Commentators on CNBC-TV are all abuzz about the possibility of a “double dip” in the U.S. housing market this morning.
The conjecture is largely based on the Standard & Poor’s/Case-Shiller composite index of 20 metropolitan areas, which declined 1.0 percent in October from September on a seasonally adjusted basis, a much steeper drop than the 0.6 percent fall expected by economists.
Eighteen of the 20 cities showed weaker year-on-year readings in October and all 20 cities showed monthly price declines, according to CNBC.com.
It should be noted that San Francisco, which is included in the survey, is one of the two cities that actually showed a year-on-year increase. It should also be noted that all real estate, like politics, is local. At the same time, statistics I pulled from the MLS this morning for the past two years, which is far more up to date than that in the Case-Shiller study, may be supporting the “double-dip” scenario in the Almaden-Blossom Valley-Cambrian (ABC) arc where I focus much of my effort.
The two-year-chart shows largely seasonal variations of average sale prices in the ABC area, but it’s not hard to spot an underlying trend that might be significant: a drop in price from $637,000 in December 2009 to $611,000 so far this month — a number more resembling the $618,000 in December 2008, when we were much closer to the bottom of the market.
Anecdotal evidence I’ve gathered at open houses, and from other agents and managers in these areas, also supports the idea of a market that seems to be weakening — at least temporarily. Remember, however, the market typically gets a big jolt after the Super Bowl, as buyers and sellers who have been hibernating since Thanksgiving tend to flood back into the market.
If interest rates can resist their recent upward trend, and perhaps even reverse back toward a 4.0 rate for a conforming 30-year fixed-rate mortgage, then fence-sitting home buyers might be rewarded with a new window of opportunity. While a full-fledged national housing recovery likely will have to wait for some appreciable growth in jobs, it’s not hard to imagine an extremely active market in San Jose this coming spring, especially if buyers whose confidence was shaken by the recent spike in interest rates finally decide it’s time to take advantage of the historic convergence of low prices and interest rates.
At the very least, I believe the Bay Area real estate market is poised for a very interesting year.