The Morning Report
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In my sporadic updates of late, I have been focusing on this graph:
The blue line in the graph shows how many months of supply are for sale in the San Diego housing market (it’s inverted so that the line goes higher when supply is lower). The red line shows monthly price changes (per the Case Shiller index and, for the most recent two months, an estimate thereof based on the median price per square foot). It is pretty clear that the two lines tend to move together — when supply is low, prices tend to rise, and vice-versa. Not too surprising a result, actually. (For more background on the history of the relationship, see this article).
Months of inventory dropped quite abruptly (a rise in the blue line) early this year. This foreshadowed higher home prices, and sure enough, we’ve gotten them. In the graph above, you can see that the red line indicating monthly home price changes has been firmly in positive territory since that time. This next chart, which shows the median price per square foot for San Diego homes, gives an idea of the cumulative price change this year:
Since January, which was the low point for prices by this measure since early 2009, prices have risen by about 10 percent. We are now entering the weaker part of the season for housing, but that months of inventory figure remains very low. Unless that changes, home prices seem likely to remain fairly firm in the months immediately ahead.