Note this guy’s negativity in the second paragraph.

I guarantee you that he is going to be wrong, wrong, wrong.

San Diego Case-Shiller Index, July

The soft landing continued in July, with the month-over-month increase being half of what it was in April. The YoY set another recent high, but wasn’t the all-time record.  In July and August, 2004 the local index rose 33% YoY.

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
Jun
274.91
+0.5%
+5.0%
Jul
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%
Jun
349.78
+2.6%
+27.2%
Jul
355.33
+1.6%
+27.8%

“We have previously suggested that the strength in the U.S. housing market is being driven in part by a reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. July’s data are consistent with this hypothesis.”

“This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.”

“Phoenix’s 32.4% increase led all cities for the 26th consecutive month, with San Diego (+27.8%) and Seattle (+25.5%) not far behind. As has been the case for the last several months, prices were strongest in the Southwest (+24.2%) and West (+23.7%), but every region logged double-digit gains and recorded all-time high rate increases.”

San Diego Case-Shiller Index, June

Remember when we were impressed that our Case-Shiller Index was going up 3% to 5% per year?

How do you like +27.2% YoY?

The month-over-month increase was the lowest since January, so it will interesting to see if pricing starts to plateau. With inventory so low, the pricing statistics could continue upward.

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
Jun
274.91
+0.5%
+5.0%
Jul
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%
Jun
349.78
+2.6%
+27.2%

Phoenix, San Diego, and Seattle reported the strongest price increases of the 20 cities. Prices in Phoenix increased 29.3% year-over-year. In San Diego they rose 27.1%, and in Seattle they were up 25.0%. All 20 cities reported higher price increases in the year ending June 2021 versus the year ending May 2021.

“The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “In June, all 20 cities rose, and all 20 gained more in the 12 months ended in June than they had gained in the 12 months ended in May.”

Prices in just about every city in the 20-city index, except for Chicago, are at all-time highs, he said, as are the national composition and the 10- and 20-city indices.

Peter Boockvar, chief investment officer at Bleakley Advisory group, said prices are rising at “a really out of control pace that is unsustainable and unhealthy.”

Home sales, however, have started to cool. Signed contracts on existing homes dropped in July, according to the National Association of Realtors. Prices usually lag sales by about six months, so that could be a sign that price gains will stop accelerating as they have been for over a year.

“According to new Ally Home data, 45% of buyers say they have delayed purchasing a home due to market conditions, with 29% citing high home prices and 20% indicating homes selling too quickly as factors in this delay,” says Glenn Brunker, president of Ally Home.

https://www.cnbc.com/2021/08/31/home-prices-surged-in-june-shattering-another-record-sp-case-shiller-says.html

San Diego Case-Shiller Index, May

Phoenix edged us out again for the top spot in May, but the San Diego CSI went up 12.4% between February and May, which looks like a record for four months of appreciation – and at these prices!

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
June
274.91
+0.5%
+5.0%
July
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%
May
341.05
+2.9%
+24.7%

“Housing price growth set a record for the second consecutive month in May 2021,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its twelfth consecutive month of accelerating prices with a 16.6% gain from year-ago levels, up from 14.8% in April. This acceleration is also reflected in the 10- and 20-City Composites (up 16.4% and 17.0%, respectively)”.

The market’s strength continues to be broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in May than they had gained in the 12 months ended in April. Prices in 18 of our 20 cities now stand at all time highs, as do the National Composite and both the 10- and 20-City indices.

“A month ago, I described April’s performance as “truly extraordinary,” and this month I find myself running out of superlatives. The 16.6% gain is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. As was the case last month, five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – joined the National Composite in recording their all-time highest 12-month gains. Price gains in all 20 cities were in the top quartile of historical performance; in 17 cities, price gains were in top decile”.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. May’s data continue to be consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question”.

“Phoenix’s 25.9% increase led all cities for the 24th consecutive month, with San Diego (+24.7%) and Seattle (+23.4%) close behind. As was the case last month, prices were strongest in the West (+19.9%) and Southwest (+19.8%), but every region logged double-digit gains.”

San Diego Case-Shiller Index, April

San Diego has had positive gains straight through the Covid-19 era, and now we have back-to-back months of +3.3% improvements, which has to be about the max the index can go up in a month.

We are right behind Phoenix, whose non-seasonally-adjusted index in April rose 22.3% YoY to our +21.6%.

Let’s go San Diego, we can take them, and be number one in the nation! Maybe next month!

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
June
274.91
+0.5%
+5.0%
July
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%
Apr
331.47
+3.3%
+21.6%

From cnbc:

Home prices in April saw an annual gain of 14.6% in April, up from a 13.3% increase in March, according to the S&P CoreLogic Case-Shiller National Home Price Index.

