August was interesting. How interesting was it?
August 2011 was an interesting month, as in "may you live in interesting times" interesting. In case you missed it, Standard & Poor's didn't like how Congress handled the debt ceiling debate. You and I didn't either, but unlike us, S&P could actually do something about it: downgrade the federal government's debt rating. Which rattled a few cages. And then stock market volatility of historic proportions rattled a few more.
I doubt you missed all this, but apparently you did, at least if you were making offers on Silicon Valley homes last month. Because August 2011 was a darn good month for local real estate, at least by August standards, and in fact by any standards.
August is usually a slow month—although with so many schools starting before Labor Day this may change—and lately it's been a tough month. The Lehman Brothers collapse of August 2008 is generally regarded as the end of the boom in this area (it ended in 2006 in most other parts of California). And last year about this time I reported an embarrassing and apparently inexplicable sag in agent morale that was probably noticeable several galaxies away. So how does our latest interesting August compare?
Last year I compared Augusts for every market my newsletter covers. This year, in the interest of saving time—I'm still writing this as you're reading it—I'll narrow the field to six representative local markets that also happen to be markets where I have clients thinking of either buying or selling. Let's start with my favorite market indicator, absorption: the percentage of homes on the market absorbed by buyers in a certain period of time, in this case, the Augusts of 2008, 2010 and 2011. "SFR" stands for single-family residence, "CID" for Common Interest Development (condos and townhomes).
As you can see, there should be no complaints, at least from most sellers and their agents. All but one market has an absorption rate above .3, which is excellent, especially considering the level of uncertainty in the world these days.
Next let's look at my second-favorite indicator, days on market (DOM) which, as the name implies, shows the average number of days it takes a home to get in contract.
Again, there's little here for sellers and listing agents to grouse about. Palo Alto clocks in at a smokin' 10 DOM, and only the two San Jose markets are over 25. Compare these numbers with America's Official Fastest Selling City, Denver, last seen blasting through a speed trap at a death-defying 39 DOM. The national average DOM is 92. Slow is relative, folks.
Now let's check out another important indicator, but one I usually wrap into absorption—inventory—since absorption is sales/inventory. However, the Augusts differ so much in inventory level that this indicator deserves its own chart.
Kind of explains why some of these markets are extreme seller's markets, while the others are at least tilting more toward sellers than they have for years. Of course, markets are changeable, but any buyer looking at this kind of decline in inventory (read "decline in choices") year-over-year in every market shown should feel a little more urgency about getting off the fence.
Finally, a look at sales, one of the more bogus—and, of course, given the nature of things, one of the most reported and followed—indicators of real estate health. Why bogus? Because if there's not much on the market—quite often the case in a mature boom—there won't be that many sales. But we're not in the "mature boom" phase yet, so here goes.
Wow! Bogus or not, those are impressive increases in almost every case. In fact, it's fair to say that "impressive" describes every market we've looked at. They're not all booming, but at least they're all improving. And that's all we ask.