Data from the country tax records indicate that the median home is a three bedroom, two bath 1820 square foot home on a 6,600 square foot lot. If the median size of sold homes during a given period were greater than that it would account for the median price also being more.

Quickly surveying the sales from September to October (closed homes) we indeed see that more large home sold in October—6 0% of the homes sold were over 1820 square feet as opposed to only 46% in September.

Since there was a shift in the median size home sold (up 14%), it stands to reason that the median home price would reflect that change—as it did. Yet applying the median price per square foot for the homes which sold, to the true median size home in Belmont (1820 Sq. Ft.), we return the following theoretical media price—still an increase over the prior month.

Larger homes sell for less per square foot. Much of this has to do with not accounting for land in the formula, but needless to say with more large homes selling the price per square foot should drop—it didn’t.

The median size home sold in September (1700 Sq. Ft) was more representative of the median sized Belmont home while in October the median size home (2,100) sold was 400 square feet larger. Using the established median price in September of $529.00 per square foot, that accounts for $211,765 of the higher median value in October or better put, adding that to Septembers’ median raises it to $1,191,765 and yield no median price growth.

Applying the square footage of the median size Belmont home to the median price per square foot would yield a more accurate depiction of what the true cost of a median price home in Belmont is today–$900,000. This data is a more true representation of the market as it includes only median size homes and what they have sold for in the preceding 12 month period.

Click here for the rest of the story…

Or did it really? What do you do when you know the numbers must be wrong?

Numbers are of course just data and need to be interpreted well in order to be of any use.

Clearly there’s more inventory, there are fewer buyers and homes are sitting on the market longer. All this should equate to homes selling for less. Yet last month Belmont’s median home price shot up from $980,000 to $1,170,000. Are you thinking more expensive homes must have sold? Read on…

Granted, Belmont is a small market sample and is subject to dramatic swings in data on a month-to-month basis. Yet examining the last several years, though there are wild fluctuations, overall the trend appears rather clear and recent history reveals this to be an anomaly.

Often times the median home price will spike in a given period due to more expensive homes selling; that argument is made on a regular basis. The problem is how does one know if more expensive home are selling—perhaps homes are simply more expensive?

A more accurate statement to justify a momentary up-tick in values would be more large homes sold in a given period—larger home sell for more right?

If this is the case, we must first understand the profile of the median home in Belmont.

Click here to read more analysis on why the median price data is misleading!

Many of the real estate stories you may be hearing are dealing with national or statewide issues and do not reflect our local market. That doesn’t mean that the overall housing picture doesn’t affect our market-it does. The perception of a declining market is all it takes to create one. As optimistic as homeowners are about the value of their homes, we believe that somewhere in the back of their minds there’s a nagging uncertainty of future valuation and a realization that at some point the run up in real estate values will come to an end. And of course it will. The question remains is this it? Are we there now?

In the Bay Area, conditions are not the same as many parts of the country where cities are reporting a rapid decline in home values. These are some of the factors which may enable the Bay Area to weather the current real estate storm better than other parts of the county:

• The Bay Area is currently adding high paying jobs to the workforce,"… Jobs in the San Jose area increased 1.6 percent during the year."-increasing the demand for housing with high paying jobs that can support the Bay Area home prices. Though the overall employment picture is not as rosy as construction and other jobs related to the housing industry are waning.
• The Bay Area rental market is tapped out at near 100% occupancy rates adding to the pressure to buy a home.
• New construction is limited due to land constraints and fewer new homes starts as developer try and keep inventories low to buoy prices. This is keeping the supply of homes (inventory) at reasonable levels.
• The last major downturn in real estate for the Bay Area was in 1990-1994 "…The country’s last recession begin in July 1990 and lasted until March 1991. But NBER did not officially declare the downturn over until December 1992." The actual decline in real estate values lasted about three years and then remained flat for another several years depending on what city you lived in). The difference between the last major decline in home values and the precipice we are on now is that we are not in a recession as we were in 1990.  Absent the need for homeowners to sell due to a job loss or relocation, sellers may choose to wait out the market. This would continue to keep inventory levels from skyrocketing as they did in 1990. Less motivated sellers equates to fewer "fire sales", helping keep values from plummeting.

This isn’t to say we aren’t in for a bumpy ride. The issues facing the sub-prime lending have led to increasing mortgage defaults around the country and have even the most enthusiastic real estate investors on edge. The Bay Area real estate market weathered the recession of 2001 fairly well and may do so again but any protracted or significant recession will have a huge impact on the Bay Area housing market due to the current low affordability index.

The optimism and expectations for Bay Area real estate are very high–too high to be sustainable. A pull-back will happen. When it will happen and how deep it will go is yet to be seen.

What should you do?

