… or “Why I think Steve is being silly.” Do not think for a minute that this post is not going to get me in some really deep domestic doo-doo.
First off, it is not his conclusion I disagree with — of course there is hope for the future — but it is the argument. And in all fairness, it is only parts of his argument.
My partner likes to point to the increase in number of homes sold lately to make his case that the market is turning, and he likes to point to these sales numbers a lot. “I am going to the store. Do you need anything? By the way, sales are up!” or “We need to send Grandma a birthday card. How ’bout those November sales?” This has been a huge point of contention at Chez Berg, where we spend our leisure hours as any healthy family does — arguing about market data.
Here is where we generally agree. We are not through the down-trending in prices, but the rate of decline this next year will be gentler. Favorable interest rates and latent buyer demand will both serve to bolster the market as we move forward, as will measures being taken at the Federal level to assist homeowners at risk and to stimulate lending. A lot of the bad news is behind us and while we are far from a reversal, we are moving in that direction.
Where I disagree is with what the Fall sales numbers are telling us.
There are a whole bunch of things you can count on in life. Thanksgiving always falls on a Thursday, most resolutions are made and broken in January, people spend more money during the holidays, and Steve’s hard drive will crash once a year. Home buying activity is just as predictable. The minute any of these things stop happening as expected, we have outside influences at play. The results may be anomalies, but they don’t necessarily signal a trend.
Let’s look at sales numbers. This chart shows the number of homes sold each month in San Diego County back to 2004 (courtesy of the Sandicor MLS, all property types).
Volumes may change, but the trend lines are the same. Spring activity is healthier, and March, June and August see spikes in recorded sales. Sales begin tapering off in September — always. Now, here is what 2008 has looked like so far, and I have included the 2007 trend line, since we all like to talk about how the number of sales is up over last year:
Yes, sales are up, both the annual sales and the monthly sales year-over-year. But the trend line is whacked out. Stuff is going on, external stuff, influencing activity. The problem is that a lot of the externals are temporary, and we can’t begin to predict what new variables are going to be thrown in the mix as we move forward, so predicting the future based on immediate past performance is a turkey shoot at best. All the sales numbers tell us right now is that we have volatility and uncertainty. Until the trends return to “normal,” and I am not talking about numbers of sales or sales prices, but the trend line itself, market stability will be somewhere off in the future, and how far off that future is will be any one’s guess.
Somewhat off topic, but because I know you are dying to see the price trends, here you go. This takes us from January of 2004 to today. It would have been far more interesting had I gone back to the days of our last market “correction” (mid-1990’s), but I ran out of steam.
Now I will be heading off to the corner as a preemptive strike. Bad wife.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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{ 4 comments… read them below or add one }
Maybe you should just give him a hug/kiss and tell him he’s cute when he’s wrong. Husbands like that sort of thing.
Steve is a very lucky guy to have someone like you to set him straight when he messes up
Good call, Mom. (I still love you, Dad.)
Now I can see who my true friends are (or are not, as the case may be). Let me bring this down to the most elemental level for my critics, because they obviously communicate best there. The trend lines you so thoughtfully provided are lagging indicators (again, for your friends that means “Past” indicators). Anyone can look at lagging indicators and tell me what has happended. It takes a knowledgeable and intelligent interpretation of those past indicators to predict human behavior in the future.
I know the patterns and trend lines are out of whack. This is not a news flash. The fact that they are out of whack is what catches my attention. When sales should be declining in CA, they are doubling. Why is that? But it’s not just homes sold. Could it be that the median price has fallen 40% in just the past year and many who have been waiting think prices are ripe? Could it be that the affordability index has climbed over 100% (from 24% to 53%)? How about interest rates? How about the fact that demand has been building for the past three years as people waited for just this moment.
This is simply the free market (until recently) doing its’ thing. Part of that “thing” naturally includes volatility. It’s to be expected and actually portends the next phase – stability.
BTW – Becky, your grounded!