August 2009
See how local real estate is doing now.
A statistical overview, with brief commentary, of these five local real estate sub-markets:
Hand-crafted and laboriously charted statistics you won't find anywhere else, showing recent and historical trends for these seven important market indicators:
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This month's summary: more proof that "you've got to got through 'less bad' to get to 'good'''. An incrementally recovering market has been hit by the usual summer doldrums. Only the lower price range, especially bank-owned homes, shows real strength. Again, a declining inventory is perhaps the best sign of a stabilizing market. |
What everyone wants to know. Look for long-term trends here, since monthly average sales price can be skewed in the short term by variations in the size, number or price range of homes sold each month within each sub-market. Also bear in mind that sales price data for the last month or so are incomplete, since not all properties in contract have closed. See also Making sense of market indicators, part 3: sales price. Commentary: Flat or slightly declining was mostly the trend, typical of vacation time, particularly in the higher price ranges, although it looks like investors and first-time buyers aren't taking much time off. Back to top.
Perhaps a more reliable indicator of price trends than average sales price, since the average size of homes sold each month in each sub-market can vary enough to significantly skew results. However, average sales price per square foot can itself also be skewed by average size of homes sold each month: all else being equal, smaller homes sell for more per square foot than larger homes. Commentary: Much the same story as above, although that blip at the low end confirms high demand and declining inventory. Back to top.
The best indicator of whether the market favors buyers or sellers. Absorption = sales/inventory. A huge advantage of absorption is that it can be calculated well before the most recent sales prices are known. Absorption of less than .3 of monthly inventory generally indicates a buyer's market, although this varies to some extent by sub-market, with both low-end and, particularly, top-end SFR usually averaging lower absorption rates. Absorption of more than .4 indicates a seller's market, again depending on the sub-market, while a market between .3 and .4 is in equilibrium. See also Making sense of market indicators, part 5: absorption. Commentary: A cooling market at the high end, where buyers are more likely to take long and distant vacations, while entry-level buyers remain focused on the job at hand. Very much a seller's market for bank-owned homes, where absorption is far higher than the chart indicates, and very much a buyer's market for almost anything else except the occasional well-priced, no-excuses home. Back to top.
One of the most popular (because easily determined), most widely disseminated and quoted, and least reliable market indicators. Low sales always mean low absolute demand, but not always low relative demand. In other words, a market may have relatively few active buyers, but may not have many sellers either, so may still be tilted in favor of sellers. Note that, unlike other sources for price and sales data, I count sales in the month they occur, not the month they close. Using closed sales, with their typical thirty- to forty-five day lag time due to the escrow period, is like using yesterday's sales volume to evaluate today's stock market activity. See also Marking sense of market indicators, part 1: sales. Commentary: Again, much the same story: strong and/or increasing activity at the low end, summer slowdown for everything else. As I've mentioned before, the chart slightly understates condo and low-end SFR sales, since I've removed all pending short sales (which have a low probability of closing) until and if they close, so expect to see some modest upward correction to these two numbers. Back to top.
A fairly reliable indicator of whether the market favors buyers or sellers. High or rising inventory generally indicates a buyer's market, low or declining inventory a seller's market. Commentary: I keep stressing that the big—huge—news here is that inventory is still tapering off in four of five sub-markets, although the up tick in condo inventory is worrisome. I hear anecdotal reports of high-end homeowners in financial distress, but so far this hasn't shown up as the kind of inventory inundation that overwhelmed the low end in 2007. However, lack of inventory is not a problem for high-end buyers. But note the precipitous and continuing drop in low-end SFR inventory—banks are beginning to manage their still-ample inventories better, with bidding wars the frequent result. Back to top.
Another fairly reliable indicator of whether the market favors buyers or sellers. Measures the monthly average number of days a home is on the market before it goes into contract. High or rising days on market (DOM) generally indicates a buyer's market, low or declining DOM a seller's market. See also Making sense of market indicators, part 2: days on market. Commentary: Not a fast market, at least by local standards, although lightening quick by most others. Well-priced, well-presented homes sell quickly, sometimes with several offers, but these are the exceptions: price reductions are still common. Back to top.
A good indicator of whether the market favors buyers or sellers, and of how exuberant buyers are. An average bid above list price indicates a seller's market and suggests multiple offers (although in the lowest price ranges it can also indicate that the buyer's closing costs were wrapped into the sales price), while an average bid below list price (sometimes even with multiple offers) indicates a buyer's market . See also Making sense of market indicators, part 4: bid. Commentary: Continuing signs of improvement—which means improving buyer confidence—although buyers are far from euphoric. Note the strong showing of the low-end SFR sub-market, where average bid was more than list price for the third month in a row. Just another mildly encouraging sign, especially if real estate markets really do warm from the bottom up. Back to top.
condos: single-level CID (Common Interest Development) 2000 sq.ft. or less in Los Altos, Menlo Park, Mountain View, Palo Alto, Redwood City, Redwood Shores and Sunnyvale.
townhouses: two-plus level CID 2000 sq.ft. or less in the same cities.
low-end SFR (Single-family Residences): homes at least twenty years old in East Palo Alto east and west of 101; Menlo Park east of 101 (Belle Haven); Redwood City, San Carlos and Belmont east of El Camino; and San Mateo neighborhoods east of 101, plus MLS area 416 Bowie Estate west of 101 but east of El Camino.
mid-range SFR: Homes 2000 sq.ft. or less in entry-level neighborhoods of Palo Alto and Menlo Park; all of Mountain View; and Redwood City and San Carlos west of El Camino.
top-end SFR: Homes 2001 sq.ft. or more in top-end Menlo Park, Palo Alto, Woodside and Portola Valley; Los Altos; Los Altos Hills; and Atherton.
Can't find your home here? If it's between Burlingame and San Jose, just use the price range that's closest to your home's likely value.
Thinking of buying or selling? Please contact me at jfyten@cbnorcal.com. (This is not a solicitation if your home is listed with another broker.) Department of Real Estate license 01044243.