The National Association of Realtors Pending Home Sales Index, for which 100 denotes an average level of activity, hit a ten-year high in April, ticking up 5.3 percent from (a revised) 110.7 in March to 116.3 in April and now measures 4.6 percent higher versus the same time last year.
And while running a below average 95.3 in March, the Pending Home Sales Index for the West surged 11.4 percent in April to 106.2. The Index for the West is now 2.8 percent higher versus the same time last year, the first year-over-year gain in four months.
Comments from Plugged-In Readers
My friends are closing on a home down in So Cal inland area. They both work low paying service jobs. Their rent got raised and they figured why not get an FHA loan and own for less. It’s the low end areas finally catching up to the topping high end. Not sustainable.
Do you realize that your illustration suggests a sustained growth is more common than a crash?
How can you use the word sustained while we are talking about 3% down loans? Short memory?
You added a qualifier just now, didn’t you? I’m not interested in arguing for arguing’s sake. I’m not interested in an amorphous argument that you continually add to. You said a thing and posted a chart. It didn’t illustrate what you said. That’s all I got today. Have a good one.
oh, I guess I’d add that 3.5 percent loans remain extant? other than that it’s all good. have the last word(s) if you like.
When you hit the affordability ceiling, just lower the bar on loans. Rinse, repeat.
Also take another look at the chart. Approx 1990 to 2000 we saw “sustained growth” happen during this time as the lines moved in unison. Then the purple line took on an “unsustainable” upward trajectory as evidenced by its sharp return to the red line in 2010.
Trend up? Crash.
Trend down? Crash.
Trend flat? Crash.
Home prices rise along with incomes and inflation, no crash. Home prices far outpace incomes and inflation, crash.
Its not about trends. Its about pricing staying in sync with fundamentals. Current pricing levels are spurring significant construction levels that I haven’t seen in the last 20 years in the bay. Look at all the condo developments in SF. There are fields of new townhoused under construction in Fremont and other neighboring towns. The delay between the pricing and development cycles creates inefficiencies in the economy.
Sabbie, while your thinking might apply to the whole country on aggregate, it doesn’t have to apply to an individual city such as San Francisco. Here is why:
1) Imagine a city where:
Population grows from 750’000 to 850’000 within 5 years = +100’000 or +13%
Housing stock grows from 370’000 to 380’000 within 5 years = + 10’000 or +3%
In this situation, I would expect home prices to increase even if inflation and incomes stay the same.
2) Imagine a city where more and more workers are white collar and income for white collar workers increases much faster than for blue collar workers. In fact, your graph only consideres non-managerial, production worker salaries.
Under these circumstances, I would expect housing prices to go up without necessarily becoming unsustainable.
uh, SF’s 2010 population was 805k, per US Census. SF population was ~750k 20 years ago at the start of the dotcom boom. SF has added 35k housing units since then, per SFPlanning’s Housing Inventory report (pdf at namelink). If we are to base our conclusions on facts instead of imaginations, then…
FWIW, analyzing SF housing and population in isolation from the rest of the Bay Area is really a fools errand. About half of the resident population movement both of SFers leaving and non-SFers moving into SF is to and from other Bay Area counties. And those flows are much larger than any of the growth or declines in population of the boom and bust years.
Pero, I agree with everything you said. But I think SF may be too inflated as well. Here, instead of loose lending, I think people are just pushing the limits and spending a huge chunk of their income to make it work. Check out this interesting article from Trulia regarding entry level jobs, even though we offer by far the highest income here, we still have a pathetic rank on the income to expense ratio.
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