The Morning Report
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With the varied home buyer tax credits either expired or winding down, San Diego home sales predictably declined in July. This happened in a month when, excepting the housing implosion phase in 2007, sales have typically risen in recent years:
The chart above shows the number of home sales closed in each month. A more timely method to gauge sale volume is to measure the number of homes that have gone into escrow (presumably to close, and be represented in the above chart, a month or two later). I am indebted to Schahrzad Berkland, local realtor and proprietor of the San Diego Housing Forecast website, who provided me with some historical data that allows me to do a similar chart of these so-called pending home sales:
As with closed sales, pending sales dropped during what has been a seasonally strong month over the past two years, suggesting unseasonably weak closed sales ahead.
The tax credits stimulated the market by encouraging people to buy earlier than they otherwise would have, thus pulling forward future demand. The data suggests that we are now entering the payback phase: buyers who would have been buying now have already bought, and current demand has dropped as a result.
As this post-stimulus lull in demand gets underway, housing inventory has continued the steady rise that has been taking place all year:
This has resulted in an increase in the number of months’ worth of inventory for sale in the county (this chart is modified from previous months’ versions to use pending sales instead of closed sales, as the former give us a more timely snapshot of demand):
The number of months’ worth of inventory has not yet surpassed six months, a level which has historically marked the line between rising and falling prices. If current trends hold up, however, we could be above that demarcation quite soon.
— RICH TOSCANO