Picture This

While it has been widely reported that home sales are down, and they are, it is still comforting to know that during the first four months of 2007 the number of homes sold between $400,000 and $2,500,000 totaled 428. There were additional homes sold for less than $400,000 plus some mobile homes. So over all while the market is down in number of sales, it is not dead as some think.  Homes priced between $900,000 and $1million are still the slowest to sell.

Click here to view a graph.

No Responses »

In all markets certain price ranges of homes sell faster than others. There are many reasons for this. When I lived in Fremont, they were in a massive expansion of new homes and numerous homeowners decided to trade up. This flooded the market with lower priced homes and drove the price of the homes they sought even higher. In our area lower priced homes have always sold well because they meet the budget of more people. More people can qualify for a $500,000 home than a million dollar home. It is often true that for a $100,000 more you can get much more house. In the chart below we find that homes priced between $800,000 and $1,000,000 to be slowest to sell so far this year.

Yet the number of homes sold between 1 million and 2 million show a spike in sales. These homes traditionally have the best views, location, size, and other ammenities. Data includes condo’s and PUD’s.

No Responses »

The Tribune recently reported the median prices for SLO County homes rose last month. While this may be true, it may also be caused by the continued sales of properties over 1 million dollars. If high end home continue to sell when everything else slows down it will increase the median and tend to skew our interpretation of real events. One need only look at the quantity of price reductions of homes currently for sale to realize that prices for most homes continue to decline. Data for the following chart comes from the MLS.

I believe the we could plot a similar curve for the 5 cities area. I still believe this decline in prices will bottom out in the 4th quarter 2006.

No Responses »

July is looking like a record month for price reductions. With only a week left, we could surpass 80 reductions by the end of the month.

A few price reductions are common, as sellers and REALTORS® overestimate the current value of a property and need to make adjustments. A trend, such as we are currently seeing, indicates that property values have already declined and adjustments are being made accordingly. Further analysis is required to establish if values are continuing to decline, level off, or rise.

No Responses »

WHERE ARE WE NOW? – JULY 2006

It started last summer. The interest rate bottomed out, and there was massive new construction. The media began talking about a housing bubble, and even Greenspan commented there was “Froth” in the real estate market. The US economy involves how we feel collectively, rather than inventories of consumer goods, stock market averages, unemployment, or inflation.

But last summer talk ensued about the housing bubble. It was on every broadcast being debated by every talk show host. By October it had affected everyone and sales plummeted.

From October 2005 to December 2006 prices in Morro Bay fell by 6%. Since there is no massive construction of new homes in Los Osos, Morro Bay, or Cayucos the elements of a housing bubble did apply but it was like being unemployed during a season of low unemployment: the collective feeling of the nation was in control. Interest rates were still great. Baby boomers were still retiring, but now buyers could wait and see if prices were going to continue downward in which case it paid to wait.

*note* July has 11 more days to equal or exceed Junes statistics.

As buyers left the market and demand fell, sellers were forced to lower the price of their homes; therefore, home values in the area continued to decline from January 2006 to the present (July 2006). I surmise along the lines of another 6%. In the chart above it is obvious that REALTORS® and sellers were late in reacting to the downward trend, partly because it was felt to be a temporary anomaly (bad press, holidays, and an extended rainy season).

While it was obvious to me in October, I gave it 6 months and expected it to bottom out in April 2006. My real estate predictions have been incredibly accurate for the past 6 years but I missed this one.

Based on current indicators this may last a year and bottom out in September or October. This means that the best time to buy a home on the central coast is anytime in the next three months. When things do turn around, I fully expect annual appreciation to return to the 15%-20% range. How can I say that you might ask? It is simply this: we are small communities and will remain small. This quaint lifestyle is very attractive to anyone who has been stuck in traffic. The air is clear and the climate is fantastic. But most importantly: We are still the most reasonably priced area between San Diego and San Francisco.

No Responses »

DECLINING MARKET - BUYER’S MARKET

The rub comes in when you are in a Declining Market. If you err on the high side, the home never sells because it is always overpriced. Even if you price it correctly, if it doesn’t sell immediately then your home becomes over priced and doesn’t sell.

Let’s take the same example. A similar home closed this week for $790,000 and had a 30 day escrow. The current market value of your home is $780,000 because it has declined $10,000 during the month. So if you price your home at $780,000 and it doesn’t sell right away then you are over priced and need to reduce your price $10,000 every month until it sells. Obviously if your home sits on the market for 5 months you may be lucky to get $740,000 for it. Other factors which come in to play in a Declining Market are fewer buyers and more homes for sale – supply is high and demand is low. So it becomes even more important to price you home properly.

It may be best to offer your home at $20,000 under market value to attract potential buyers and get a quick sale. There is a price where everyone says to themselves, “That’s a no brainer! We’ll buy it.” Everyone wins. The seller minimizes their potential loss and the buyer gets a good buy. REALTORS® will steer their clients to the best buys available. So if you under price your home by $30,000 then you have a good chance of selling it within 3 months. At the end of 3 months, you will need to reduce the price yet again.

Naturally, we want to predict when this declining market will end, level off, and start back up. If we feel it is going to be of short duration then we may want to hold off on reducing our price. If it looks like it is going to persist then we may want to get aggressive in our pricing. Recent events have made it very difficult for REALTORS® and Sellers in determining the proper course of action.

No Responses »

RISING MARKET – SELLER’S MARKET

Sellers and REALTORS® have had it easy pricing property over the last 6 years. Look up comparable properties that have recently sold and add $10,000-$20,000.

In the example below let’s suppose the comparable property for your home just closed escrow at $790,000. It was a 30 day escrow so today’s current market value of your home should be $800,000 because prices have been rising at $10,000 per month.

So if you price your home at $840,000 then it should sell within 5-6 months. On the 5^th month it should be at current market value and on the 6^th month under current market value. The beauty of this market is that you can err a bit on the high side and everyone is happy.

No Responses »

Even the worst fixer upper will sell at the right price.

Despite 6% dips in Morro Bay and Los Osos, Cayucos values have remain level. The reason for this may be that prices in Cayucos move in stair steps while the price line of all the other cities on the coast have a uniform slope. So while prices may level off for awhile in Cayucos, I don’t expect them to drop much unless this nation wide downturn is sustained for a while longer.

No Responses »

My daughter Jenni has spent many hours setting up this blog for me. I hope you enjoy it, and I hope to start writing regular columns about the local real estate market very soon. I’ll post notes about my family and hobbies, too.

As I am the president of the Cayucos Chamber of Commerce, I will also post announcements for the Chamber.

-Breck

No Responses »