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San Diego has just experienced a second consecutive month of solid gains to the size-adjusted median home sale price. It would appear that the Spring Rally is more or less official.

Between April and May, the size-adjusted median price rose 3.3 percent for detached homes and 2.9 percent for condos. The accompanying graph chronicles the declines from the peak in this price measure.

It’s possible that the increase in the size-adjusted median has been caused by a sudden shift in buyer preference from cheaper to more expensive homes. This is exactly what happened in the spring of 2007, when an increase in both the median and size-adjusted median prices lulled most analysts into believing that all was well with the housing market even as home prices themselves were declining. (A contemporary bout of table-pounding on the topic can be found here).

But my guess is that this isn’t 2007 all over again. Back in May 2007, the inventory of homes for sale was a full 45 percent higher than in May 2009. Yet 4 percent few homes sold in May 2007 than did last month. The supply and demand situation underpinning current short-term price movements is thus very different than it was during the median price headfake of spring 2007. (Incidentally, current inventory is even lower than the above numbers would indicate — but that’s a topic I will address next week).

So until the more-accurate but lagging Case-Shiller index can settle the question, I am going to wager that we are seeing a legitimate rise in home prices. But that doesn’t mean the bear market is over. As I pointed out last month, spring-to-summer price rallies are common even in multi-year housing busts.

That said, there are certainly some positive, if disclaimer-laden, factors in support of housing. They are: reasonable home prices (though only in certain areas); extremely low mortgage rates (though artificially so, and at risk to rise enormously in the years ahead); healthy demand (though heavily dependent on continued low rates); low inventory (not counting foreclosed “shadow” inventory), and unfathomable amounts of government stimulus aimed directly at propping up home prices (okay, I admit that’s not likely to stop any time soon).

But given the huge overhang of current and potential future foreclosures that will likely need to be sold into the market, not to mention all the parenthetical disclaimers in the paragraph above, it’s going to take more than a two-month spring rally to convince me that the bottom is in.

— RICH TOSCANO

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