When will San Clemente’s flat housing market recover?

After hitting an all time high of $898,442 in January 2007, San Clemente’s seasonally adjusted home median price slid to $628,583 by October 2009, a peak-to-trough drop of 30 percent. That’s more than a 1 percent drop in market value every month for almost 3 years.

But since the end of 2009, prices have been mostly flat, with a very slight weakness noted at the start of this year.

Note:  Every neighborhood is its own market, and while some areas of town have been hit far less severely than the median price, others have suffered up to a 50 percent peak-to-trough drop.

So much for history. Where do we go from here?

Try as we may, there’s no predicting San Clemente’s housing market.

Of course, we do a lot of talking about the market. We’re all excellent Monday-morning quarterbacks. But that just makes us feel better about how the game already turned out.  It’s hindsight, not foresight.

I’ve always felt that if I could accurately predict market prices, I wouldn’t have to work for a living.

I have also written that most local buyers and sellers will buy or sell based on changes in family circumstances, not market price predictions.

What do market prognosticators base their forecasts on, anyway?

There is an economic axiom that says the near past is the best indicator of the near future.  This theory says if we have an up month in January for example, the recent “trend” will likely continue into February. My guess is this notion is accurate about half the time.

In other words, it’s pretty worthless.

Most forecasters tie the real estate market to the general economy. This theory says if the economy (mostly job growth) is good, the real estate market will be good. And this is intuitively valid.

But it works well only on the large scale. I have tried to tie the local real estate market to Orange County’s job market for years, to no avail. Every time I have looked, the numbers show a perverse inverse correlation. In other words, the better the local economy, the worse San Clemente’s home values. This can’t be actually true.

Other forecasters try to predict one set of statistics with another. For instance, they say, if home sales volume rises, so will home prices. This idea seems right.  The only problem is, it’s wrong. There is no evidence that local sales volume can predict the direction of market prices.

All kinds of statistics are poured over each month by real estate analysts trying to find something--anything--that can predict the direction of home prices. 

In the final analysis, maybe it’s a leap of faith. In the long term past, San Clemente home prices have gone up. I think they will continue to go up in the long term future.

Pay your money and make your choice.

For more of the latest market news and statistics on San Clemente real estate, visit my blog or MCotter.com.