July 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: another month of incremental improvement. Virtually all indicators are encouraging, although a long way from robust. A continuing decline in 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: The trend lines show that the price declines that hit all ranges to varying degree have either slowed or abated for the moment. The question now appears to be how the local economy, particularly the tech sector that drives the midrange, weathers the balance of the recession. Will lay-offs do to the midrange what subprime did to the low end? It's a question that, as we'll see in a moment, an increasing number of midrange buyers seem to have answered to their own satisfaction. 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: Again, more indication that prices have flattened for the moment throughout the price range. 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: Is local real estate back from the dead? Yes, in the sense that it's come off life support without looking particularly lively. The recovery continues, although when absorption at or near dot-bust levels is cause for celebration, it shows how dead the market was just a few months ago. Still a strong buyer's market for all but the most desirable properties. 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: Note the surge in midrange sales, something the newspapers didn't miss. Other ranges flattened, typical behavior in this area during the summer, although still worrisome in this not-so-typical market. Again, low-end SFR sales are understated on the chart, since I've started removing all pending short sales (which have a low probability of closing) until and if they close, so expect to see some slight upward correction to this number. This month I've also done the same with condos, the other range where short sales are a factor. 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: Again, the big—huge—news here is that inventory is still tapering off in all price ranges, which may take pressure off prices over the summer, usually one of the slower times of year. Note the precipitous drop in low-end SFR inventory—banks are beginning to manage their inventories better. And midrange inventory, while still high, is now at least not at unprecedented levels. But we still have plenty of homes on the market, although in some price ranges they outnumber motivated sellers. 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 slow by local standards, although lightening quick by most others. Well-presented, well-priced homes sell quickly, sometimes with several offers—the "offer date" is making a modest comeback—while everything else just sits until it's had a price reduction or three. 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—throughout the market, but especially for low-end SFR, where the average bid was more than list price for the second month in a row. It isn't time to break out the champagne, just one more incremental improvement in a marketplace that was virtually shut down a few months ago. 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.