Tuesday, February 23, 2010

Does Two Months a Trend Make?

Popular wisdom posits that high end home prices still have a ways to fall in California. The short version of the story goes, that sub-prime loans went bad first, so the lower end homes have more or less hit bottom, but the Alt-A and Option ARM loans which were sold as "affordability products" to purchase more expensive homes have yet to sour/reset en masse.

Last month I noticed that sales were up in the two zip codes I tracked. These two zip codes are generally considered higher end for Sacramento. The January DQ numbers just came out, and it appears this trend has continued and was rather pervasive.

To test this hypothesis, I compared the year-over-year change in sales, with median home price for all the reported zip codes in the Sacramento Metro Area. The results confirmed what I observed, a positive Y-o-Y increase in sales was correlated with higher priced zip codes, +.27 correlation. When I removed zip codes with very few sales (less than 5), the results were even better (removing big % swings due to small numbers). For zip codes with 5 or more sales in the month of January, the correlation with median home price was even higher, +.34.

I realize two months isn't a trend....but December and January are notoriously some of the worst months in real estate. I am now anxiously awaiting February sales numbers to see if the trend holds.


husmanen said...

Are you trying to say that there is a correlation between decreasing prices and increased sales in the higher end?

Buying Time said...

Not quite....Bigger increase in sales (compapared to last year) associated with higher priced zips. (Positive correlation - Sales go up as home prices go up).

Guess I can't blog and listen to a telcon at the same time!

husmanen said...

Couldn't this emerging trend hold true with the delayed impact of the housing crisis on the higher end. Prices don't seem to be going up.

Meaning that it is natural that sales increase as prices decrease. Prices have decreased in these areas, albeit not as much as I expected, but the decrease continues.

Also, the median and the average prices might not dip much but the $/sq could tell another story. Basically, getting much more of a house/land for the same or less money.

My price range has not changed much in the last few years, but the number houses in this price range have dramatically increased. All the while my automatic email updates of homes on the market show daily price reductions, then a sale once a market price point is hit.

I understand the correlation between increased sales in the Zips you refer to, but not because of increased prices.

The data that will be very interesting is when the $8k credit is removed and the support for the low interest rates goes away (signs are there).

Feb can show some continued signs of a positive correlation between sales and zips, but how about the summer? We will see...

Deflationary Jane said...

I'm waiting for the expiration of the FTHB credit to see what happens too.

I see some people raising prices and others decreasing in the same neighborhoods with the spreads wildly out of alignment. It looks like panic from here.

Today I begin working on the new house. I'm off to get my permits - think good thoughts for me >; )

husmanen said...

I got some partial data from TrendGraphix for EDH for Feb 2010:

• Avg $ sqft -2.7% from previous month ($157/sqft), -5.2% YoY
• # Houses for sale +6.3% (221) from previous month
• # Sold -15.6% (38) from previous month
• # Pending +10.6% (73) from previous month

From Foreclosure Radar the time to foreclosure jumped from 300 days to 493 days.

The Outcomes changed too with the number of cancellations dropping from 22 in Jan 2010 to 10 in Feb 2010 (more in line with the overall trend).

Homes sold to the bank was 18 in Feb 2010 up one from 17 in Jan 2010.

Homes sold to 3rd parties increased from 5 in Jan 2010 to 7 in Feb 2010.

What I am missing is the foreclosure filings for Feb 2010. If/when I get them I will share.

Helio said...

Just my anedoctal observations on the housing market in Roseville/Rocklin: all homes (about 10 out of 100+ visited) I had chosen to make an offer since late December have now closed or are under contract. Some of them had gone away before I could make an offer. When a buyer backed out on a home we had lost previously, we jumped back in with a sweetened offer which was only accepted under the condition that we closed in 10 days which we could and did.
With moving and all, I didn't have a chance to check the market anymore but I've noticed that the half a dozen or so homes that had for sale sign in my neighborhood (95747), dropped the signs and there were moving trucks in 3 of them. I have not checked the sales price relative to last year or to the asking price, maybe the sellers have been discounting aggressively. The fact of the matter is that there are no houses for sale in my neighborhood at this time. It may just be a localized and temporary phenomenon, but there it is FWIW. Congratulatins to all who already bought the homes and are happy there, and good luck to all looking to do so shortly.
BT, thanks for all the research and data. It did help me buy my home at what I believe was the right price then.
helio (ex-radiophilejapan)

Buying Time said...

Hearty congratulations to both DJ and Helio (radiophile)! So glad to see your patience has been rewarded.

I would love to see pictures...and promise not to post them.

Thanks for the trendgraphix update Hus.

Kim said...

I'm curious to see what your recent statistics show. I can't imagine the housing market in California dropping anymore. Austin Apartments