June 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: local real estate continues to dig itself out of a very deep hole—slowly, one shovel-full at a time. A slight dip in inventory suggests that prices may continue to stabilize, even through the summer doldrums. |
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: despite some inherent volatility in the numbers from month to month due to the small number of sales, average price continues to show signs of flattening. Even the hard-hit low-end single-family residence market has stabilized for the moment, and anecdotal evidence from other parts of the Bay Area suggests that prices in ultra-affordable neighborhoods have even begun to climb modestly due to a dramatic surge in demand and a (most likely temporary) shortage of inventory. In other ranges, prices are still stuck at 2004 levels. 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 also be skewed by average size of homes sold each month: all else being equal, smaller homes sell for more per square foot, larger homes, less. Commentary: again, more indication that prices have flattened 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: dramatic proof that the pace of local real estate has picked up throughout the price range, with the more affordable markets even showing improvement over the same period in 2008. However, absorption levels are still quite depressed, often reminiscent of 2001 dot-bust numbers which, on a glass-half-full note, means we've improved from the unprecedented lows of only 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: sales continue to climb, although from ten-year record lows. Levels are still low for this time of year, usually comparable to, or slightly higher than, dot-bust 2001. The low-end SFR sales on this chart are understated, 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. Open houses continue to be well-attended (although this varies on price range and house), suggesting strong pent-up demand. 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: the big—huge—news here is that inventory is beginning to taper off in all price ranges, which may take pressure off prices over the summer, usually one of the slower times of year. Not that we lack for homes to sell. Inventories are still at or near record ten-year highs for this time of year, although midrange SFR inventory is the exception. 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: all over the map but still high, yet another indication we're in a buyer's market, although note that townhouses are down to a "snappy" 37 DOM, their lowest days on market in a year. 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: signs of improvement—which means improving buyer confidence—throughout, but especially for low-end SFR, where the bid was positive (over list price) for only the fifth time since February 2007 and higher than in any month since December 2006, just prior to the collapse of subprime lending. Multiple offers on well-priced bank-owned homes are common these days, as buyers crowd this end of the market just as inventory shrinks. We're a long way from irrational exuberance, let alone a "normal" market, but these bid numbers are another suggestion that, barring further catastrophic news (particularly, local lay-offs) , the market in this area bottomed earlier this year. 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. 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.