Tuesday, January 26, 2010

Is December a Month to Remember?

Below is a short summary of housing statistics for Folsom and El Dorado Hills. The data come from two separate sources. The top set only included stats for existing single family homes, while I believe the bottom includes new home sales too (note the bottom set also uses average, and not median).

December's numbers surprised me quite a bit. Double digit increase in sales, and only single digit drops in price. Typically December is a really slow time of the year for real estate, and I figured it would be even worse with government subsidies drying up.

Could this be the end of free fall, or is it just a dead cat bounce?


husmanen said...

Looking at the macro data it is often hard to predict, there could be a little of both 'bottom' and 'bounce' depending on the micro area, or even a 'shuffle' of some sorts.

I have seen a few homes that are at or just below rental parity, but a lot more above. If you look at the bubble prices a lot of homes in Serrano look 'cheap', but after HOAs and rental parity are considered many are still 25% above the rental market.

If it is a bottom bounce, what do we have to support the level for the short term? Government give aways? FHA changes? Interest rates?

No matter what, the data is the data, and sales were up while prices were declining. Actually makes sense :-)

husmanen said...

Also, do you happen to have data that goes back to pre-bubble, i.e. early 2001?

Given inflation, we could take a rough stab at a 'normal' increase in median and average without the bubble. I have done this on individual houses that are currently close to rental parity and it is a pretty good measure.

husmanen said...

Here are some medians by county, quite a jump after 2000.


If I took the Sacbee numbers for El Dorado County as an example of the percentage increase median from 2000 to 2002, I would get about a 30% increase in median price.

Assuming the percent increase was similar to what occurred in El Dorado Hills too, I could then back the numbers from your chart to 2000 by decreasing the $407k median by 23% to $312k.

Now if I take the year 2000 as a non-bubble year and $312k as the possible mean price in EDH I could then increase the median by inflation every year until 2009 to see what we could get.

When I do this I get a median in EDH of $396k. That is only 5% off the $420k you provided.

Now lets not over shoot the bottom like all other bubbles before us :-)

Paul said...

As usual, I haven't a clue about where we are or what is going to happen, but with 10% or so of our local mortgages in some stage of delinquency, and somewhere around 1/2 underwater, with 12% unemployment ... I don't see how we can avoid continued pricing pressure for the foreseeable future. And as Husmanen points out, history tells us that bubbles over-correct, without exception. (Although maybe we could achieve an over-correction by merely staying flat for 5-10 years?)

patient renter said...

The tax credit was up, temporarily, but the FHA sillyness is still around, and rates are still artificially low. The data are skewed by these.

Buying Time said...

Sorry Husmanen...I gave ya all I got.

husmanen said...

BT. I thought so and it is much appreciated.

Your blog has added great value to the housing discussion in this area and has provided many the data they could not get otherwise to make informed decisions - myself included.

Keep it up :-)

Giacomo said...

Bribes for buyers, artificially-suppressed interest rates, rising defaults... don't kid yourself, prices are still headed down. Without employment and a stable economy, the supports just aren't there.

The sales numbers are just an indicator of how many are being fooled by the RE industry/government deceptions. It's a mistake to interpret stats in the same way that one would in a normal market situation.

PeonInChief said...

Investors. They like to close deals by the end of the year for the tax advantages.