- Sales Volume Trends
- Price Trends
- Interest Rate Trends
- Our Economy
- Putting the Pieces Together
- Market Timing for San Diego
Sales Volume Trends
People often think real estate sales are seasonal; families prefer to move during the summer, between school years. This is only a half-truth, as the charts below will show. The following charts show year-over-year results on a month-by-month basis. We will first look at listings and sales.
The most significant behavior observable in the "Listings by Month" chart above is the fact that listings completely fall off at the end of the calendar year. With Thanksgiving, Christmas, and all the holiday parties in between, it just seems to be too much trouble. This in turn creates the huge surge in the January listings from everyone who held-off during the holidays (with an apparent decline in February).
We see that the January 2008 new listings come in at under 7,000, showing a contraction back toward to normalcy. Unfortunately, we are probably 1,000 - 2,000 listings higher than we would like to be.
The "Sales by Month" chart above confirms the seasonal behaviors seen in the Listings chart. Naturally we see that January and February are the slow months for closing escrow. Remember, a typical 60-day escrow means that the purchases were back in November and December. So, the actual slow period is the end of the prior year. The true activity picks up in January, resulting in the boom in sales closings in March.
Looking at the statistics for 2000, we see that sales (closed escrows), gradually increase from January through June and, with the exception of July, it shows a similar and reasonably steady decline through the end of the year. Absent other data, and knowing what our market did during the last eight years, I posit that this is perhaps the best definition of a normal year.
Right now, the initial sales of 1335 homes for January 2008 are down to less than 80% of last year at this time. February information (to date) indicates it will be substantially worse. Looking at the end of 2007, we see the sales numbers are down to about 65% of 2006.
Taken in isolation, it looks grim indeed. And for anyone who had needed to sell, it has been painfully slow.
But, looking at the bigger picture we see a depression (or even an inverse bubble) in the rate of sales. In the years 2000 – 2005, every January and February were 2297 sales and up. Today, sales are less than 60% of six other years. We have a pendulum swing or rubber band effect. There is always a pull toward normal. As with either a pendulum or rubber band, the further away from center, the more difficult it is to keep moving away. Right now, we are way below normal.
I hate to introduce this next part, because the numbers just don’t work, but here it is anyway. According to work by Rohe, Van Zandt, and McCarthy in 2001, homeowners remain in their home an average of 8.2 years while renters move every 2.1 years. (Anecdotally I hear 5-7 years for Californians.) In San Diego, with over 1,000,000 housing units (half of which are rentals), an average stay of 8.2 years would mean we would need to sell 61,000 units annually.
Not even at the height of the real estate mania did we reach this number. So, at least one of our numbers above is wrong. Be that as it may, we see the annual sales data showing us the same thing we are seeing in the monthly data – sales are far below any “normal” rate of sales. All else being equal, the quantity of sales must swing back. It is my belief that the pendulum is stopping already and the swing back must begin soon.