Bay Area Home Values Eclipse Historical Records

Case Shiller Report for June 2017

The Case-Shiller Report was released June 27th, the last Tuesday of the month, which tracks home sales in 20 metropolitan cities around the country, called MSA’s, of Metropolitan Statistical Areas.

Our MSA (Metropolitan Statistical Area) in the Bay Area consist of five counties—Marin, San Francisco, San Mateo, Alameda and Contra Costsa. It’s important to note that while home values might be headed upward at a dramatic pace in the counties of San Francisco and San Mateo, they might be lagging in Alameda and Contra Costa, thus diluting the upward trend in one county vs. the whole MSA. This has been the case in our area since the housing recovery began in earnest in 2012.

The same goes for the 20 city composite index, which takes 20 metropolitan cities in the country and tracks them as an average trend.

While the 10 and 20 city composite indices shows that the housing market has not yet eclipsed the all-time high recorded around March of 2006, in the Bay Area, we have.

This graph which we built utilized the data from Case-Shiller for our SFMSA and illustrates that we have reached a new all-time high for home values. However, it’s important to note that the delta between the trend line and the peak where we are today, illustrating where the straight-line home values should be, is far less than in the peak of 2006, where we see a much great deviance off the trend line values. In fact, the peak of 2006 was 58% higher above the trend line than it is today.

One might infer from this that we are not as overvalued as it might appear at first glance.

This give some credence to the synopsis for the Standard and Poor’s Case-Schiller analysis and discussion.

Case-Shiller Analysis by Standard & Poor’s— ANALYSIS

Great View of San Francisco

“As home prices continue rising faster than inflation, two questions are being asked: why? And, could this be a bubble?” says David M. Blitzer Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up. The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a four- month supply. Adding to price pressures, mortgage rates remain close to 4% and affordability is not a significant issue.

“The question is not if home prices can climb without any limit; they can’t. Rather, will home price gains gently slow or will they crash and take the economy down with them? For the moment, conditions appear favorable for avoiding a crash. Housing starts are trending higher and rising prices may encourage some homeowners to sell. Moreover, mortgage default rates are low and household debt levels are manageable. Total mortgage debt outstanding is $14.4 trillion, about $400 billion below the record set in 2008. Any increase in mortgage interest rates would dampen demand. Household finances should be able to weather a fairly large price drop.”

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California.  They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario

 

 

Belmont’s Housing Market Woes

Is the local Belmont housing market slowing?

We’re hearing a few rumblings from sellers thinking it might be a good time to cash out before there’s a full market correction. We’ve also heard from buyers that they might try and wait out the market, and see if there’s a decrease in home values anytime soon. And many of our colleagues are sharing the same sentiments, as the number of multiple bidders appears to them to be waning.

And they’re not necessarily wrong. The market has shifted as we have been espousing in several of our more recent blog posts.

But our observations on why the market seems to be “cooling” has more to do with home values surpassing the purchasing power of the average buyer, than a market experiencing a correction. Because while the mid-peninsula may be realizing a chill in the air when it comes to the number of multiple bids, the lower priced cities such as South San Francisco have never seen more activity. In reality what has happened is that the strong demand for homes under $1,200,000 has forced buyers to look elsewhere.

Housing markets tend to move a little slower than the stock market, where one may see sizeable swings in individual stock or sector valuations on a daily, even hourly basis.

We’ve been talking about the shift to a more normal market, where the number of homes for sale is at equilibrium with the number of buyers looking for a place to purchase.

We believe that our market is not there yet, but it may be getting closer. Any decline in consumer confidence could make that shift happen more rapidly.

It’s important, however, to make a distinction between a much over used term “market correction” and a more accurate term “market shift”. In fact, we’d argue that there is no correction in the housing market like there is in the stock market.

A change in the balance of supply vs. demand is a market shift. A market correction is where the market itself decides values are too high, and forces a correction with a widespread sell–off.

Consider it this way. Thousands of homeowners on the peninsula would all have to be convinced at once that the market has reached an unsustainable level and cash out to create a flood of housing inventory to result in the type of market correction that is being bantered about.

A housing market shift is typically fueled by an outside force—such as the tech bubble bursting in 2000, where wide-spread job lay-offs in the sector forced many homeowners to sell at once, flooding the market with homes for sale. That was not a correction in home values, it was a market shift.

