Friday, September 15, 2006

San Diego housing market: sales down 32%

News from San Diego's formerly "hot" real estate market - San Diego County's residential real estate market continued to cool last month, with overall prices down 2.2% from August 2005.

It was the third straight month of year-over-year price declines.
It also was the slowest August in terms of sales volume since 1997.

The median price for all homes in August was $482,000 for 3,666 sales, compared with a median price of $493,000 for 5,379 sales in August 2005.

August was also the 26th consecutive month in which the total number of homes sold fell on a year-over-year basis. The year-over-year decline in total sales last month was 31.8%, the biggest for any month in 11 years.

San Diego has been viewed as the canary in the coal mine because San Diego has been in the forefront of the housing boom. Real estate analysts across the nation are watching what's happening in San Diego.

Housing is not in a free fall here. Turnover is slowing month by month and prices are soft. Whatever is happening is happening very slowly but persistently. I'm now seeing many "for rent" signs going up. Home-owners who can't get the price they want for their homes are trying to rent their homes rather than lower the price. Even if they did lower the price, they are not convinced they could sell their home. Bids are drying up.

The housing market overseas has been holding up fairly well, and in countries where prices have come down, there is a general firming now going on. One difference between the US and the overseas housing market is that in the US housing is a larger percentage of the economy than the overseas markets. Also, in the US the savings rate is negative.

Debt is also a problem in the US. Annaly Capital Management (mortgage real estate investment trust) estimates that of the $2.3 trillion Americans borrowed last year, $1.3 trillion of it was home-mortgage debt. Almost half of that $1.3 trillion or some $500 billion was used to buy cars, big-screen TVs, water toys, etc.

So -- is what we've seen so far just the tip of the national real estate iceberg? Or will the US get through the decline of the real estate bubble with flying colors? All I can say is that so far, the danger signs are missing. Take Countrywide Financial Corp, a major holder of mortgages. The stock has dropped from a high of 43 back in May to a low of 32 in August. The stock has been rallying since, selling at just under 35 yesterday. The stock corrected yes, but no disaster here. I'd say it's been about the same story for all the mortgage stocks, at least so far. It's been the same story for almost all of the home-building stocks.

Today was a BIG volume day in the Stock Market, over 3 billion shares, but upside volume was only 54.4% of up + down volume.


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8:01 PM  

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