The Next -0- days

May 20, 2006

View from Silicon Valley- The Next -0- days

Two months ago we documented how median house prices in Silicon Valley make most of their annual increases from February to April. We showed how, over the last three years, the six-months starting July showed median price changes of 0% ($0, 2003), +1.6% ($11K. 2004) and -0.9% (-$6K, 2005). We argued 60 days ago that if house prices were to maintain their luster, "The next 60 days," would be key.

February checked in with a +$17K gain and March registered +$12K with 80%+ of each gain "miraculously" showing up in the last two or three days of each month. Regardless, April needed to show big gains if annual 18 -20% increases were to be maintained.

It's now 60 days later, so how are prices doing?

Re-creating "The Next 60 days'" table, using the local paper's figures:

Median +/-$ 2003 2004 2005 2006
January -$4K -$47K -0- +$1K

February     +$7K   +$52K   +$22K   +$17K
March        -$10K   +$39K   +$33K   +$12K
April        +$15K   +$11K   +$17K   -$10K
May          -$4K   +$15K    +$8K
June         +$29K    +$9K   +$15K
July         -$24K -$9K    -$5K
August       +$17K   -0-    +$14K
September    -$3K    +$5K    -$9K
October      +$10K +$5K    +$9K
November     -0- -0-     +$1K
December       -0-   +$10K   -$15K
Total        +$43K +$90K   +$90K

If April's negative $10K didn't kill the bull case for perpetual and inevitable gains for Silicon Valley housing, they at least have to admit their case is bleeding. The fact this week's paper includes a graph showing the highest number of single-family houses listed for sale in the last two years is salt in the bulls' "Silicon Valley prices never go down" case.

As an aside, digging back through our records, this week's 2,606 listings is the highest since ~November, 2003. Alert readers will also recall evidence suggests local real estate agents appear to be actively disguising listing volume (http://www.viewfromsiliconvalley.com/id221.html).

Breaking down the details:

2005 Peak Since Since

All Homes Current Peak Date Peak y-o-y Jul.01

Santa Clara Co. $675K $670K Sep.15 0.7% 6.3% 3.5%

San Mateo Co.* $749K $775K Aug.19 -2.6% -0.1% -0.8%

Santa Cruz Co.**$699K $720K Nov.04 -2.0% 11.5% -1.5%

Resale Homes

Santa Clara Co. $725K $725K Nov.11 0.0% 5.1% 3.4%

San Mateo Co.* $805K $830K Aug.19 -2.4% 2.5% 0.6%

Santa Cruz Co.**$749K $775K Nov.04 -3.4% 10.8% -2.1%

*= thru April 25

**= thru April 28

San Mateo and Santa Cruz numbers are much more volatile than Santa Clara County. They bounce, up and down, on lower volume, more than Santa Clara County on a regular basis. (And Santa Cruz bounced up hard(!) this past week. We'll see if it holds up next week or the week after.)

* * * * *

April also clearly showed continued weakness in y-o-y gains:

Apr Mar Feb Jan

All Homes Current Gain Gain Gain Gain

Santa Clara Co. $675K $0K $3K $19K -$5K

San Mateo Co. $749K -$1K $37K $15K -$20K

Santa Cruz Co. $699K $14K $5K -$20K -$10K

Or just focusing on the y-o-y:

Apr Mar Feb Jan end-Dec

All Homes Current y-o-y y-o-y y-o-y y-o-y y-o-y

Santa Clara Co. $675K 6.3% 10.2% 14.2% 15.5% 14.8%

San Mateo Co. $749K -0.1% 3.4% 6.4% 8.2% 12.5%

Santa Cruz Co. $699K 11.5% 8.0% 12.6% 13.5% 17.4%

Running the same numbers for Resale Homes:

Apr Mar Feb Jan

Resales Homes Current Gain Gain Gain Gain

Santa Clara Co. $725K -$15K $7K $17K $0K

San Mateo Co. $805K -$5K $25K $13K -$17K

Santa Cruz Co. $749K $24K -$7K -$12K $9K

Again focusing on just y-o-y:

Apr Mar Feb Jan end-Dec

Resale Homes Current y-o-y y-o-y y-o-y y-o-y y-o-y

Santa Clara Co. $725K 5.1% 10.6% 13.0% 13.6% 16.5%

San Mateo Co. $805K 2.5% 3.8% 5.7% 10.8% 10.7%

Santa Cruz Co. $749K 10.8% 3.8% -0.3% 4.7% 10.9%

Headlines have already dismissed April's fall as only one month removed from new highs exhibited in March. While literally true, this clearly ignores the y-o-y price trend, for both "Al Homes" and "Resale Homes", in all three counties.

Perhaps the final piece of the evaluation is y-o-y volume:

Santa Clara Co. y-o-y volume: %-Total
All homes            -15.3%   --
Total resale houses  -18.7%   64.5%
Total condominiums   -18.6%   24.9%
Total new homes       +29.9%   10.6%

San Mateo Co. y-o-y volume:   %-Total
All homes             -13.0%   --
Total resale houses   -16.5%  74.3%
Total condominiums     +8.7%   24.2%
Total new homes       -60.0%   1.5%

Santa Cruz Co. y-o-y volume: %-Total
All homes            -21.5%    --
Total resale houses -30.9%   66.0%
Total condominiums   -32.1%   15.8%
Total new homes      +109.5%   18.2%

As noted in "Test of the High" (December, 2005, http://www.viewfromsiliconvalley.com/id213.html), the failure of sales volume to recapture and hold prior rates was a bad sign for continued price increases. Bulls dismissed declining volume as data mining since y-o-y prices were still strong.

Now that y-o-y prices are solidly down into single digits, the bull case is bleeding through another wound.

Bottom line:

Figure another 60 days and we may experience actual negative y-o-y prices. If we haven't grabbed the bull's attention yet, maybe negative y-o-y prices will finally do the job.

Next month: "The last 30 days?"