Misleading Market Indicators

As of late, I have been a bit concerned about housing inventory. Primarily because the biggest price drops tend to occur in the last quarter of the calendar year when it is more difficult to sell a home (at least over the last couple of years). So I checked in on our local listing service, Metrolistmls, and was in for a very pleasant surprise. They have recently rejiggered their site, so you can now search by status (active, pending, and sold). This is great news for us market watchers and data hounds.

What is even better, is that I can now easily calculate "months inventory", which is a key market statistic for determining supply and demand. With a click of a button (single family homes under 500k), for both El Dorado Hills and Folsom, I was able to see that EDH had 109 homes pending, and 138 that are active. Meanwhile Folsom has 165 homes pending and 207 active.

The results of both these queries shocked me (perhaps someone can double check my queries). This is a little over one month of inventory for both markets assuming all the PS close in 30 days. Of course, more realistically (dealing with banks), homes can take around 3 months to close, but even then, that is still only 3 months inventory.

So just maybe, the positive trends I have seen over the last couple months in these areas will hold. For instance, the number of foreclosured homes in EDH is back down to levels not seen since mid 2008. Some could argue that the banks are holding back inventory, and that a flood is coming, but the whole shadow theory has lost credibility in my eyes.

I'm feeling more confident that we have indeed found bottom, and are now scraping along.

Finally Movin on Up?

A while back, I reported that the high end was "hopeless," based on some statistics, and a lot of anecdotal stories.

Well times have changed (it is late spring after all). Several of those that had decided to hold off, are now back in active offer mode. All are move-up buyers. Our dear friends, are even a bit frustrated.

DQ numbers are out for the month of May. Sales and price are both up (year-over-year) for Folsom. Sales are up for El Dorado Hills, but median price is down 5.4% annually. However the median is still above the low hit in Oct 2009.

Median Price Per Square Foot - Folsom & El Dorado Hills

By special request, below is the chart of median price per square foot for Folsom and El Dorado Hills. Again, seems to me that we are in a new phase, where prices fluctuate a bit month to month, but overall, stay fairly flat.

The growing gap between Folsom and EDH is somewhat distressing, and leads me to believe it may close up some time in the future (either Folsom dropping, or EDH rising).

Updated Housing Market Stats for Folsom and El Dorado Hills

Wow, I didn't realize it had been so long since I last posted the historical charts. As usual, both sales count and price (average and median) are presented from two different sources. Note that the Melissa data includes new home sales, and cites the average, which is typically much higher than the median.

To help wade through all the monthly fluctuations, the 6 month moving average is now emphasized. The strong downward pricing trend over the last couple years has given way to a new period of relatively flat prices. I believe this new trend has momentum since sales are also up, or flat.

The forecasted flurry of foreclosures appears to be more of a steady trickle. The number of foreclosures and defaults, while elevated compared to historical standards, are both off their previous peaks for Folsom and El Dorado Hills.

Are we there Yet?

Dare I Say Bottom? I know we have had a lot of fits and starts, especially in the spring time, when you typically get a little bounce, but the market around here is really beginning to firm up (of course it's hard to say with all the tax credits flying around these days).

This winter things were looking pretty bleak for my beloved neighborhood, almost 10% of the homes were up for sale, several still left to be sold by the builder, some short sales, a couple foreclosures etc. When I checked this morning, all but one are now pending sale. That's a pretty dramatic turn around.

And as much as I would love to think everyone else has discovered how wonderful our little community is, I know our situation is not unique. Melissa Data average prices in El Dorado Hills hit a bottom in November (09), and have been slowly (but erratically) climbing since then. Similarly, Folsom has had 3 months since their last low (back in Jan 10). And year-over-year sales have increased for both those zips since December 2009.

The fact that price and quantity are beginning to move in tandem, which hasn't happened consistently since Mid 2005, is a big deal in my book. After 2005, prices were still increasing, but sales started dropping. In the last year or so, sales have been increasing, but prices were still dropping.

So what do you think....are we there yet?

