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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!

San Diego Case-Shiller Index, Feb

San Diego had positive gains straight through the Covid-19 era:

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

The index should continue to rise more than 2% month-over-month over the next few readings.

Wifey did this for me because I left this morning before the new number was released. We’re heading for more than 20% appreciation this year!  San Diego jumped into the #2 slot for the whole country too! From cnbc:

The cities with the largest gains continue to be Phoenix, San Diego and Seattle. Prices in Phoenix gained 17.4% year over year, followed by San Diego with a 17% increase and Seattle with a 15.4% increase. Nineteen of the 20 cities reported stronger price gains in the year ended February 2021 versus the year ended January.

Even as vaccines are distributed more widely and Americans start to emerge back into the economy, the desire for larger living spaces with more outdoor amenities appears not to be waning.

“This demand may represent buyers who accelerated purchases that would have happened anyway over the next several years,” said Lazzara. “Alternatively, there may have been a secular change in preferences, leading to a permanent shift in the demand curve for housing. Future data will be required to analyze this question.”

San Diego Case-Shiller Index, Jan

It’s more than just the trendy areas – it’s red-hot everywhere.

Every metro area on the list is having substantial gains in their index, which means there has been a psychological shift happening coast-to-coast on how human beings feel about their homes.  With the real-estate-selling business being one of the last totally-free markets left, it’s going to run wild for a while.

The #1 market, Phoenix, hit +1.9% month-over-month, which is incredible for a January reading.

It should put them on track for a +20% to +25% annual gain in 2021, and we won’t be far behind.

I think we might catch them!

San Diego had positive gains straight through the Covid-19 era last year, and now we have 2% monthly gains in our sights for the next few months. Look how that compares to the 2019 readings:

San Diego Non-Seasonally-Adjusted CSI changes

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

From S&P

“The strong price gains that we observed in the last half of 2020 continued into the f irst month of the new year. In January 2021, the National Composite Index rose by 11.2% compared to its year-ago levels,” says Craig J. Lazzara,Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The trend of accelerating prices that began in June 2020 has now reached its eighth month and is also reflected in the 10- and 20-City Composites (up 10.9% and 11.1%, respectively). The market’s strength is broadly-based: all 20 cities rose, and all 20 cities gained more in the 12 months ended in January 2021 than they had gained in the 12 months ended in December 2020.

“January’s performance is particularly impressive in historical context. The National Composite’s 11.2% gain is the highest recorded since February 2006, just one month shy of 15 years ago. In more than 30 years of S&P CoreLogic Case-Shiller data, January’s year-over-year change is comfortably in the top decile. That strength is reflected across all 20 cities. January’s price gains in every city are above that city’s median level, and rank in the top quartile of all reports in 18 cities.

“January’s data remain consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes. 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 shift in the demand curve for housing. Future data will be required to analyze this question

“Phoenix’s 15.8% increase led all cities for the 20th consecutive month, with Seattle (+14.3%) and San Diego (+14.2%) close behind. Although prices were strongest in the West (+11.7%), gains were impressive in every region.”

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

San Diego Case-Shiller Index, Dec

I guessed that we might have +10% in both sales and pricing this year, but so far that is way too conservative.  It’s not just the pricing that’s on the run – the sales are cooking too:

NSDCC Closed Sales Jan 1 – Feb 15

Year
# of Sales
Median Sales Price
2020
254
$1,394,775
2021
296
$1,692,500
% Change, YoY
+17%
+22%

The Case-Shiller Index should really take off in the coming months – maybe San Diego will get to #1 in USA!

San Diego Non-Seasonally-Adjusted CSI changes:

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

From cnbc:

December is usually the slowest month for the housing market, but price gains didn’t slow down one bit in 2020. In fact, they rose at the fastest pace in seven years.

Home prices nationally increased 10.4% compared with December 2019, according to the S&P CoreLogic Case-Shiller Home Price Indices.  That is the strongest annual growth rate in over six years, and a significantly stronger gain than in November, when prices were up 9.5%. It also ranks as one of the largest annual gains in the more than 30-year history of the index.

The 10-city composite annual increase was 9.8%, up from 8.9% in November. The 20-city composite posted a 10.1% gain, up from 9.2% in the previous month. Detroit was excluded, due to Covid-related data collection issues.

“2020?s 10.4% gain marks the best performance of housing prices in a calendar year since 2013,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. “From the perspective of more than 30 years of S&P CoreLogic Case-Shiller data, December’s year-over-year change ranks within the top decile of all reports.”