When will the market dynamics change so that buyers are once again in control? When inventory levels surpass demand. Imagine an hour glass where the sand is slowly flowing from top to bottom. The sand begins to pile up and form a small mountain at the bottom of the glass. Until all of a sudden, it collapses. When will that one grain of sand cause the entire pile to cascade down? That’s impossible to predict. So it is in the world of real estate, that while market shifts are inevitable, forecasting when they will occur is an impractical task.

And now a look at the numbers in Belmont for March 2017:

Belmont home sales indicated the number of units sold in 2017 increased by less than 1% over the same period last year. Sellers received 1.7% more of their asking price, and the time it took to sell their homes dropped from 11 days to 10.

And while the median price for a Belmont home in March at $1,723,000, increased 18.2% YOY, the size of homes selling this March were 16% larger than last year. Adjusting for the size of the homes selling in these two periods, the actual YOY appreciation might be closer to 2%.

 

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

 

Housing May Be Approaching Equilibrium

A lot transpires at the end of the year. There are resolutions for the new year, and reflection upon the year just passed. There’s wrapping up the holiday decorations and reflecting upon the celebratory memories.

And then there’s wrapping up the year-end business for us. Surveying what happened in our local housing market and taking a stab at the “Why”?

We posted an article for our blog in December which we authored and was originally printed in the Examiner. It was aptly titled, “Shifting Market in Play”. In it, we discussed the subtle but noticeable shift in our housing market towards a market approaching equilibrium—that being a market wherein the demand is nearing the supply. That’s a good thing, as a more normal market is a more sustainable market.

It’s not simply that demand for housing is waning, but rather demand at the newly established price point is down. In other words, fewer people can afford the median price home which has had a dampening effect on home sales.

Affordability is affected by three major factors: median house price, mortgage interest rates, and household income. Mortgage rates are still below historical averages, and household income is on the rise. So, what is keeping housing affordability down are home prices—which are ironically artificially inflated due to the first two factors, low interest rates and high income.

Comparing the year-end numbers for Belmont, we see that listings were up but sales were down. The time it took to sell a home was higher, but the price the sellers received and the percent of the seller’s asking price were lower.

2016-2017 YOY Data

 

 

The median price appears to have taken a hit too, but upon further examination, one can see that while the median price was down 1.5%, the median size home that sold last year was down even more, at 3.4%.

When the housing market dropped in 2007, home values bounced along at the bottom for several years before climbing again. This is typically true at the peak as well. Are we there? We could be. Data from Q1 & Q2 will give us a more clear picture.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomesand on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

 

Shifting Market in Play

NOTE: Shifting Market in Play is an article we did for the Examiner in December, when asked to comment on 2016—A Year in Review: This is a link to the original article.

In order to understand our current housing market, one must appreciate that markets are constantly in flux. In our town of Belmont, we looked at home sales and compared the periods from January thru November for years 2015 and 2016.

Let’s first discuss the market conditions. There’s a lot of hyperbole as to the state of our current housing market. Sellers are still in the mindset that they hold all of the cards, yet buyers are beginning to push back on prices. Sellers are receiving fewer offers, many have had to lower their asking prices, and homes are often times closing below the asking price—something that rarely happened from 2012-2015. This suggests a shifting market.

Clearly, the sky is not falling, the shift is towards a more normal market, where homes sit on the market longer, and may sell above, at, or below the seller’s asking price. This long awaited market shift is not a correction, but rather a predictable and healthy move towards a more balanced and sustainable market. To be blunt, prices have risen to a level at which the majority of buyers can no longer afford the median priced home, resulting in a cooling down effect on the housing market.

We first examined all of the home sales in Belmont that occurred in 2015 through November in order to compare those with the same period of home sales in 2016. We added no search filter other than the date range, since the larger the pool of sales, the more reliable the data.

2015 2016 % ∆
Sales 178 181 1.7%
Median Home Price $1,516,500 $1,389,000 -8.4%
Home ft² 1850 1760 -4.9%
$/ft² 830 856 3.1%
DOM (Days on market) 12 11 -8.3%
% Received 114.5 107.2 -6.4%
Price Reductions 9 19 111.1%
For How Much $120,638 $118,477 -1.8%
Sold Over Asking 156 149 -4.5%
Sold At Asking 6 10 66.7%
Sold Under Asking 16 22 37.5%

 

It’s clear that a market shift has occurred. Note that the median home price reflects a significant decrease year over year (YOY), and part of that is simply because smaller homes sold in 2016 skewing the numbers. But in almost every category there’s a distinct shift towards a more normal market. There were fewer homes selling for more than the asking price and the ones that did sell over asking sold for 33% less over asking than in 2015. There were more cancelled listings, and more price reductions for greater amounts. The inventory of homes for sale is growing—up from 0.3 to 0.7 months of inventory (still considered seller’s territory).