Housing Market Status in El Dorado Hills

Earlier this month I was really surprised when I took a look at the MLS in my zip code. So I decided to take some time to scrape the MLS for El Dorado Hills to get a better idea of what is happening. The results are presented in the table below.

As you can see, I was not imagining things, PS and PSB together make up over 100 listings. It is also obvious why median is a better statistic, because the average is strongly skewed toward the high end, due to some really pricey homes in this zip code.

Month's inventory, while low by these numbers, is somewhat useless in a distressed market. PS take longer to close when dealing with banks, and all the AS/ASC listings can take months to go PS, even when they have a legitimate offer.

It will be very interesting to see if this pace keeps up.

Housing Market Milestone in EDH

The new DQ stats are out for the Sacramento area zip codes. February 2010 marks a milestone for EDH. This is the first positive year-over-year median price since November 2006.

I also took a look at the MLS the other day. I was stunned by how many high end homes were PS. By my rough count, less than 6 months inventory at the high end, which is simply shocking, as I remember it being over 30 months a while back. Again, this assumes that everything PS closes in a month, which we know it doesn't.....but still, a huge sea change from earlier, especially given all the gloom and doom hype about the high end.

Lot o' Caveats:
It's a small increase for EDH, and I don't have the #s for Feb 2009 (for the 38 data points, ironically that's the one I am missing), and the year-over-year price per square foot is still slightly negative.

One additional caveat, this happened to Folsom a couple months back, but now they are back to double digit declines. I should also note, that recent statistics show that Folsom has caught up to EDH in terms of correction. Both have corrected between 38-40% off the peak price, and are only 5% above late 2002 levels (which is the earliest my data goes back).

All stats are based off DQ resale numbers.

Update: Some corroboration from today's WSJ.

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.

Is December a Month to Remember?

Below is a short summary of housing statistics for Folsom and El Dorado Hills. The data come from two separate sources. The top set only included stats for existing single family homes, while I believe the bottom includes new home sales too (note the bottom set also uses average, and not median).

December's numbers surprised me quite a bit. Double digit increase in sales, and only single digit drops in price. Typically December is a really slow time of the year for real estate, and I figured it would be even worse with government subsidies drying up.

Could this be the end of free fall, or is it just a dead cat bounce?

Cresting Wave or Holiday Respite

Back in November, I suggested that the wave of NODs in the two zip codes I track may be cresting. A month and a half later, it sure does appear that way. However, I'm starting wonder if there could be something else is afoot.

Around this time last year we saw a significant drop off in fillings due to state legislation, coupled with a holiday reprieve by some of the government agencies (not sure if it only applied to foreclosure or if it applied to NOD filings as well). So I'm starting to wonder if the wave is actually cresting, or if it's just a temporary lull to avoid the potential bad PR of throwing a family into the streets during the holidays. It's hard to know for sure. I'm curious to hear other's thoughts.

In any case, I do think the number of foreclosures will slowly creep back up, as the NODs run their course. To be honest, I expected to see a lot more foreclosures by now. Fewer NODs are resulting in foreclosures (at least according to the data I track). Perhaps banks are more willing to negotiate short sales, perhaps there is shadow inventory, who knows.

California October 2009 Home Sales

Was looking for some context on how the Sacramento Metro Area housing market compares to the rest of California. Below are two charts, the first has data for all California cities, and the second, only data from cities in the four county metro area.

The horizontal axis is the Oct 2009 median home price, the vertical axis is the % change from Oct 2008, and the size of the bubble is the number of home sales in Oct 2009.

Charts were cut off at 1 million price tag and 50% increase/decrease to better show the majority of the data. The grey bubble in the first chart is data from the city of Sacramento.

On Track for Stabilization?

As some of you know, I really like to monitor housing tracker since it looks at several price ranges as well as inventory. Thought I would do a retrospective look at how the market has behaved over the last couple years, and compare it with the predictions I made back in December of 2008. The top table is the raw numbers from HT. The second table is the % change from one line to another (except the last line). Price declines have certainly moderated since Feb 2009, compared to previous year, with even a slight uptick at the low end. Meanwhile inventory continues to decline. Both of these are good news for Sacramento housing market health.