First time buyers who can afford a home, feel their jobs are secure and are not planning a move in the next several years should seriously consider buying a home while there’s more to choose from and less competiton. Chances are you’ll get a better deal than what the median prices reflect. In the early 1990’s the buyers who purchased a home despite flat (or declining) appreciation levels were in the best position when the market rebounded as pent-up demand for housing meant multiple offers and a rapid increase in home values (*the recession had been over for nearly two years before the Bay Area housing market had a significant rebound).

Trade-up sellers: This group really has nothing to lose by trading up in this market. Falling values means a more expensive trade-up home is less in real dollars. More inventory means more to choose from and seller’s are even considering a contingency on the sale of your residence-something we have not seen in years.

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

Drew & Christine Morgan Morganhomes.com

Visit our Blog at BeautifulMountainBlog.org

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

This graph shows sales for the last the last four years for Belmont, California. It’s interesting to note that even with higher inventory levels, the median price is till holding along the trend-line where it would be calculated to be based upon past trends, The third quarter ending period in September should add more valuable data to help understand if in deed the market forces are beginning to impact not just sales and inventory, put selling priced as well.

You can read more abou these grahs for Belnt and other openineuals cities on our web page at morganhomes.com

Also, visit our Belmont Blog at BeautifulMountainBlog.org

Drew & Christine Morgan Morganhomes.com

Visit our Real Estate Blog on Active Rain real estate network.

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

Many of the real estate stories you may be hearing are dealing with national or statewide issues and do not reflect our local market. That doesn’t mean that the overall housing picture doesn’t affect our market—it does. The perception of a declining market is all it takes to create one. As optimistic as homeowners are about the value of their homes, we believe that somewhere in the back of their minds there’s a nagging uncertainty of future valuation and a realization that at some point the run up in real estate values will come to an end. And of course it will. The question remains is this it? Are we there now?

In the Bay Area, conditions are not the same as many parts of the country where cities are reporting a rapid decline in home values. These are some of the factors which may enable the Bay Area to weather the current real estate storm better than other parts of the county:

• The Bay Area is currently adding high paying jobs to the workforce,”… Jobs in the San Jose area increased 1.6 percent during the year.”—increasing the demand for housing with high paying jobs that can support the Bay Area home prices. Though the overall employment picture is not as rosy as construction and other jobs related to the housing industry are waning.
• The Bay Area rental market is tapped out at near 100% occupancy rates adding to the pressure to buy a home.
• New construction is limited due to land constraints and fewer new homes starts as developer try and keep inventories low to buoy prices. This is keeping the supply of homes (inventory) at reasonable levels.
• The last major downturn in real estate for the Bay Area was in 1990-1994 “…The country’s last recession begin in July 1990 and lasted until March 1991. But NBER did not officially declare the downturn over until December 1992.” The actual decline in real estate values lasted about three years and then remained flat for another several years depending on what city you lived in). The difference between the last major decline in home values and the precipice we are on now is that we are not in a recession as we were in 1990.  Absent the need for homeowners to sell due to a job loss or relocation, sellers may choose to wait out the market. This would continue to keep inventory levels from skyrocketing as they did in 1990. Less motivated sellers equates to fewer “fire sales”, helping keep values from plummeting.

This isn’t to say we aren’t in for a bumpy ride. The issues facing the sub-prime lending have led to increasing mortgage defaults around the country and have even the most enthusiastic real estate investors on edge. The Bay Area real estate market weathered the recession of 2001 fairly well and may do so again but any protracted or significant recession will have a huge impact on the Bay Area housing market due to the current low affordability index.

The optimism and expectations for Bay Area real estate are very high—too high to be sustainable. A pull-back will happen. When it will happen and how deep it will go is yet to be seen.

What should you do?

First time buyers who can afford a home, feel their jobs are secure and are not planning a move in the next several years should seriously consider buying a home while there’s more to choose from and less completion. Chances are you’ll get a better deal than what the median prices reflect. In the early 1990’s the buyers who purchased a home despite flat (or declining) appreciation levels were in the best position when the market rebounded as pent-up demand for housing meant multiple offers and a rapid increase in home values (*the recession had been over for nearly two years before the Bay Area housing market had a significant rebound).

Trade-up sellers: This group really has nothing to lose by trading up in this market. Falling values means a more expensive trade-up home is less in real dollars. More inventory means more to choose from and seller’s are even considering a contingency on the sale of your residence—something we have not seen in years.

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

The graph below is for San Mateo County, California. Notice how steep the trend-line is for this year as compared to 2004. The trend line used is a straight line computation in which the trend illustrated is based upon the previous data points. Of course this predicted outcome can change radically as market conditions change and in fact we would expect that this level of appreciation (given the current issues in the mortgage industry) is not sustainable and in fact it may be the result of more expensive homes selling in the two previous months–September data points should help level off this trend.