Phoenix, Seattle, and San Diego continued to show the strongest price gains among the 19 cities surveyed. Prices in Phoenix rose 14.4% year-over-year price. In Seattle, they rose 13.6% and San Diego saw a 13.0% increase. Eighteen of the 19 cities reported higher price increases in the 12 months ending December 2020 versus the 12 months ending November 2020.

“These data are consistent with the view that Covid has encouraged potential buyers to move from urban apartments to suburban homes. This may indicate a secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway,” added Lazzara.

Home prices began to see big gains last summer, as Covid-driven demand from the stay-at-home culture descended on the housing market. Record low supply combined with record low mortgage rates caused bidding wars on homes across the nation.

Mortgage rates turned sharply higher last week, which will cut into affordability going forward into the 2021 spring market. Prices generally lag sales, so if sales do suffer, it is unlikely the market will see significant cooling of prices for several months.

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

San Diego Case-Shiller Index, Nov

It was in June, 2011 that Ben Bernanke said at a live press conference: We have told the banks to handle their REOs…..long pause………..in an economy-supportive way.  Oops.  What he was GOING to say was “we have told the banks not to flood the market with REOs.”

Since then, foreclosures dried up, mortgage rates came down, and the local home prices have gone up steadily.  Today’s pricing curve looks similar to 2013 – if it repeats, then prices should flatten out this summer.  But who knows – there is heavy demand, and few sellers have been lured by these prices!

San Diego Non-Seasonally-Adjusted CSI changes:

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

From cnbc:

Phoenix, Seattle and San Diego continued to show the strongest price appreciation of all the major markets in November. Phoenix led the way with a 13.8% year-over-year price increase, followed by Seattle with a 12.7% increase and San Diego with a 12.3% increase. All 19 cities reported higher price increases in the year ending November versus the end of October.

“Our 2021 outlook expects an eventual moderation to price gains as home construction ramps up and the widespread availability of COVID vaccines bring more flexible sellers back to the housing market, but it will be some time before these changes bring relief,” said Danielle Hale, chief economist with realtor.com.

https://www.cnbc.com/2021/01/26/november-home-prices-rose-9point5percent-one-of-the-highest-gains-on-record-case-shiller-says.html

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

Home Prices in 2021

Bill has his annual forecast on home prices here:

https://www.calculatedriskblog.com/2020/12/question-8-for-2021-what-will-happen.html

Here is a snapshot of the forecasts:

(I was reading the previous chart wrong when I said that all were forecasting 7% to 10% appreciation. This is the accurate chart, with the old fuddy-duddies still lagging behind in the safety zone of 2% to 3%)

THE FRENZY IS COMING!

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

San Diego Case Shiller, Oct

Because our market at the end of 2019 was so flat (December’s index was lower than July’s), the year-over-year gains are going to make for sexy double-digit headlines for the next couple of readings.

San Diego Non-Seasonally-Adjusted CSI changes:

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

From cnbc:

U.S. home prices jumped in October by the most in more than six years as a pandemic-fueled buying rush drives the number of available properties for sale to record lows.

The biggest price gain was in Phoenix for the 17th straight month, where home prices rose 12.7% from a year ago. It was followed by Seattle with 11.7% and San Diego at 11.6%.

https://www.cnbc.com/2020/12/29/us-home-prices-rise-at-fastest-pace-in-more-than-6-years-.html

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

Only An Occasional Low Sale

The 15% increase from the last peak 15 years ago doesn’t seem bad, though both were bubblelicious thanks to stimulus (exotic financing then and ultra-low rates today).

https://wolfstreet.com/2020/11/24/the-most-splendid-housing-bubbles-in-america-november-update/

The big difference is that the last bubble was built on the backs of the the under-qualified borrowers who took exotic mortgages from unscrupulous loan brokers.  The bad loans were funneled to Wall Street, where the same thing happened – the Tan Man took advantage of greedy but unknowing financiers and the combined effect exposed the house of cards.  Without the end users making their payments, the machine came to a grinding halt.

Could it happen again?

Because mortgage underwriting has been strict over the last ten years, it’s hard to imagine that a wave of homeowners loaded with equity would get foreclosed – and then the banks would give them away too.

But it is possible that we could have mild swings of 5% to 10%.  But if there were a couple of low sales, wouldn’t the lower-motivated sellers just wait it out? Probably.

Here’s a recent example we can follow – I think we can call this a low sale:

1756 Skimmer Ct., Carlsbad, CA 92011

4 br/2.5 ba, 2,409sf one-story with 3-car garage on a 10,041sf lot.

LP = $1,328,000 on September 10, 2020

SP = $1,000,000 on November 17, 2020.

The home had been on the market for a couple of months and it was time – the seller was ready to move!  My buyers offered the right price, on the right day, and the seller signed it.

