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 Morgan Hill has seen some big changes in the market this month. For the first time in yeas, we have seen a real drop in the average price of a home. In fact, homes are down 4.7% from the same time period last year. That means the average home in Morgan Hill is now selling for over $45,000 less than last year.
While this should not be a surprise given what we have talked about in previous articles, it is the final piece in the puzzle for our market. With all the other elements in play, home prices really had nowhere else to go.
Read on for all the details!
Supply and Demand
 We are finally seeing the market move in the way all the numbers we have looked at over the last 6 months or so said they would.
For months, we have seen high inventory, low sales and still we saw increased average home prices. There was just no way that the market could sustain that trend.
All the trends we have seen in past months are still here. Inventory has continued it rise, but sales and new listings are on par with what we saw at the same time last year.
In fact, we again set a new record for the month of March when it comes to high inventory. 
Looking at the last months gives us some potential insight into what to expect in the coming months. I think that it is likely we will see the same general trends in 2007 as in 2006, with the exception of average sales price of homes. So, if we do try to look into our crystal ball in this way, we can see that from here, inventory will go up while sales stagnate and new listings increase.
Remember, we are heading into the time when most sellers list their homes. There is no question that as we head further into summer, we will get more listings. I don't see any market elements that are likely to bring out more buyers, so those folks that are looking to buy, are going to have lots of homes to choose from and are likely to have a great deal of bargaining power.
Home Prices
As mentioned earlier, the big point to take from the March home data for Morgan Hill is that the average home price has dropped in a way that is more than just a very minor influence.
While in previous months we have seen isolated drops of 1% or less from the previous year, this month we have seen a drop of 4.7%. Further, I believe the data supports the idea that this is simply the first in a series of months where we will see drops in the average price of a home when compared to the same months in previous years.
Frankly, it is amazing that we did not see this occur sooner. It is of course too soon to call this a trend... time will tell. However, I do think that in the months to come, we will see this be a trend that sticks around for a while. 
When we look at home prices over the previous months, we don't see any particular trends - mostly just the usual seasonal influences that drive prices up and down depending on whether it is winter, summer or spring. So while we do know that the average price is down from this time last year, it is up from last month.
It is interesting to note that in June of 2006, we did see the median being higher than the average. This tells us that more homes were selling above the average price than below.
Days To Sell
 When it comes to days to sell, lower is better. Since 2005, the days to sell has been steadily increasing.
We are currently seeing a 16.9% increase in the days to sell, compared to the same time last year.
It currently takes, on average, 104 days to sell a home in Morgan Hill. But remember that as recently as 2005, it was taking only 35 days to sell that same home. To fully put these numbers into context, realize that these are number for the average home. Since the current average price is about $930,000 that means if you are trying to sell your home for less, the likely days on the market will be less.  Likewise, if your trying to sell a home above the average price, you can count on taking much longer to sell your home than the average.
The data for previous months is very clear in its upward trend. In fact, the sort of seasonal influence that would normally lower the days on market for the summer months is barely noticeable - if detectable at all.
This trend of increasing days on market has been going on for a long while now. I suspect it will continue, but may slacken over the coming months if average price continues to go down.
Percent of List Price
If you have been reading my past market reports, you know that I do not normally present data regarding the percent of list price that homes sell for. The reason has been that there was really nothing to learn from this number. It has always been hovering between 95% and over 100% of asking price. However, I have noted recent fluctuations that might helps us understand the market better.
If you look at the numbers comparing previous years, you get the biggest insight. Now, keep in mind that for sellers, the lower this number the worse for them. It means that they are getting further from their asking price. For buyers, it is an indicator of how much below asking price they may be able to go when making an offer. In March 2007, Sellers were getting 97.56% of their asking price. 
This number is actually down from the previous year by 1.1%, when Sellers typically got 98.6% of asking price. I suspect that as Seller expectations lag behind the market realities on pricing, we will see Sellers taking bigger cuts in their asking price as close to full price and full price offers become less and less likely.
We can also spot the trend when looking at the past months. While this number has fluctuated quite a bit over the last year or so, you can spot the trend (as noted by the curving black line) downward. Indicating an overall trend of Sellers getting further from their asking price. Its also interesting to note that we saw dips during the summer season of 2006 - clearly indicating that sellers were not entertaining multiple offers as had been the case in previous years.
Final Conclusions
Finally, we see what we have been expecting for months. The average price of homes in Morgan Hill has dropped in statistically significant way that does not appear to be a one month anomaly. This looks like something that just might become a defining trend for the next few months.
With prices dropping, more buyers will eventually be drawn into the market. However, this tends to lag behind price drops by a month or two. This could make the upcoming summer season better than expected, but still down when compared to previous years.
All of the signs we are seeing continue to support the idea that this is not a "Market Collapse" as many of predicted. At least in the near term, these changes in the market numbers are gradual and not nearly as precipitous as they would have to be in order to categorize them as collapsing.
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