February 2010 newsletter covering the period December 2009-January 2010
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: Condos start 2010 with a muffled thud, everything else with a loud bang. Loud bangs are rare this time of the year, suggesting that much of local real estate will be hot this spring, if not beyond. Low-end single-family residences (SFR) give us good news/bad news: sales are way way up, but half are problematic "short sales". Let's see if those short sales actually close, instead of turning into tomorrow's bank-owned homes. |
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: Prices in most ranges are holding their own or even picking up, surprising given that we're looking at the mid-winter market, yet not surprising given the elevated level of activity. My guess is that we'll see a more pronounced upward trend through May. It just feels like it's going to be that kind of spring. 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: The picture is less clear here, but December is usually when prices are at their lowest. Note that four of five markets are well above their December 2008 lows. Does everything point toward the spring recovery I mentioned last month? I think it does. 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: January is a bellwether month. If the market picks up then, real estate will be active all spring and home prices will rise. And except for condos, still mired in a years-long slump, market activity was strong last month. That plunging trend line for low-end SFR is deceptive. Gross absorption in the most affordable neighborhoods was twice as high as indicated but, as I mentioned in the summary, half this activity was short sales I don't count until (and if) they close. 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 rebounded in January, a promising sign. As I've mentioned before, the chart slightly understates recent condo sales and, this time, greatly understates 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 (or in this case, maybe huge) upward correction to these 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 began to build in January, typical for this time of year. Expect to see inventory climb through the summer, although I have a feeling that this year there won't be enough good inventory in the most active markets. For some reason, inventory usually fails to show up when needed most. 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: Generally days on market declined in January, what you'd expect of an awakening market. 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: More proof that our two strongest performers are midrange and low-end SFR. Low-end continues to stay in positive bid territory, thanks to waves of investors and first-time buyers, while midrange flirts with equilibrium between buyers and sellers. 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.