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 Inventory up, sales down, days on market up. You would think that this would all add up to a drop in prices. But once again, we would be wrong. Despite all the numbers, the average price of a home went up 8.9% in June.
I keep saying that something has gotta give - but it never seems to happen. Read on for all the nitty gritty details.
Supply And Demand
The most revealing numbers are the ones that we compare to the same period in previous years. This lets us evaluate them in a way that removes seasonal concerns. When we do this for the real estate market in Santa Clara County for June of 2007, we can see that the current trends have been building up over a long period of time - about the last three years.
When compared to the same time last year, we can see the following:
- Inventory UP 17.8%
- Current home inventory: 4,504
- Sales Down 23%
- Total Homes Sold: 982
- New listings are down 20% from last year
- Total new listings in June: 1993
Note how similar the current numbers are to what we saw in 2001. I point this out since when it happened then, the market responded with a drop in home prices. Of course, I have been pointing this out for the last few months, but we have yet to see the drop in prices. However, one big difference is that in 2001 the changes came on quick - in less than a year. In our current situation, we have been slowly creeping up on these numbers - stretching it all out over three years. It may then take longer for the corrective action to occur.
If we look at previous months, we can see some pretty clear trends, even after taking into account the usual seasonal influences. But don't let this particular view carry as much wait as the year to year statistics.
Inventory is just headed up and up. It seems to have peaked a bit, which would be a welcome change. As we have seen over the previous months, the sales continue to remain flat. New listings are also fairly flat, and even declined over the last month. Despite this, the inventory remains high.
Home Prices
It is amazing to see home prices continue to rise despite all the market influences we have already discussed.
When compared to the same time last year, home prices in Santa Clara County increased 8.9% from June 2006.
That gives us a current average home price of $1,066,610 in Santa Clara County.
In order to draw in buyers, this number is simply going to have to come down - or at the very least flatten for an extended period of time. My guess is that as sellers become more desperate to get their homes sold, the inevitable drop in price will come.
Here is one instance where the numbers are interesting because they tend to deviate a bit from what we would expect at this time of year. Normally, we would expect home prices to take a bit of a an increase as we enter the summer season.
If you click and enlarge the graph at right, you will see what I mean. In June 2006, we saw prices rise a bit. This year, we did not see that. In fact, we saw prices drop. This is unusual and might just be giving us a hint of what to expect in the summer season of 2007.
If anything would wake up the market to the need for lower prices, it would be a very down summer season.
Days On Market
Once we get an idea of prices, inventory and solds, the next big question is "How long will it take to sell my house?" Days on market gives us that information.
In June 2007, it took sellers 53 days to get their homes sold.
That is a 51.4% increase from the same time last year. Plus, this number has been steadily rising since 2005.
Whats more, this number represents the homes that have actually sold. Don't forget that right now for every home that sells, there are over 4 other homes trying to get sold. Many of those have been on the market much longer for one reason or another.
If we assume that the numbers for June will continue, that would mean we have enough homes in inventory right now to last us 4.5 months.
When we look at the days on market over the last few months, the biggest thing we see is the seasonal influence. You can always expect the days on market to peak during the winter months. Normally, you would expect the days on market numbers to start to drop as we enter the selling season of summer. However, we did not see this last year and I suspect we will not see it this year either.
The market continues to struggle and eventually,something is going to have to change to get the market back into balance.
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