Welcome to the new norm. As you know if you have been following us for any length of time we provide a detailed analysis of the local housing market and Belmont’s housing market in particular. We’ve been gathering data since 1998 and have used it to contrast and compare varying market cycles over the years. However, comparing the reality of the new housing market to a market that was artificially inflated with substandard lending practices will provide for endless disappointment if a new base-line is not established.
Today’s market seems to reflect the new reality of stricter lending practices leading to fewer sales and more cautious buyers. This environment will undoubtedly continue for some time until the devastation in the housing industry which wiped out so many people’s equity is a distant memory. Just as the Consumer Confidence index was set at 100% in 1985 because it was neither a peak nor trough in the business cycle, we submit that at least for Belmont, after years of price and sales declines, that the more stable 2011 might become the new baseline by which future years are compared.
(click on the image to enlarge) *Data from the San Mateo Board of REALTORS MLS system.
Looking at the numbers…
Belmont homes sales for October 2011 were strong compared with last year.
BELMONT HOME SALES
Although two fewer homes traded hands this year in Belmont compared with last October, there are signs that the housing market may be stabilizing, as we anticipated.
MEDIAN PRICE
The median price, while falling from last October’s $864,200 to $806,000 this year, does not reflect the size homes which sold last October were 13.5 percent larger, with a median price drop of only 7.2%. This helps us better understand that the median price while reported lower is probably higher than in October of last year.
DOM (days on market)
In October of 2011 it took on average 22 days to sell a home while last year that number was 46, more than double.
PRICE REDUCTIONS
Forty-six percent of Belmont homes selling in October of 2010 had price reductions of on average $92,000 compared with this October where the seller had to lower their price by on average only $58,000 to attract a buyer.
SELLING vs. ASKING PRICE
This October 27% of the homes sold over the seller’s asking price by on average $64,000. Last October the 23% of homes sold for over the asking price receiving on average only $29,000 more.
In 2010 nearly 70% of the homes which sold went for less—by on average $33,000. This year 63% of the homes sold for on average $32,000 less.
INVENTORY
The number of homes available for sale impacts the price a seller might achieve based on the familiar principle of supply vs. demand. But an increase in supply can be the result of several factors which may in turn be the result of very different market forces. For example, if supply is increasing because homes are not selling, or home owners are out of work, or upside down in their mortgage, that negative environment might mean that buyers will also be concerned about their future and demand will drop.
But if supply increases because sellers are taking advantage of favorable move-up market conditions or perhaps they view the current strength of the local market as being in their favor, and demand remains constant, it could be an indication on a strengthening market.
There are currently 57 single family homes on the market in Belmont as compared with last October when there were 63 during the same period. In Belmont, if we look at peak housing markets prior to the housing market collapse in 2007, we find that in October the typical inventory levels hovered around 35-40 homes for sale. Yet in periods of uncertainty—such as the October after September 11th and the following year which was a landmark presidential election year, inventory level rose to 93 homes for sale in 2001 and 79 in 2002.
Does the market seem stronger than last year? Yes. Are seller’s lowering their expectations (asking price) to accommodate the reality of the new market conditions, yes. Hey interest rates don’t hurt either. Buyers are slowly dipping their toes into the icy waters of real estate as rates plummet and Bay Area job cuts seem to have waned.
We’re seeing more sellers and buyers out later in the year than ever before and we predict next spring will bring many new buyers to the purchase table along with many new homes to choose from.
All the best,
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Comments