My 1 year prediction made back in December 2008....so far seems right on the money

As banks complied with the legislated wait period in California, new NOD activity slowed to a crawl in the fall of 2008. This means the pipeline of foreclosures will temporarily dry up sometime in early to mid-2009. Together with inventory down significantly, this should lead to stabilization in prices for at least a couple months. But slowed economic activity and job losses will take a toll on the local economy. Excess housing inventory and frustrated sellers, will keep downward pressure on rents. As a result, by the end of the year home prices will continue their downward march, eventually surpassing what I consider affordable/sustainable levels (based on historical price/rent ratios and income)........In terms of time lines…..next year home prices will level off then continue to fall to affordable levels, with years 2-4 seeing no increase, and perhaps single digit decreases, in prices as excess and distressed inventory are absorbed.

I'm curious to hear the predictions of other market watchers....what do you think things will look going forward? Continued stabilization or or plummeting prices?

Updated Historical Housing Sales and Price data for EDH and Folsom

It's been a long time since I posted the updated historical charts for Folsom and El Dorado Hills. Please note that the unlabeled source reports the median price, while the MelissaData chart is the average. I believe the MD chart includes new home sales, while the other is primarily for resales.

The late fall is when the biggest price drops have occurred over the last couple years. It will be interesting to see if this trend holds true for the current year. With many tax credits expiring and a backlog of foreclosures, it is certainly possible.

Status Check: Sacramento Metro Median Home Price

Below is a table (apologies for so much data in such a small font), with a comparison by zip code, starting with the June 2009 median price (as well as count of transactions and price per sq ft), compared to the minimum and maximum prices since August 2002 (data doesn't go back any further).

In the minimum field, a red date indicates the median price minimum was before the bubble burst, a blue date indicates a median price minimum was hit after the bubble burst. No color indicates that the most recent month was the minimum.

The percent drop from peak (maximum) is also color coded for the severity of the drop (red most severe, green least). Zip codes are sorted from the greatest dollar drop from peak to the least.

Update: I calculated the weighted median price (for the June 2009 data) and it comes out to be $211,628. The weighted median per sq foot is $125....this implies a median home size of 1,687 square feet. Which given 3x income, is affordable to a houshold making $70,550 a year. (Statistical note...you can't just average all the zip codes, you have to weight the data by the number of sales in each zip code to get an accurate picture.)

Note: Data has been filtered for zip codes with at least 10 transactions in June 2009.

Trickle or a Flood?

With all the chatter about shadow inventory, I thought it might be helpful to look at some local numbers.

According to Metrolistmls.com the number of REOs on the market in EDH is 47, and about half of those are pending sale. Folsom has about 43, with many pending sale as well.

According to foreclosure.com, EDH has 96 total REOs, and Folsom has 85. This means about half the REOs are actually listed in the MLS, leaving a theoretical shadow inventory of one out of every two bank owned homes.

Below are some historical inventory levels of single family homes (does not include pending) gathered from Ziprealty.com, as well as the current number of NODs.

El Dorado Hills Inventory of Single Family Homes
2007 - 507
2008 - 433
2009 - 366
Current NODS - 267

Folsom Inventory of Single Family Homes
2007 - 400
2008 - 266
2009 - 292
Current NODS - 298

To sum, inventory is down almost 30%, from 2007. Total REOs are down 17% for EDH, and 26% for Folsom from last year, however NODs are way way up. NODs are 33% above their level last year at this time for Folsom, and a whopping 54% above for EDH.

Mixed Messages

Using some slightly non-scientific methods (the ZipRealty interactive map), I took a look to see how the different Sacramento housing market price levels are faring this spring. On March 4th of 2009 inventory was around 9000 SFH units. Today its now down to around 8400 units, a drop of 8.2%.