It’s a classic example of finding a long-time owner who could sell for less and still walk away with a bucketful of money. The seller paid $430,000 when the home was new in 2001. They didn’t put in any upgrades then or now – it was the original carpet and paint, etc., they made no attempt to improve the property for sale:

https://www.compass.com/listing/1756-skimmer-court-carlsbad-ca-92011/603767865654710185/

The thing to appreciate about this home is that it backs to dedicated open space, where the other side of the street backs to Poinsettia, a four-laner which will soon be connected to the I-5 off-ramp about a mile away.  My buyers benefit from easier access but no noticeable road noise!

New bridge in red

The last two sales of this model were $910,000 and $935,000 in 2017 (does anybody want to pay within 10% of 2017 prices today – yeah!). The last sale on this street was a newly-built 3,380sf home at the end of the street that sold for $1,380,000 in August. It was in the shadow of the power lines, and backed to El Camino Real/Poinsettia intersection with substantial road noise:

Here are the one-story homes sold in the last six months – they average $533/sf, and we closed at $415/sf:

Yes, I’m tooting my own horn for being the agent who recognized that this home was languishing on the market, had an original owner and would be a candidate to sell for less.

But will I be the villian who started the Big Downturn in the 92011? No, every other one-story-home seller nearby will shrug this off and list for at least $500/sf in the foreseeable future.

 

San Diego Case-Shiller Index, Sept

What a difference compared to the second half of 2019:

San Diego Non-Seasonally-Adjusted CSI changes:

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

If we can sustain the monthly 1.8% increase x 12 = 21.6%.

From cnbc:

This index is a three-month running average, so it represents prices from July through September, when buyers were eagerly seeking homes with more space for working and schooling at home due to the coronavirus.

“Housing prices were notably – I am tempted to say ‘very’ – strong in September,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. “This month’s increase may reflect a catch-up of COVID-depressed demand from earlier this year; it might also presage future strength, as COVID encourages potential buyers to move from urban apartments to suburban homes. The next several months’ reports should help to shed light on this question.”

Phoenix, Seattle and San Diego continued to see the highest annual gains among the 19 cities (excluding Detroit) in September. Home prices in Phoenix rose 11.4% year over year, followed by Seattle with a 10.1% increase and San Diego with a 9.5% increase.

https://www.cnbc.com/2020/11/24/home-prices-see-biggest-spike-in-6-years-in-september.html

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

San Diego Case-Shiller Index, August

What a difference compared to the second half of 2019:

San Diego Non-Seasonally-Adjusted CSI changes:

Observation Month
SD CSI
M-o-M chg
Y-o-Y chg
January ’19
251.30
-0.2%
+1.3%
Feb
253.69
+0.9%
+1.1%
Mar
256.40
+1.1%
+1.2%
Apr
257.63
+0.5%
+0.8%
May
260.08
+1.0%
+1.1%
June
261.90
+0.7%
+1.3%
July
263.66
+0.7%
+2.0%
Aug
263.23
-0.2%
+2.3%
Sep
263.26
0%
+2.8%
Oct
262.56
-0.2%
+2.7%
Nov
263.18
+0.2%
+3.9%
Dec
263.51
+0.1%
+4.7%
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%

Last month I said, “Will the September & October indices hit 2.0%? Likely!”

From cnbc.com:

“A trend of accelerating increases in the National Composite Index began in August 2019 but was interrupted in May and June, as Covid-related restrictions produced modestly-decelerating price gains,” said Craig Lazzara, managing director and global head of Index Investment Strategy at S&P Dow Jones Indices.

“The last time that the National Composite matched August’s 5.7% growth rate was 25 months ago, in July 2018. If future reports continue in this vein, we may soon be able to conclude that the Covid-related deceleration is behind us. ”

Phoenix, Seattle and San Diego reported the highest annual gains among the 19 cities (excluding Detroit) in August. Phoenix led the way with a 9.9% price increase, followed by Seattle with an 8.5% increase and San Diego with a 7.6% increase.

Chicago, New York City and San Francisco saw the smallest annual home price gains in August.

S&P Case-Shiller is a repeat sales index, running on a three-month average; it measures the sale prices of similar homes over time. Other home price indexes, like the measure from the National Association of Realtors, show much higher price gains because they calculate the median price of all homes sold during the month.

Since there is currently much more sales activity on the higher end of the market, where there is more supply available, that is skewing the median price much higher. The Realtors reported a 15% annual price gain for September.

Prices are being fueled not just by strong demand but by record low mortgage rates. Rates set several new records over the summer and continued to do so in September as well. Low mortgage rates give buyers more purchasing power, allowing sellers to raise prices.

https://www.cnbc.com/2020/10/27/home-prices-rise-at-.html

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