On a more macro-level, when we look at the San Francisco Metropolitan Statistical Area (SFMSA) as produced by Case-Shiller for Standard and Poor’s, which encompasses the counties of Marin, Alameda, Contra Costa, San Francisco and San Mateo, one can see that while the YOY increase in their index was a rise of almost 15%, there was only a nominal 0.5% increase in home values since April.

How long will the new normal market continue? We’ll save that wild card question for other talking heads. Nobody really knows of course, and anybody that professes to know should give you cause for concern. However, the market appears to have hit a price threshold. As fewer buyers can qualify for the median priced home, more sellers will be getting less windfall profits like they did during the meteoric rise over the last three years.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA with RE/MAX Star Propeties. with more than 20 years of experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook at https://www.facebook.com/Morganhomes and on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Know What Changed our Housing Market

In order to know what changed our housing market, one must understand that markets are constantly in flux, it’s just hard to see when you are in the middle of one.

We took a look at homes in Foster City for a client recently. The premise was they wanted to know if the housing market was in the seller’s favor, or in the buyer’s favor–if prices were going up, steady, or dropping.

Anecdotally many agents will tell you their opinion based upon their personal observations. If they had a hard time selling their last home they might tell you the market is “changing” and if their last listing flew off of the shelf, they might believe the housing market is as robust as ever. But whatever people feel, the numbers don’t lie. Numbers are an unemotional representation of what is occurring in a given market.

Let’s first discuss the market conditions. There’s a lot of hyperbole as to the state of our current housing market. Sellers are still in the mindset that they hold all of the cards, yet buyers are beginning to push back on prices. Sellers are receiving fewer offers, many homes are having to lower their asking price, and homes are selling often times below the asking price—something that rarely happened in 2012- 2015. This lends itself to a shifting market.

Shift

Clearly the sky is not falling, the shift is towards a more normal market, where homes sit on the market longer, and may or may not sell at the seller’s asking price. This long awaited market shift is not a correction, but rather a predictable and healthy move towards a more balanced and sustainable market. To be blunt, prices have risen to a level that the majority of buyers can no longer afford.

We first examined all of the sales in Foster City which occurred in 2015 through August 31st in order to compare 2015 home sales within the same seasonal periods to 2016. We added no search filter other than the date range, since the larger the pool of sales more reliable the data.

This is the data:

FC Market Conditions

It’s clear that a market shift has occurred. While the median home price had a marginal increase of 3% YOY, in every category there’s a distinct shift towards a more normal market. There are more homes selling, for less over the asking price, and taking longer to do so. There are more cancelled listings, more price reductions, and for a greater amount. The inventory of homes for sale is growing—up from .83 months of inventory to three months this year.

The month’s supply of inventory is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. For example, if there are 50 homes on the market and 10 homes selling each month, there is a 5 month supply of homes for sale.

The months of supply is a good indicator of whether a particular real estate market is favoring buyers or sellers. Typically, a market that favors sellers has less than 3 months of supply, while more than 6 months of supply indicates an excess of homes for sale that favors buyers. Foster City is currently running a housing inventory level of 3 months.

What this means is that the market shift will no doubt continue until there’s a full blown correction. We could be years away from that happening, but we are moving into the slowest part of the season where seller’s typically net the least for their homes. And if interest rates rise—and they should since they’re at historic lows, that too will have a damping effect on home values in the foreseeable future.

How long will the new normal market continue? We’ll save that wild card prediction for other talking heads. Nobody really knows of course, and anybody that professes they know should scare you. But the market appears to have hit a price threshold. As fewer and fewer buyers can qualify for the median price home, fewer sellers will be getting windfall profits like they did during the meteoric rise over the last three years.

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

 

 

 

Belmont Home Sales Suffer From A Stall

Belmont home sales this June suffered from the stall we predicted in this post back in May.