Among larger cities covered by the index, the 10-city composite was up 14.4% year over year, up from 12.9% the previous month. The 20-city composite was 14.9% higher, up from 13.4% in March.

“April’s performance was truly extraordinary. The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI.

Not only did home prices rise in all 20 cities, but the price gains accelerated in all as well and were in the top quartile of performance historically.

Five cities – Charlotte, Cleveland, Dallas, Denver and Seattle – saw their largest annual gains ever.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. April’s data continue to be consistent with this hypothesis,” added Lazzara.

Price gains have been expanding for the last eleven months, as buyer demand continues to outstrip supply. The inventory of homes for sale rose slightly in May compared with April, but was still 21% lower than May 2020, according to the National Association of Realtors.

Home sales have been falling for the past few months, due both to low supply, especially at the entry level of the market, and very high prices. Single-family housing starts have also slipped, as homebuilders try to keep up with a heavy backlog of demand amid high prices for land, labor and materials.

There has been growing talk of a price bubble in the housing market, but the fundamentals of today’s market say otherwise.

“Although home price growth is reaching new highs, the risk of price declines has fallen far below pre-pandemic and summer 2006 levels, when homes prices last peaked. This is likely because favorable mortgage rates and income growth continue to keep the ratio of mortgage payments to monthly household income much lower today,” said Selma Hepp, deputy chief economist at CoreLogic.

“Consequently, elevated buyer demand, coupled with lacking for-sale inventories, will continue putting pressure on prices — which are likely to remain at double-digit increases through the third quarter of 2020,” she added.

There is, however, a growing divide between the haves and have-nots in housing.

Sales activity is gaining dramatically on the higher end of the market but falling on the low end as more buyers are priced out. Some blame the Federal Reserve for keeping mortgage rates artificially low, through its bond-buying program. Record low rates last year helped juice the homebuying boom, but those rates, now slightly higher, cannot offset the huge price gains.

“So much for the Fed’s all-inclusive monetary policy where lower income people now can’t afford housing,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.

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Frenzy Duration

This graph is charting the local Case-Shiller Index.  The latest reading is from March, so these trends are reflecting the first quarter of 2021 – which means these lines will be going straight up for at least another 2-3 readings before there is any chance of a change.

The editors expect a collapse in prices next year, though they are coming to the wrong conclusions:

https://journal.firsttuesday.us/california-tiered-home-pricing-2/1592/

Can we learn anything from history?

The 2003-2007 era was goosed by increasingly-easier financing each year, so using those years as a gauge wouldn’t be accurate (financing has never been so tough to get now).

But the 2013 frenzy lasted for about a year – as long as we’ve been on fire now.

Are we due for a cooling off? Today, there are listings on the fringes that aren’t selling as fast, or at all.

But the red-hot newer tract homes with decent yards and pools will continue to attract a crowd, as will the single-story homes – probably straight through the 2022 selling season.

Get Good Help!

More Shiller

The housing market is hot as home prices continue to rise, but Nobel Prize winning economist Robert Shiller predicts prices will eventually drop. “They’ll come back down, not overnight, but enough to cause some pain,” Shiller told Yahoo Finance Live.

The latest S&P CoreLogic Case-Shiller national home price index posted a 13.2% annual gain in March, the fastest pace prices have risen in more than 15 years. Last week, the National Association of Realtors (NAR) reported the median existing-home price in April was $341,600, up 19.1% from April 2020.

“This is not a market that collapses overnight,” Shiller said. “It’s less short run volatile than the stock market. But you can see that we’re seeing price increases now that haven’t quite been realized since those years just before the financial crisis.”

Shiller said there is no “clean explanation” why the housing market is so hot. He expects it to continue another year or two driven by low interest rates and the COVID-19 pandemic work-from-home revolution.

But Shiller cautions that people are also driven by narratives and market sentiment. It’s a topic he wrote about in his book “Narrative Economics: How Stories Go Viral and Drive Major Economic Events.”

“I think it is some kind of irrational exuberance,” he said. “People are having fun, and they will as long as prices keep going up.” He said today’s housing market looks similar to 2003. “There is excitement and people are talking and some people are bidding way more than the asking price and that becomes a narrative or a story.”

But he tempers his comparison saying the current housing craze is different from the mortgage crisis that caused the last housing bubble to burst.

“So it’s not the same as 2003,” Shiller said. “It could be stronger. I think we have better protections, we have better supervision of lenders. So I don’t know if we should be worried about 2007, 2008, 2009 happening again.”

The current run up in prices, according to Shiller, “is disquieting” and he cites Phoenix as an example. “The biggest increase over the last year was Phoenix and home prices have gone up 20% in one year,” he said.

Shiller points out that demand in the housing market gets all the headlines while supply tries to catch up. Record prices for lumber, he says, are driving up prices for newly built homes. “The builders might be building to profit from these high prices now. But, it hasn’t happened yet,” said Shiller and that has him worried.

