Prices Way Down, Sales Way Up

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Last week I noted that May had been another good month, as these things go, for home sales. But there is more to the story, as you might expect. Just as there has been a huge disparity in price declines between different areas of San Diego, the recent surge in sales activity has been every bit as uneven.

Using the zip code-level sales data kindly offered up by our pals at the Union-Tribune, I collected information on all zip codes that had more than 20 sales either in May 2007 or May 2008. I put the resulting list in order based on the year-over-year change in sales activity, with the biggest sales increase at the top. Then I took some averages for the top 20 zip codes (those with the biggest increases) and the bottom 20 (those with the biggest decreases). The two lists are here for anyone who wants more detail.

The results, summarized by the table to the right, were pretty clear. To begin with, the sales disparity among different zip codes is huge. The top 20 zips averaged a year-over-year sales increase of 38 percent while the bottom 20 averaged a decrease of 42 percent.

There was a big difference in pricing between the two categories, as well. The average median price (that sounds funny, but it's the average of the 20 zip codes' individual median prices) in the top 20 was $352,228, which was down 25 percent from last May. And the average median in the bottom 20 zips was $640,463, which was down only 8 percent from a year back.

In short, the lower-cost areas that have taken huge price hits are seeing a big resurgence in activity. More expensive areas whose prices have been resilient, on the other hand, have experienced a severe drop in activity.

A few implications leap to mind. First, because the composition of sales has shifted towards lower-priced homes, the plain-vanilla median price is almost certainly overstating shorter-term price declines at this point. There is no shortage of analysts pointing this out, by the way. (Oddly enough, not so many of them were pointing out the compositional changes that caused the median to overstate price increases in early 2007).

Second, this is not a good sign for the high end of the market. All the talk of desirability is meaningless if there aren't actual desirous people buying actual houses. The challenges faced by the high end, covered here before, may be taking their toll.

Finally, the increase in sales volume is obviously a sign of improvement in the lower priced markets. At the same time, this is where foreclosure incidence is highest, and for now, foreclosures are still winning. But at least something good is finally happening at the long-suffering low end of the housing market.

-- RICH TOSCANO