Rich Toscano noted here that the low-inventory conditions might cause some appreciation:

Months of inventory, which measures how many homes are for sale compared the rate at which they are being purchased, was notably lower than in recent Januaries past:

There was 26.3 percent less supply by this measure than in January of 2011, and 4.2 months of inventory is the lowest reading we’ve seen in nearly two years.  Prices may have been dropping of late, but if supply remains this constrained and rates remain incredibly low (that second one is a big “if”), it’s certainly plausible that prices could start to rebound once the spring season gets underway.

http://www.voiceofsandiego.org/toscano/article_0e4efcf2-5b61-11e1-b977-0019bb2963f4.html

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The January trend of lower-supply-higher-demand has continued, reminding me of the frenzy era.

Let’s compare the amount of detached homes coming on the market to the number of solds, to see how 2012 is shaping up.  Though the number of new listings and number of solds are mostly unrelated to each other, if we compare the same categories for the same time frames each year we can analyze the trends. (La Jolla was omitted again by MLS glitch)

Here’s a review of the January 1st-to-February 20th period for NSDCC detached listings, where lately we are seeing fewer new listings but sales are increasing anyway:

Here is how the NL/S looks on a graph – we are back to the 2.0-3.0 range of the frenzy era:

But will we see appreciation?  We might see some spots where a flurry of activity might give you a temporary buzz, but it will be short-lived.  Here are reasons why:

1.  Pent-up supply is waiting just under the surface, and any sign of higher pricing should cause sellers to flood the market. But such a surge will be counter-productive, because greed will cause sellers to tack on an extra 10% on top of the temporary blip, making them look ridiculous in the eyes of the buyers.

2.  Our artificially-low rates have been declared to last through 2014.  Buyers are patient and unfazed by the threat of higher rates in 2012. We might see an appreciating market be more likely in a couple of years if the threat of higher rates begins to materialize, but buyers aren’t going to pay more now just because they think rates are rising.

3.  We are in a short-sale environment, where realtors have more control of pricing.  Short-sale listing agents want quick sales, and will price at recent comps or lower.  They’re not going to test higher pricing boundaries – they don’t have to, unless the banks really get their act together on valuations and can detect a rising trend.  Based on their drip system, it looks like the banks still believe the market is in free fall.

It will be a bouncy ride, get good help!