December 2009 newsletter covering the period October-November 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: Is this the "new normal"? Is flat the new up? Would it be bad if it was? Prices aren't going up (except at the low end), but they aren't going down either. Sales have dwindled, but they always do this time of year. Inventory continues to plummet, but it always does this time of year. Is the market just saving its strength for a big break-out next spring? Stay tuned. |
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: Low-end SFR prices still trending up, everything else still mostly flat. 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 average sales price. 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: Prices continue to recover from last winter's lows. 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: Absorption continues to range from "really bad" (top end) to "fairly decent" (midrange). But there's a little more to this than meets the eye: low-end absorption would be sparkling if not for all those short sales that can't sell. 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: Sales are declining, typical of the season, but note that they're still at levels not seen at this time of year in several years. As I've mentioned before, the chart slightly understates recent 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: Inventory also declines, but is still above normal. Plenty of choices for buyers, although much low-end SFR inventory is hard-to-sell short sales, while nice homes further up the price range sell quickly if correctly priced and presented well. 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: Still a slow market, at least by local standards, although like any average, this one is deceiving: the homes everyone wants sell quickly. It's just that the other 90 percent don't. 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: Midrange bids continue to hover around zero, outstanding performance in the new normal (remember, flat is up). This is big: the warmth from the red-hot low-end SFR market is starting to reach the midrange. 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.) My Department of Real Estate license number is 01044243.