Comparing Belmont July of 2015 sales statistics to July of this year, they might look rather benign, but when you look a little deeper, you can see indications of what could be a slowing trend.

There were only two more listing this year than last, and even with seven more home sales in 2016 the inventory of unsold homes doubled. So did the months of inventory–rising from a minuscule .3 of a month to a mere .7—(still a ridiculously low number considering the U.S. housing inventory level hovers around six months). [CLICK THE IMAGE TO ENLARGE]

YOY June 2015-2016

While the $129,000 median drop in home prices might seem shocking at first glance, it’s mitigated to some degree since smaller homes sold this year. In fact, if we factor in the difference in the size of the homes in the two periods we come up with an almost identical median price year-over-year of $1,633,000.

We also see the price per square foot dropping from $906 to $824—and larger homes sold last year. Why is that important? Because larger homes statistically sell for less per square foot, since the land upon which they sit is not in the equation, yet can account for 50% or more of a home’s value.

And there’s the smoking gun—home prices did not go up in Belmont this June as compared to last. Not only that, but sellers received only 106% of their asking price compared to 119% in June of 2015. [CLICK THE IMAGE TO ENLARGE]

BELMONT jUNE 2016

Is it the unknown of Brexit? That served only to help lower mortgage payments—in theory giving buyers more buying power. It is an election year? This one is tumultuous. Whenever there’s an unknown in the air buyers tend to pull back, sit on the fence and wait it out—it’s human nature.

It could also simply be that we’ve hit a price threshold that the average buyer can no longer afford, or any combination of the above (or more). In any case, it was bound to happen at some point. The question is, have we hit that point?

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441. 

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Drew & Christine Morgan did not necessarily participate in these sales

 

 

 

 

 

How Low Can Housing Inventory go?

The year is just getting started but already there’s a problem with the housing inventory levels. Belmont’s housing inventory consisted of five homes for the month of January 2016. To put that into perspective, Belmont’s housing inventory has averaged 41 homes a month since 1998. In 2015 the average for the year was 12 homes a month. Since housing inventory fluctuates seasonally, we looked at the housing inventory levels for each January—that averaged 30—remember, we are at five right now.

This inadequate housing supply puts intense upward pressure on home prices. As we have seen in the past year alone, the amount sellers received of asking increased from 105% in January 2015 to 107% in 2016.

MONTHS OF INVENTORY

Month’s supply of inventory is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. For example, if there are 50 homes on the market and 10 homes selling each month, there is a 5 month supply of homes for sale.

The months of supply is a good indicator of whether a particular real estate market is favoring buyers or sellers. Typically, a market that favors sellers has less than 6 months of supply, while more than 6 months of supply indicates an excess of homes for sale that favors buyers. Belmont currently is running a housing inventory level of .56—yes, less than one month. On a national level, we’re still hovering around 5.6 months of inventory. Home Sales January 2016

MEDIAN HOME PRICE

The median home price in Belmont increased 24% YOY, from $1,210,000 in 2015 to $1,500,000 in January 2016.

The median size home which sold increased YOY too, from 1,500 sqft in 2015 to 1,610 sqft in 2016. If it’s any consolation to buyers, while homes went up 24% in January 2016, buyers did get a home that was 7.3% larger.

PRICE REDUCTIONS

Price reductions remain at an all-time low. Only one seller in 2015 had to lower their initial asking price and in 2016 no one suffered the price reduction fate. Imagine the chatter around the water cooler when it’s time to fess up to your colleagues yours is the only home that had to have its asking price lowered.

OVER/UNDER GAME

Of the homes that sold in 2016, seven sold for over the asking price, one home sold right at asking and one home sold for less—strange as that may sound given the tight market conditions—it’s still possible to overprice one’s home.

Days on Market [DOM]

The time it took to sell a home in Belmont dropped nominally from 12.7 days in 2015 to 11 days in 2016.

Are December Home Values Real?

Are December Home Values Real? Can we trust what we hear?

Being REALTORS, we’re used to being asked “How’s the market?”, but never more than during holiday social events.

Real estate is the topic of conversation at a lot of social gatherings—we overhear conversations when we are out and about quite frequently. Usually it’s one person telling another about a crazy home sale in their neighborhood, where the final sale price was hundreds of thousands of dollars over asking, or the number of bidders hitting double digits.