Shiller helped create the CME S&P Case Shiller home price index futures 15 years ago so people could hedge their risk during housing markets like this one. “So our futures market is now predicting big increases over the next year or more but it’s not certain,” he said.

“It kind of reminds me of the spirit that ended after World War II,” Shiller said. “There was a spending spree by people. They were jubilant the war was over,” he said comparing the mood of the country then to the mood now as the United States emerges from coronavirus pandemic.

https://finance.yahoo.com/news/robert-shiller-home-prices-to-fall-and-cause-some-pain-103750858.html

San Diego Case Shiller Index, March

San Diego has had positive gains straight through the Covid-19 era, and we are really ramping up in 2021 with a 3.3% monthly gain in March!  We kept our #2 spot in the nation, and are right behind Phoenix:

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
Jan ’20
264.04
+0.2%
+5.1%
Feb
265.34
+0.5%
+4.6%
Mar
269.63
+1.6%
+5.2%
Apr
272.48
+1.1%
+5.8%
May
273.51
+0.4%
+5.2%
June
274.91
+0.5%
+5.0%
July
278.00
+1.1%
+5.4%
Aug
283.06
+1.8%
+7.6%
Sep
288.11
+1.8%
+9.4%
Oct
292.85
+1.6%
+11.5%
Nov
295.64
+1.0%
+12.3%
Dec
297.52
+0.6%
+13.0%
Jan ’21
301.72
+1.4%
+14.3%
Feb
310.62
+2.9%
+17.1%
Mar
320.81
+3.3%
+19.1%

From cnbc:

Home prices in March were 13.2% higher in March, compared with March 2020, according to the S&P CoreLogic Case-Shiller National Home Price Index. That’s up from the 12% annual gain in February, and it marks the 10th straight month of accelerating home prices.

The March gain is the largest since December 2005 and is one of the largest in the index’s 30-year history. Prices are being pushed higher by incredibly strong competition in the market. High demand is butting up against near record-low supply, resulting in bidding wars for the vast majority of listings.

The 10-city composite rose 12.8% year over year, up from 11.7% in the previous month. The 20-city composite increased 13.3%, up from 12% in February.

Cities with the strongest price gains continue to be Phoenix, San Diego and Seattle. Phoenix sits at the top with 20% year-over-year price increase, followed by San Diego with a 19.1% increase and Seattle prices rising 18.3%. All 20 cities reported higher price increases in the year ending March 2021 versus the year ending February 2021.

“These data are consistent with the hypothesis that Covid has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI.

“This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years. Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing,” he added.

Mortgage rates began rising during this period, with the average rate on the 30-year fixed just below 3% in February and then ending March at around 3.4%, according to Mortgage News Daily. Higher mortgage rates cut into purchasing power and usually put a chill on home prices, but clearly unusual competition in the market is overwhelming the usual mechanics of the market.

Only 1.16 million homes were on the market in April, a 20% drop year over year, according to the National Association of Realtors. The continued shortage of homes, especially at the lower end of the market, forecasts that home prices will not cool off any time soon.

Sales are beginning to weaken, and prices usually follow, but again, the usual trends are not dependable in this very unusual housing market.

Shiller – “Wild West”

Shiller has been too conservative on his predictions because he’s an ivory-tower guy. If he were to talk to potential home sellers, he’d find that there aren’t many – if any – who have to move so badly that they would sell for “substantially lower” prices.  The next phase after the frenzy will be the stagnant/plateau stage where the demand thins out and sellers wait for that perfect nuclear family with 2.2 kids to come along some day.

Nobel prize-winning economist Robert Shiller is worried a bubble is forming in some of the market’s hottest trades. He’s notably concerned about housing, stocks and cryptocurrencies, where he sees a “Wild West” mentality among investors.

“We have a lot of upward momentum now. So, waiting a year probably won’t bring house prices down,” Shiller said.

According to Shiller, current home price action is also reminiscent of 2003, two years before the slide began. He notes the dip happened gradually and ultimately crashed around the 2008 financial crisis.

“If you go out three or five years, I could imagine they’d [prices] be substantially lower than they are now, and maybe that’s a good thing,” he added. “Not from the standpoint of a homeowner, but it’s from the standpoint of a prospective homeowner. It’s a good thing. If we have more houses, we’re better off.”

30% Appreciation in 2021?

Our seasonally-adjusted Case-Shiller Index rose more in one month than any other U.S. metro area!

The increase in the three-month annual percentage was nearly 22%, and it doesn’t include March and April which have been hotter.

The San Diego index was still positive during the initial Covid months (but muted), so it’s safe to say that the year-over-year percentage increase for the next few readings will be substantially higher than February’s.

Could San Diego end up with 30% appreciation in 2021?

It looks feasible today!

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