No huge surprises in January 2007 for Santa Clara County. If your really looking for a surprise, the only one you may find is that despite what all the pundits have been predicting, there has been no crash or "bursting" of the real estate market. Average home prices are up, but so are the number of homes for sale and the amount of time it takes to sell them.
While we saw the usual seasonal dip in inventory and listings in December, we saw those two items rise in January but with a decrease in sold homes from December to January.
January has always been a transitionary month for our real estate market, and this time around has been no exception. Read more to get all the details.
Supply and Demand
First, lets take a look at the month of January, going back to 1998 so that we can see how the numbers stack up at this time of year.
You can see that the majority of fluctuation comes with inventory and listed data. The total number of homes sold for the month remains relatively flat.
What is interesting here is to not the ratio between the total inventory of homes and the total homes sold for any given January in the past.
For instance, in January 2007 we have seen that for every home that sold, there were 4.3 homes on the market.
In hotter markets, that ratio is much tighter. For instance, in 2005 when we were seeing a very strong market, for every home that sold, there were 1.8 homes on the market.
Looking at the graph, you can see that while we are in a down market, it does not compare to what we were seeing in 2003 when for every home that sold, there were 4.6 homes on the market. At that time, we also saw a dramatic drop in the average price of homes.
So what does all that really mean in practical terms? Well, for buyers, it means that they have a whole lot more power. That power comes from there being lots of homes to choose from and from the homes being on the market longer (a number we will take a look at in a few moments).
For sellers, it means that they have to work harder to get and keep the attention of buyers that are in relatively short supply.
Now lets look at these same trends just going back over the last 12 months to January 2006. Again, it is interesting to note the increase in inventory and newly listed homes while at the same time we see a drop in the homes sold. Not a good trend when we already have such a large inventory of available homes.
Most of what you see on this graph can be explained by seasonal forces. In summer, it is simply more normal for buying and selling to take place, but the overall trend of homes staying on the market longer and more homes being listed while the number of homes sold dips or stays flat results in a much bigger supply of homes on the market.
Home Prices
As we have seen in past months, despite the increase in inventory and the low home sales, the average price of a home remains high and even increasing.
Look at that steady increase since 2003. Now the last time we saw market numbers like we are now was back around 2003 and 2003. In 2002 we saw the average home price drop by 19.6% because of the same market influences we are seeing now - high inventory and low sales. The result was about 2 years of home prices staying at this lower level until they began the steady increases we have seen ever since.
Days On Market
The other important indicator is how long it takes for a home to sell in the current market.
To put our last graph in perspective, look at the average price and the days on market numbers. In 2002, when the average price had taken its 19.6% fall, the days on the market shot through the roof, from 34 days to 83 days.
Prices remained flat over 2003 and 2003 and as we saw the average price recover in 2004, we also saw the days on market drop until they reached their lowest of 36 days in 2005. Remember that in that 36 is likely to be an escrow that probably took up 30 of those days. That means most homes were going into escrow within a week of being listed!
Again, we see that we are in a similar situation as back in the 2002/2003 timeframe, with one very interesting difference. Instead of a huge increase in the days on market, we have more gradually built up to our current level. I believe this to be another sign that in general, this change in the market is likely to be a gradually change that is less dramatic. Perhaps even longer lived as we gradually see this number rise then gradually come back down.
Over the past months, we can see that the usual seasonal influences of summer and winter have effected the days it takes to sell a home. However, it is interesting to note that the drops have not been as long lived as we might have expected. It is taking 48% longer to sell your home in January 2007 than it did just one year ago. In addition, we have seen a 20% increase in how long it takes to sell a home just from lst month.
Proximity to Asking Price
So how close to asking price did the seller actually get? Now that the way data is reported by the multiple listing service has been "fixed" (check out my article on "re-listing" and its effects if you want to know what that comment is about ), we can get a better idea of how the numbers on this are coming out.
Here are some interesting statistics:
- January 2007 saw sellers getting 98.34% of their asking price.
- The high in the last 12 months was March with 100.26%
- The low in the last 12 months was December with 98.3%
So despite all the numbers we have talked about - things like high inventory and low sales - sellers are STILL getting more than their asking price in some cases, or very close to it in most.
The market is going to change. There is nothing else it can do. I just don't see how we can sustain a market with such high inventory and low sales and expect the average price to continue to rise. Now we did see the average price of a home drop in December 2006 by 2%, but January saw that change back to positive numbers.
It will be interesting to see how these numbers evolve in the coming months as we head into what is typically the "season" for selling.
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