by Jim the Realtor | Jun 26, 2009 | Graphs of Market Indicators, Thinking of Buying? |
There has been discussion about San Diego home prices reverting back to their ‘normal’ trend, but what is normal? 3x income? 4x income? 5x income?
The few times I’ve spoken up about the income question, I’ve said “Who cares about the median income for the county, what counts is the income of the potential buyers”. Not everyone who lives in the county is looking to buy a home, and at this point they are most certainly a minority.
But comparing the trend is noteworthy, because over time there should be a statistical ‘norm’.
Harvard has charted the affordability index for each metro area, the comparison of median household income to median home price through 2006. I used the city-data report of median household income ($61,793) to their median home price ($556,500) for 2007.
For 2008 and 2009 the income used was $60,000, and the Dataquick median home price for May ($380,000 and $295,000). This is the chart of median price/median household income:
Since 1980 the number has never been under 4.0.
Yes, today’s median sales price is skewed artificially low due to the hot lower-end markets, but overall it looks like the relationship has gotten somewhat back in line.
Yes, the higher-end is screwed up, and has a long ways to go. The median sales price so far this month for the 126 detached sales from Carmel Valley to Carlsbad is $800,000. But as more higher-end sellers sell for less (instead of not selling), this number should trend higher if the median sales price rises, and incomes stay the same.
What if the median income goes down at the same time?
Example: Median sales price trends up to $350,000 due to additional higher-end sales, and the median income drops to $55,000. New ratio is MSP = 6.36 x income.
I’m not sure we’ll depend on this relationship to tell us much in the future.
The Harvard Excel spreadsheet for metro USA areas: metro_affordability_index_20071
by Jim the Realtor | Jun 23, 2009 | Graphs of Market Indicators, North County Coastal, Thinking of Buying? |
Who cares about all the hoopla about listings flying into escrow – ARE THEY CLOSING?
Here’s the graph of weekly sales of detached homes from La Jolla to Carlsbad – the most recent three years are in bold, with three previous years included with thin lines for flavor:
(click on image for slightly better clarity)
Sales tend to increase towards the end of every month because of pro-rations (the buyers’ responsiblity for interest and taxes go down as they approach the end of the month).
With the dip in interest rates back in March, you’d figure that the end-of-May sales this year would have been at least as good as 2008. But they aren’t. While sales perked up in June last year, this year the North County Coastal region is looking weak – only 30 closings reported so far for June 16-22, 2009, which would send the red line even lower.
Yes, there will be late reporters, but if we don’t see a surge in closings over the next couple of weeks between La Jolla and Carlsbad, we’ll start wondering if this spring/summer selling season is going to fizzle out.
The biggest concern? In the first half of June, 2005 there were 34 houses that closed in Rancho Santa Fe and La Jolla. This year? 13.
Currently there are 593 active detached listings in those two zip codes!
by Jim the Realtor | Jun 13, 2009 | Graphs of Market Indicators, Thinking of Buying? |
You could make a case on both sides of the rental market.
On one hand: you could say that buying a home is still an expensive proposition, and the uncertainty ahead would keep the tenant pool brimming.
On the other hand: current tenants may be buying homes to live in, plus the return of investors buying homes to rent have increased the supply of available rentals.
The U-T’s article today says that vacancy is up, and the average rents were slightly lower Y-O-Y:
http://www3.signonsandiego.com/stories/2009/jun/13/1b13rent2182-county-landlords-bitten-recession/?business&zIndex=115895
An excerpt:
The ongoing recession is placing a strain on the region’s landlords, as tenants double up to save money or abandon the rental market to take advantage of bargains on foreclosed homes.
The latest half-yearly survey from the San Diego County Apartment Association shows a 5.4 percent vacancy rate for the region, a rise of 1.8 percentage points from its fall 2008 survey and 0.6 points from a year earlier.
As tenants seek out rentals with lower rates, properties less than six years old reported the highest number of vacancies in the recent survey. Complexes more than 25 years old had the highest occupancies.
