“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Autumn brings shorter days, brisker weather to Southern California — and a homebuying chill.
Source: My trusty spreadsheet looked at seasonal swings in monthly DQNews stats dating to 1988, tracking 9 million sales over one-third of a century.
The Trend
Historically speaking, September is definitely the start of a six-month chill for house hunting when pondering closed transactions.
How much so? SoCal purchases from September to February have run 16% below the homebuying pace of March to August since 1988.
That slowdown means the region’s median home price declined in 59% of those half-years starting in September.
Prices averaged a six-month decrease of 1.79% in this autumn-winter period vs. increasing 6.7% in a year’s six other months.
The Dissection
You don’t need a spreadsheet to know that folks typically dislike buying a home once school starts and as the holiday season nears.
But history helps define how the cooldown may occur. So, remember a typical year’s ups and downs when reports on autumn homebuying start coming out. Here’s how the seasonal change has looked since 1988, on a monthly basis …
September: Since 1988, prices dropped 55% of the time from August for an average one-month change of 0.56%. Sales saw dips in 88% of the past 33 September months, with an average one-month decline of 9.5%.
October: Prices dropped 58% of the time. Average change? 0.79% decline. Sales? 48% monthly drops; average 0.1% increase.
November: Prices dropped 24% of the time. Average change? 0.73% increase. Sales? 88% monthly drops; average 8.8% decline.
December: Prices dropped 21% of the time. Average change? 0.54% increase. Sales? 6% monthly drops; average 2.2% increase.
January: Prices dropped every time. Average change? 2.77% decline. Sales? All drops; average 27% decline.
February: Prices dropped 24% of the time. Average change? 1.11% increase. Sales? 45% monthly drops; average 1% increase.
Homebuying’s “prime time” then follows. It’s a period that saw prices decline over six months only 6% of the time.
March: Prices fell only 3% of the time. Average 2.88% increase. Sales: No monthly drops; average change of 36.2% increase.
April: Prices fell 30% of the time. Average 0.85% increase. Sales? 45% monthly drops; average change of 0.9% increase.
May: Prices fell 15% of the time. Average 1.06% increase. Sales? 15% monthly drops; average change of 5.8% increase.
June: Prices fell 12% of the time. Average 1.73% increase. Sales? 21% monthly drops; average change of 7.1% increase.
July: Prices fell 61% of the time. Average 0.33% decline. Sales: 70% monthly drops; average change of 5.2% decline.
August: Prices fell 30% of the time. Average 0.4% increase. Sales? 39% monthly drops; average change of 3.5% increase.
Another view
Among six Southern California counties, all had a decline in sales over 33 years in this “off” season. Only Riverside and San Bernardino counties averaged half-year price gains once September begins.
Here’s what history suggests what may happen in the next six months at the county level …
Los Angeles County: 2.4% price drop and 16% fewer sales.
Orange County: 1% price drop and 18% fewer sales.
Riverside County: 1.7% price gain and 15% fewer sales.
San Bernardino County: 0.6% price gain and 11% fewer sales.
San Diego County: 0.8% price drop and 18% fewer sales.
Ventura County: 3.1% price drop and 17% fewer sales.
How bubbly?
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … TWO BUBBLES!
Understanding that the end of peak buying season usually creates downward pressure on pricing and sales is a healthy perspective necessary to digest any downturns you’ll see in market statistics.
But what’s unknown is how the anticipated seasonal cooling mixes with the current wild market and its challenges — from high prices to limited choices.
For example, will buyers pull back, awaiting the impact of the season’s historical softer pricing? Or will sellers pull homes from the market, awaiting the traditional spring boost in 2022?
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
Source: Orange County Register
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