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Morgan Hill - Market Analysis - October 2006

By
Real Estate Broker/Owner with Whitelaw & Sons Real Estate Services DRE# 00984909
Tuesday, 05 December 2006

videopresomorganhillIn the month of October, Morgan Hill continues the trend of more homes for sale and the same number or fewer buyers out there looking for them.

Despite all the numbers showing that the market is flooded with homes, that there are fewer and fewer buyers and that it is taking longer than ever to sell a home, average home prices are still up from this time last year. Lets take a look at all the numbers for October 2006. 

Supply and Demand

Supply and Demand - Octobers in Past As we usually do, lets start off with an analysis of how many homes are for sale and how many of them are selling. 

To put it bluntly, we have a whole lot of homes on the market right now. In fact, we have more homes on the market in the month of October 2006 than we have had an any previous October going back before 1998. Even if we just compare the current situation with this time last year, the number of homes in inventory right now is up 57.4%! That is a staggering number that gets even worse if you compare it to 2004. The bottom line is that we have a giant supply of homes available and few people buying them. As you can see from the chart at right (click to enlarge), the number of homes being sold is about the same as last year - but a little lower. With all those homes to choose from, sellers in the current market are going to have to work harder to get the attention of the limited number of buyers in the marketplace.

Supply and Demand - Morgan Hill - October 2006 and rest of year.Now lets take a look at those same numbers going back to January of 2006. 

There is no question about the inventory trend we have seen over the year. A steady rise in inventory every month except for September and October which have shown minor drops since Augest. With only a 1.8% drop in inventory this month, we have a long way to go before inventory returns to any kind of normal leveI. I would love to be able to interpret this as a real market trend, but the reality is that this feels more like a seasonal shift than a true market change. We normally expect to see a drop in the overall inventory as we move into winter and the holiday season.

We also saw a decrease in the number of new listings this month, which is also to be expected in this time of year. 

Home Prices

Home Prices - Morgan Hill - Past Octobers Home prices have managed to resist these inventory forces. Despite buyers having many homes to choose from, home prices have still increased from last year. In fact, Morgan Hill home prices have not seen a drop in their average since 2001. Average home prices are defying these other forces to the tune of 13.3% since last year!

It is important to keep in mind that just about all the market forces, including the fact that we are entering the winter/holiday season, should be working to reduce home prices. I would expect to see home prices drop unless the inventory is brought way down or the number of buyers in the market increases substantially.

Home Prices - Morgan Hill - Since January 2006 Numbers since January for home sales in Morgan Hill tell us much the same thing. While there have been months this year with higher average prices, the overall trend for the year is still up. In fact, the fluctuations we see align fairly well with seasonal changes.

Average home prices have dropped by 7.1% since last month, but again, this is normal as we enter the winter season.

 Now lets take a look at how long it is taking sellers in Morgan Hill to find the right buyer for their home.

 

Days To Sell 

Days to Sell - Morgan Hill - Past Octobers Lets start by looking at the days to sell a home in Morgan Hill compared to this same time of year in previous years. 

We again see that we are setting a record for this time of year. It is taking longer to sell a home in the month of October than any time since before 1998. The jump has been huge, in the area of 2 to 3 times higher than the previous 2 years.

When just considering this year compared to 2005, we see that the total days to sell for October is up over 132%. 

Days To Sell - Morgan Hill - Jan to Oct 2006 If we just look at the general trend so far this year, the number of days to sell has steadily increased.

With the days on market hovering right around 100 days, it seems like only a matter of time before truly motivated sellers are forced to lower their prices to attract the limited number of buyers currently in the market.

While we can point to seasonal influences to some degree, there are clearly some overriding market forces at play here that are pushing higher the time it takes to get a home sold.

Final Thoughts

There are lots of homes for sale and few buyers out there to buy them. If the market continues like this I don't think we can expect prices to stay at their current level. However, other economic indicators are doing well. The market is performing well, consumer confidence is up.

We will be in a much better position to make predictions once we come out of winter, but the plain truth is that something has got to give. Whether it is the inventory number, the number of buyers or average price of homes is yet to be seen. 

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