Like everyone else with more than a passing interest in home prices and market trends, I have been reading the refrains of “Everything’s Coming Up Roses” offered up by the San Diego Union this past week. And like a lot of others, I am a little skeptical.
First, they brought us the article in which they quoted our friends from Zillow.com, the indisputable authorities on home valuations (sarcasm alert), and advised that San Diego County is an oasis of appreciation in the desert of recovery. In the article cautiously titled “San Diego leads nation in rising home prices,” we were told that home sale prices in San Diego rose 3.7 percent in March versus March of 2009.
According to the article:
“Home values in (the top five) markets have risen significantly for at least the past 10 months after values in all five markets reached a low point in April or May 2009,” Zillow said of the California markets. “Although home values could fall again, it is more likely, given current conditions, that they will remain above their lowest level reached last year.”
Now, where did I put that checkbook?
The problem, as always, is that these statistics are aggregated for very big metropolitan areas, and your mileage may vary. If you made it beyond the good news, you would have read about other stuff like three to five years of stability with little to no appreciation, a remaining “overhang” of foreclosure properties, and a lingering environment where most homeowners owe more than their homes are worth.
Blah, blah, blah. There’s no time for that kind of talk, because yesterday brought more good news.
“Resale home prices rise in county,” trumpeted the headline. This time, the National Association of Realtors (NAR) reports that median San Diego home prices were up 14.7 percent in the first quarter of the year compared to 2009. But, wait.
Buried several paragraphs later, there was a small concession – that the median price change was more a factor of the mix of homes rather than actual prices. In other words, there is speculation that more of the more expensive properties are now selling, skewing the median. My knee-jerk reaction, like Jim Klinge’s, was that this is in fact the case.
Now, before you freak out thinking that this is the preamble to a long, boring post with a lot of statistics, chill. The long and boring part will certainly bear out, but just as I was readying Stats Man for a return appearance, I realized that the I-15 Corridor numbers show no such trend of a greater affinity for pricey properties. Au contraire, the numbers show increased prices quarter-over-quarter across the board with a greater percentage of the sales coming from lower priced homes in 2010.
So what gives? Are prices really going up? The short answer is yes – and no.
Sure, the Case/Shiller twins put March-over-March appreciation in San Diego County at 15.8 percent, giving us a consensus that it is time to do the happy dance, but there are so many internal variables and outside factors at play.
First, I’ll simplify the market trends for those confused by all of the conflicted reports. And, because I really have no intention of doing anything of the kind, I will borrow the chart I previously published here in November, 2007 with some slight modifications, since things haven’t really changed all that much:
So, back to the real deal (and by that, I mean, my opinion). First of all, think of this market as being in a boat. On the ocean. With waves. On any given day, we are bouncing up or down, caught in the wake of a pretty heinous market cycle. Generally, we are moving on a level surface and will be for many more years, but there will be eddies along the way, turbulence caused by tax credits (now you see them, now you don’t), interest rates, lending policies, and distress sale activity to name a few.
Moving on to a new metaphor, prices are improving for some segments and for some products, but not for others. Think of homebuyers in terms of teenagers. My daughters wanted insanely expensive designer jeans in 2005. One bought them, and then couldn’t afford to pay her charge card bill. The other waited, and now those same jeans are at the outlet store for a fraction of the cost. But, where the frugal one initially just wanted any style with the designer label, now she wants only the top of the line – the ones with the rhinestones – and she wants them cheap. And while both would have settled for the yucky, no-name jeans back when prices were out of control and demand exceeded inventory, those yucky jeans today are out of the question.
My sense is that someone who had the time on their hands to find enough “matched pairs” of sales (same floor plans, same development) and took the time to consider the condition and features of each would see that buyers are still getting more for their money today, even as the statisticians tell us they are paying more. We work with enough buyers and sellers to know that all but the bargain-hunting purists want perfection. Compromise is no longer in the buyer vocabulary. Give ‘em the granite, the large lot, the new designer carpet and paint delivered in staged-flawlessness, and you may have a deal. Put the home on a busy street, back it to power lines, give it a funky floor plan, or offer an allowance in lieu of addressing deferred maintenance, and you will be spending your free time counting your market time.
To be clear, I do agree that we are at or slightly beyond the low point of our current cycle. It’s just that I don’t buy the blanket “big appreciation” message, and I’ll go so far as to say that, for many, the worst is not behind us.
I’ll guess I’ll have to wait until tomorrow to see what the Union Tribune thinks about all this.