That makes for great story telling, and in fact it’s an accurate one at that. Out of the 20 Belmont home sales in December 2015, 10 sold over $100,000 above the initial asking price. So if that’s become the norm, wouldn’t the better story be the home in the neighborhood that closed over a hundred thousand dollars under the asking price? And in fact that was the case in December, when a home on Adelaide sold for $123,000 under the list price of $1,688,000. We’ll save how that could happen for our next post…

December Belmont Home Sales
December Belmont Home Sales

SALES

Belmont has 20 homes sell in December, besting December of 2014 sales by over 60%.

MEDIAN PRICE

The median home price was $1,431,000 in December, a drop over November’s median home price of $1,652,000, but an increase over December of 2014 when the median home price stood at $1,198,000. Since the median home price seems to be the factor most people focus on, we’ll try and put that ~20% year-over-year increase into perspective.

One of the problems with using the median price is that it reflects if there has been a large amount of more expensive or less expensive homes sold in any given period. In these circumstances, you can often notice large differences in the median home price of a certain city from month to month.

For this reason, it is often better to view median prices over longer periods of time and monitor the trends, rather than looking at one month’s figures in isolation.

Last year the median size home in Belmont that sold in December was only 1,430 sqft, while this December it was 1922—34% larger. A 20% increase in price offset by homes being 34% larger could mean that home values in December actually dropped year-over-year. But this is small market sample, relatively speaking, and therefore subjected to these types of wild swings in data points.

To further answer the question of whether values are still on the rise, we turn to a larger market sample—San Mateo County, where instead of the average 15 sales we have in Belmont in a given month, the county as a whole has 350.

Here we find that the median home price trend went up 22% year-over-year. Since this includes many areas which are just now enjoying the rapid appreciation Belmont has seen in the past several years, areas like South San Francisco and Daly City, this number too is a bit skewed and is not necessarily representative of our mid-peninsula cities median home price growth.

When we take the median home price in Belmont for all 12 months in 2014, we arrive at a median monthly home price of $1,283,750 and using the same calculation for 2015 we arrive at a median monthly home price of $1,506,250—or a 17% increase year-over-year.  Obviously home values are still on the rise, but the exact rate is difficult to ascertain with small market samples.

Days on Market [DOM]

Homes are still selling in about 13 days on average. This is not to say that all homes are selling in 13 days, it means that of the homes which sold, they took 13 days to sell. Some homes languish on the market even in today’s red hot seller’s market and do not sell and are thus excluded from this calculation.

MONTHS of INVENTORY

The months of supply is the time it would take for all the current inventory to sell if it all sold at the current rate without new inventory coming on the market. In Belmont, it stands at .1—yes, that’s 1/10th of 1 percent a month of inventory. To put that into perspective, nationwide the housing inventory level stands at 5.7 months.

PERCENT RECEIVED

Belmont homeowners enjoyed receiving 109.4% of their initial asking price, as compared to 107.2% in December 2014.

It is interesting to note that 35% of the homes sold closed for less than the seller’s asking price. We contribute that primarily to the slower seasonal period.

Belmont Housing Forecast—-Are We in For Another Bubble?

2015 Real Estate in Review and 2016 Forecast–Are we in for another housing bubble?

Our Peninsula housing market certainly has a life of its own.

While the nation’s housing sector has been slow to climb out of thHousing-bubblee doldrums, the SF Bay Area housing sector has been catapulted into the stratosphere fueled by historically low interest rates and demand for housing from the gainfully employed high-tech sector.

U.S. housing growth, as measured by the renowned Case-Shiller Home Price Index supplied by Standard & Poor’s, showed composite housing prices on the national level rose 4.8% year-over-year since September 2014, while the San Francisco MSA (Metropolitan Statistical Area) rose over 11% during the same period. Looking back to when the Bay Area housing market began its recovery in April of 2009, home values have risen 84%, while on a national level they have risen only 20%. (Data as of SEP 2015—S&P Indices lag the market by two months).

—Where do we go from here?

For the last three years, demand has outstripped supply resulting in multiple offers and over bidding, driving home values to record levels. But our housing sector is so heavily influenced by the tech sector’s success that any bump in the road could spell a reversal in fortunes for thousands of homeowners.

It’s seems against the very essence of REALTORS® to acknowledge our industry is susceptible to downturns—this despite recently experiencing the largest housing decline since the Great Depression. Changes in a couple of key market forces could dramatically slow or even reverse the current trend of rapid housing appreciation in the Bay Area.

