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Market Condition Update - June 09, 2009 Hi Everyone, Here's another Market Condition Update for the residential real estate market in Northern San Luis Obispo County. We all know that real estate is a micro-market business. With these updates I´m trying to provide a snapshot of what is going on in our little piece of paradise. There are three parts to the real estate market; supply (the available homes), demand or velocity (the number of deals), and pricing or value. The relationship between supply and demand determines pricing. We also know from studying the last down turn in the early 90´s that velocity always leads the market. We are nearing the end of the 2nd quarter 2009 so I will be compiling those numbers and posting them around mid July. The first quarter 2009 numbers are posted on my website at http:/MarketData.FredBruen.com. Please feel free to call or email me with any questions or for more information. And please forward this information on to anyone whom you think may be interested. Thanks, Fred Bruen 2nd Quarter 2009 Estimates # of Homes Sold Median 2nd Qtr 2008 246 $375,000 2nd Qtr 2009 (est) 270 $309,000 Rate of Change (est) +10% -18% |
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Velocity: Let´s start by looking at the velocity side of the market. I am still sticking to my position that we reached the bottom of the velocity side of the market in the fourth quarter of 2007. This is clearly evidenced by the significant improvement in demand which has extended our normal selling season (fell off in late May 2006 and 2007) through summer, fall and into the winter of 2008/2009. We experienced a less then exuberant spring time surge but it seems to be picking up steam as we near the mid-year mark. If this demand proves to be sustainable through the summer and into the fall as it did in 2008, there should be significant upward pressure on pricing. |
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Pricing: Here we have my 90/90 Pricing graphs where I look at the most recent 90 day median price of the available homes and the median list price of the homes in escrow. The first graph is the most recent data and the second graph is the data from our last Market Condition Update report in mid April. It appears, at least in the short term, that the pricing slide may have bottomed and has started a slow climb up. Give me another 30 to 60 days and I´ll let you know if we truly have passed the bottom of the pricing side of the market. Item of important note: This is the median price of homes in escrow, escrows not closed yet and the list price, not sale price. These escrows won´t close for another 45, 60, 90 days and this little up tic in price won´t be seen in sale prices for another quarter. And, the sale price will be 95% of the list price. I´m trying to find the earliest market indicators to best counsel my clients. By looking at the pending sales in relationship to available homes may be the most relative information available for those thinking of buying or selling in the |
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Supply and Demand The graph to the left shows us the relationship between active homes on the market (supply) and the active but in escrow homes (demand). It shows us that the available homes (green) is at lower levels compared to the previous two years and the number of homes in escrow (blue) is at higher levels then the previous years. The red line illustrates the increase in demand (blue in escrow properties) vs the supply (green available properties). Demand is outpacing supply at this point as indicated by the red ratio line. |
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In Closing: Our annual spring time surge was not as robust as I would like to have seen but I am encouraged by the continued improvement in demand as we approach mid-year. We will have a better 2009 vs 2008 in sales as we slowly climb up from the fourth quarter 2007 velocity bottom. The big question is will the demand be enough to turn pricing in 2009. As the "In Escrow" ratio approaches 33% of the available homes we have witnessed a slight movement upward in the median price of the homes in escrow. This may be an indication that we have passed the absolute bottom of the pricing side of the market - where the demand is first generated - pending sales. Like I said earlier, give me another 30 to 60 days of data before I call it! I´m inclined to think that pricing has bottomed. I have a specific day in mind. But I´m not quite ready to declare! If the supply side remains limited and demand remains strong, particularly with the fast competitive absorption of the foreclosed product, I believe we will continue in the current direction. Those are big ifs ? how much pent-up re-sale supply is waiting on the sideline for price improvement before entering the market? How many more distressed sale/foreclosed properties are in the pipeline that will make it to market? Time will tell ? stay tuned! Thanks Again, Fred Bruen |
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