The average rental rate countywide was up slightly to $1,192 from $1,188 in the fall 2008 survey, but down 0.7 percent from a year ago, when the average was $1,201. The average was mathematically weighted to take into account the dominance of one-and two-bedroom units in the marketplace.
The survey, which was mailed to nearly 6,000 rental property owners and managers throughout the county, received responses representing more than 33,000 units. Michelle Slingerland, spokeswoman for the association, blamed higher vacancies on high unemployment.
“Historically, the job market affects vacancy rates,” Slingerland said. “People are having to take on roommates or they are moving in with family. If supply increases, rental rates will go down accordingly.”
by Jim the Realtor | Jun 5, 2009 | Forecasts, Graphs of Market Indicators |
Back in 2000-2001, there were some of us long-time real estate people that thought we were due for a downturn. Historically the market ran its full cycle every ten years, and 1990 was the previous peak.
But thanks mostly to the 1997 rule that allowed homeowners to be exempt from capital gains’ tax on their first $500,000 of profit (if they had lived there two out of the last five years), the market kept rolling.
The mortgage industry, led by Countrywide, started pushing the more exotic loan programs, first the interest-only in the 2001-2003 era, then the option ARMs from 2003-2005. This extended the euphoria, beyond its normal life expectancy.
Yesterday’s graph by IHS Global Insight showed the ‘normalized value’ line continuing straight up, without any natural downturn/correction.
But the market was already getting overheated by 1999 or 2000 just due to the amateur speculators who were empowered by the 2-out-of-5 rule, and by year 2000 they were already onto their second flip.
A ‘normalized value’ estimation should include what should have been some sort of downturn early in the decade – this chart has an additional red line to approximate what might have been normal, if it weren’t for the wacky chain of events that artificially spurred the market.
by Jim the Realtor | May 14, 2009 | Actives/Pendings, Graphs of Market Indicators |
This is the Redfin graph of sold $/sf vs list $/sf for San Diego. For some reason the two lines are no longer tracking. Can anyone help me figure this out? [Click for a clearer picture.]
by Jim the Realtor | Apr 22, 2009 | Graphs of Market Indicators, Shadow Inventory |
FreedomCM brought up the new data from Mr. Mortgage on the San Diego real estate supply and demand, and mounting foreclosures:
http://www.fieldcheckgroup.com/2009/04/21/213/
He has his usual colorful charts and commentary – here are a couple of his notes:
(T)he housing market — particularly in the mid-to-high — is highly unbalanced with supply outpacing demand at levels never seen before.
Unless sales demand more than doubles from here, this market will remain under significant pressure. But the doubling of demand would take total sales back to peak levels seen in 2005 and is unrealistic.
While I think we’ll all appreciate his reasoning, I disagree with his last sentence here. I think the doubling of demand/sales is VERY realistic – and PRICE IS THE ANSWER!
For an example, let’s look at Carmel Valley. To confirm his ‘doubling of demand’ to get back to 2005 levels, let’s look at the period March 15 to April 15:
| Year |
# of sales |
$-per-sf |
| 2005 |
52 |
$393/sf |
| 2009 |
24 |
$345/sf |
It would actually take more than doubling of sales to get back to 2005 levels, but we have foreclosures to help get us there! We saw 36 foreclosures brewing in the CV shadow inventory, what price will it take to move them?
Of our 24 closed sales this year:
TWO were under $300/sf, and both were bank-owned.
Thirteen of the 24 sales were under $340/sf, and their average time on market was 10 days from their last price reduction.
The banks don’t have a problem listing at the right price, and if 36 REOs came on the market EVERY month around $300/sf, I don’t think there would be any shortage of buyers. If you’re on the street, you’ve seen hordes of folks looking at the marginal buys, and jumping at the good buys.
Take a good look at his charts, because the evidence is clear – there are loads of foreclosures coming to the county. It’s great news for the buyers who have been waiting patiently for better pricing, and there should be enough to go around.
