The housing market in Morgan HIll for April 2007 is continuing along the trends started just last month regarding the fall of average home prices.
As for other important data like inventory of homes for sale, total sales and days on market - we continue to see them all moving in a direction that makes it more of a buyers market.
With each passing month, my prediction that this will be the pivotal season for our market continues to look more and more likely.
Supply and Demand
Inventory continues to increase at an amazing rate. In April, inventory was up 27.5% from the same time last year.
Sales are down 19% from the same time last year. Take a look at the graph to the left - it really tells the story.
Inventory has been on the rise since 2004 and sales have been on the decline year to year from the same time. Whats more is that for the month of April, we have yet again set the record for high inventory going all the way back to 1998.
Even when we just look at the changes from month to month over the last year or so, the trend is clear. What is more interesting is if we apply the same trend we saw last year, to what we might expect this year. Since all the same market forces are in effect, we could expect the same kind of performance. In doing that, we see that inventory is likely to only increase from here.
Just from last month, inventory is up 12.6% - that is an amazing increase in just 30 days
Home Prices
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In March, we saw the first real drop in the average price of homes from the previous year. April has shown the same trend with a 4.9% drop in the average price of a home. The average price for a home in Morgan Hill in April was just under $900,000.
The median price of a home actually increased a bit. The median price is the price that was right in the middle of the prices paid for a home. So in other words, if you had 11 homes that sold the price of that 6th home (where there are 5 homes above it and 5 homes below it) is the median priced home.
Said another way, half the homes that sold were priced above the median and half were priced below the median. 
It is normal for the average to be higher than the median or close to it. The median can give us some idea of which direction home prices tend to skew. So for instance, if the average price was much greater than the median, that would tell us that more homes at the extreme high end have sold. If the median was below the average, that would indicate homes selling at the very low end - enough to bring down the average price to a level below the median.
The reason bring this up is that we are seeing the median and average coming closer together. This indicates that prices are moving closer to the median. While its nothing to base big conclusions on, it is an indicator that homes being sold are not at the high end - or at least fewer of them are selling. When we look at the raw data, we can see that this is in fact the case. Homes at the extreme high end (in this case, anything above about $1.5 Million - and that number is a moving target) are staying on the market and not selling. Sellers in that price band are having to take substantial cuts in their asking price to get their homes sold.
Days On Market
While we have seen the days it takes to sell a home increasing since 2004, it took a huge jump for the month of April. From this time last year, the time it takes to get a home sold in Morgan Hill has jumped by 62%.
That is a huge increase when you realize that from 2004 to 2005 the incease was only from 41 to 49 days and that it only increase by 1 day the year after that.
From 2006 to 2007 it went from 50 to 81 days! 
When we look at the trend over the last months, things actually don't seem so bad in this regard. There have definitely been worse months over the past year. However, once you realize that those worse months tended to be winter months and we are quickly approaching the selling season, you realize that this is a concerning trend.
The first way that sellers really get the clue that the market has turned is when they put their home on the market and nothing happens. With buyers have plenty of homes to choose from, many homes are sitting on the market for months and months with little or no attention.
Since we are not seeing any kind of increase in the number of buyers in the market leading up to this years high season, I think we can only expect that there are going to be lots of disappointed sellers come September. For those sellers that MUST sell, it is going to be time to redouble their efforts. If your a seller or about to be one, take the hint now and work to get the attention of available buyers.
Percent Of List Price
Now this number is a little less useful than you might think. It is strictly an indication of the expectations of sellers and how far below those expectations the market actually works.
So if sellers are pricing their homes appropriately for the market, this will be pretty close to 100%. But also keep in mind that this number does not reflect at all any information regarding the hundreds of unsold and active homes out there. These are only numbers regarding homes that have sold and how far below asking price those homes sold.
When compared to last year, we can see that sellers expectations of the value of their home is more distant from the reality of the market. Sellers are having to take further below their asking price than they did at this time last year. A trend that has been continuing since 2005.
If we look at the data for the last months, we can see the trend moving downward with some significant spikes in October and July of last year. The July spike is interesting. Sellers expect that time of year to be the best time to get the best price for their home and clearly that was not the case. Buyers were just not making offers on those higher priced homes and were comfortable offering less for the homes they did want.
Final Thoughts
While the rest of Santa Clara County is enjoying double digit increases in the average price of homes, Morgan Hill is seeing a drop in that number.
Since our primary interest here is the Morgan Hill market, the stats for the county as a whole are not a comfort. However, since we are an outlying community in the county, I think we can consider ourselves an indicator of what might be in store for the rest of the county. That is not to say that the county at large will see average price drops. The county in general has always tended to weather market turns better than Morgan Hill. But if we look back to history, while the county may tend to have a season where prices drop, they are more likely see flat average home prices for 18 to 24 months before recovery sets in.
Much is the same for Morgan Hill as a community. In the past, we have seen drops in average home prices, but these tend to be short lived events that last from 18 to 24 months at most. These times are then followed by healthy increases in property values.
Right now it's the time of the buyer. If the summer season pans out the way I believe it is, then buyers are going to really have some great options and some great negotiating power to get the best deals possible for Morgan Hill real estate.
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