This is very misleading if you look at total inventory. Luxury inventory, over 500k, actually went up by 5.3% (at approximately 18% of total SFH inventory). In the mid-priced homes, 250k to 500k, inventory is down by 10.6%, and in the starter-home category (below 250k), inventory is down by 12%.

This may account for some of the trends we have seen in the Sacramento Housing Tracker weekly/monthly numbers. As lower end inventory dries up, and higher end inventory grows as a percentage of total inventory, thus driving the asking prices higher.

Side note.......While I really like Housing Tracker because it tracks multiple asking price percentiles (25th, 50th, 75th) as well as inventory, I have never understood where their inventory numbers come from. When I look at the greater Sacramento area on the ZipRealty interactive map, (from Davis to the West, Auburn to the North, Cameron Park to the East, and Elk Grove/Franklin to the South), I only come up with inventory at around 9,200, whereas HT is currently listing around 14,500. If I include land listings, it only bumps my number up to around 10,500.

P.S. We went to our first River Cats game on Sunday. The weather was perfect, the stadium is really nice (not to big). But I was surprised at how empty it was and wondering if it's the economy or normal attendance (not complaining...cause I usually stay away from venues like that cause I don't like huge crowds). The announcer made a comment of how the River Cats have the best attendance of all minor league teams. Perhaps I am just used to big city crowds (but very grateful to get away from them!!!).

Folsom & El Dorado Hills Historical Sale Data

At long last, below is the historical sales number and price data from two separate sources. Astute observers may notice that the name of the second data source name has been omitted as the actual source of the data has changed. Note that all four charts have the same scale for sales number and price for easy comparison between the markets and data sources.

Hard to tell if we are on a elongated spring ledge or if the market is starting to level itself out a bit. Only time will tell. Last I checked pending sales were at one of the highest levels I have ever seen. Now that more homes meet my criteria, this is much more indicative of the broader market.

Heal Thyself?

Today's WSJ Developments blog suggests Sacramento (where we moved to), and Washington D.C. (where we moved from), will be among the first housing markets in the U.S. to recover.

They use the term rebound in the post, which I think may be a bit strong for what is in store for us. But their observation regarding inventory is still valid. Based on Max's most recent inventory stats over at SacRealStats there is no spring in inventory numbers this year.

Oddly enough, the analyst mentioned employment as a potential spoiler, but not foreclosure activity (which the blog just noted in an earlier post, is set to soar in California).

Top 25 to Bottom 35 in just 3 years

Well, the data gods must have been listening to my earlier laments......just yesterday I got wind, via the WSJ, that the Global Insight / National City (now PNC Financial Services Group) housing valuation study is still being published.

While I greatly respect the methodology, the current valuation results don't quite seem credible. In Q4 of 2005 Sacramento was in the top 25 in the nation (ranked from overvalued to undervalued, out of 330 markets), at an overvaluation of 53.3 and a home price of 391.2. That I believe.

Fast forward three years, we are now in the bottom 35 in the nation, with an undervaluation of 22.4, and home price of 216.5 (the price seems right, but the undervaluation does not).

In fact they are showing that much of California is undervalued or fairly valued.

If I had to guess why their valuation seems off , it's because they take into account interest rates in their affordability calculation. Yes, interest rates are historically low, but not everyone can get a loan with today's more rational underwriting requirements especially at the higher end.

Reference Check

The media tends to throw around percentage statistics without giving a point of reference. I myself have been guilty of this on occasion. But it makes a world of difference. Economist and analyst predictions of another 20% drop in prices can mean two very different things, depending on where you start from.

To give an example, I pulled Sacramento housing tracker data, from May 2006 and Feb of 2009....Depending on the percentile, we have seen anywhere from a 37% drop to a 57% drop.

Below that are two separate calculations, one is 20% off the 2006 number, and the other is 20% off the 2009 number. The difference between the results in all three cases is around 40k. Certainly nothing to sneeze at.

If I were the cynical type, I might suggest that they are leaving the reference point out on purpose, that way they can easily revise history depending on how things turn out.