Case-shiller index shows robust price gains in January
The price index increased 0.6 percent in January from December, compared to a decline of 0.1 percent the previous month. On a seasonally adjusted basis, January’s increase of 1.8 percent was the highest monthly price gain in the 20 U.S. cities measured by S&P/Case-Shiller, which is considered highly accurate because it captures repeat sales of identical homes.
San Diego posted the nation’s most improved year-over-year performance, at least from a seller’s perspective: January’s average was 19.4 percent higher than the same month in 2013, up from 18 percent in December.
However, various indicators suggest that the housing market is unlikely to soon return to the 20 percent-plus price growth seen in the first half of the 2000s and again from January 2012 to mid-2013.
Instead, many analysts see supply and demand staying relatively balanced in 2014.
“I’m not expecting any great movements one way or another for the rest of this year, and that’s a good thing,” said Mark Goldman, a real estate lecturer at San Diego State University and a mortgage broker. “I think a stable market is a healthier market.”
Goldman predicts average resale prices will increase from 3 percent to 3.5 percent this year in San Diego County, in line with the 100-year trend for U.S. prices.
Falling affordability is one factor that could prevent the formation of a new housing bubble.
Although unemployment fell in San Diego County to 7 percent in February from 8 percent a year earlier, wages have barely kept pace with inflation and fewer people are in the workforce.
Meanwhile, mortgage payments have increased for buyers; the average fixed rate for a 30-year mortgage was 4.32 percent last week, compared to 3.54 percent a year ago, according to Federal Reserve figures.
The combination of stagnant incomes, higher prices and rising rates have cut into demand, forcing some sellers to accept lower offers, analysts say.
Before the surge in January, which could prove to be temporary, price appreciation in the overall resale housing market was essentially flat from September to December, as measured by S&P/Case-Shiller.
The number of houses sold fell 8.6 percent in February compared to a year ago, according to real estate tracker DataQuick.
Also noteworthy: The inventory of homes for sale in the county jumped 44 percent to 6,099 active listings, according to the San Diego Association of Realtors. However, that’s still below the 8,000 to 9,000 listings seen in more typical markets, and well below the 14,000 listings near the 2005 peak.
Construction has fallen short of demand from buyers for years in San Diego County, creating a chronic shortage that could keep a floor under home prices — unless another financial crisis cuts off mortgage lending.
Other major markets displayed slowing rates of price appreciation in January.
The S&P/Case-Shiller composite of 20 major metro areas, which includes San Diego County, fell 0.1 compared to December for its third consecutive monthly decline. Compared to the previous year, the national index increased 13.2 percent.
Don McSwain
San Diego Union Tribune