Jobs—According to the Economic Institute, for each job created in the high-tech sector, approximately 4.3 local jobs are created in other goods and services sectors. That’s great when job creation in the high-tech sector is on the rise, but when the tables turn it could send the housing sector into an economic death spiral.

Interest Rates—The Federal Reserve has been droning on about an increase in the Federal Funds Rate for over a year now. If mortgage rates rise as well, a half percent (0.5%) increase would cause monthly housing payments to be 6% higher. That increase would not only affect the amount one is qualified to borrow for a mortgage, but would also limit monthly cash flow. When money becomes more expensive to borrow, the amount a potential home buyer can bid will decrease, effectively ebbing the tide of over exuberant bidding.

We’re not saying that we believe we’re there yet, and we could be years away, but one thing is certain—home values in our area are at an all-time high, and they won’t stay there forever.

 

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook athttps://www.facebook.com/Morganhomes and also find them on Twitter @ https://twitter.com/morganhomes

 

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Belmont Home Sales Drop, But Values Rise

Any way you slice this month’s statistics for Belmont home sales, seller’s really made out this October.

October is historically not a great month for home sales, but in recent years with warmer fall weather, it’s been possible to market homes well into the winter months.

Let’s look at the numbers for October 2015…

Belmont Home Sales October 2015
Belmont Home Sales October 2015-Click on the image to enlarge.

 

SALES

Belmont home sales (the number of homes sold), was down 24% year-over-year; down from 21 in 2014, to 16 in 2015. A 24% drop seems like a lot, until you realize only five less homes sold.

MEDIAN HOME PRICE

Belmont’s median home price rose 19% over last October, and was up considerably from the prior month of September.

The median home price in Belmont now stands at $1,546,500. To put that large number into perspective, it has only been surpassed twice before—both times earlier in this year—in May, and again last June. The all-time peak for Belmont’s home values occurred in June of 2015 when we reached a median home price of $1,629,000. Does this mean Belmont home values have peaked? Perhaps. The homes that closed escrow back in June sold for 5.3% more than now, and yet were 6.7% smaller. We’re going to temper that statement with the statistic that the summer price peak to October fall-off has occurred in six of the last eight years.

PRICE PER SQUARE FOOT

This is a check and balance against the median home price. If much larger homes sell during a given period, the median home price will typically yield a larger number as well, while the price per square feet which homes sell for will drop. It’s a quirky inverse relationship that manifests itself since larger homes tend to sell for less per square foot. This happens because land is not involved in the square foot equation,  and can frequently account for up to 50% of a home’s value.

For example, homes which sold in October of last year, were 2,000 sqft in size, compare to 1,905 sqft this year. They sold for $707 per sqft as compared to $877 this October, while the lot sizes remained fairly constant. This means that the median price for homes went up in real dollars—not just that larger homes sold this October.

DAYS ON THE MARKET (DOM)

In both years, it took on average only 18 days to sell a home.

PRICE REDUCTIONS

In 2014, 14% of Belmont home sellers had to lower their asking price. In 2015 that number dropped to .6%–just over one-half of one percent.

OVER-ASKING OFFERS

In 2014 66% of Belmont homes sold for more than the seller’s asking price—this October that number went up to 87%.

The number of homes which sold at the seller’s asking price represented 14% of all sales in 2014 and none in 2015, while the homes which sold under the asking price dropped from 20% in 2014, to only 13% in 2015.

PERCENT RECEIVED

Of the homes which sold in Belmont this October, the seller’s received 109.5% of their asking price, contrasted to last October when they received 107.5.

As you can see Belmont housing market fared extremely well this October.

We are now into the ninth year of economic recovery, and the fourth year of the median home price increasing steadily in Belmont. The question we are being asked by many buyers is “are we at the peak”? This uncertainty in the market can cause buyers to hesitate and sit on the sidelines to wait for the next downturn. If that happens it could be a self-fulfilling prophecy.

We’re not saying that we believe we’re there yet, but one thing is certain, home values are at an all-time high and we won’t stay there forever.

Disclaimer:

Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years’ experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.

You can find them on Facebook at https://www.facebook.com/Morganhomes and also find them on Twitter @ https://twitter.com/morganhomes

The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.