Housing Market, No Longer Level

For REALTORS^®, looking at home sales in Belmont after the end of the year is sort of like having to take the decorations down after the holidays—it’s just anti-climactic.  After all, we lived through the market and we know what happened.  We felt the exuberance of the early spring market and the pain of the fourth quarter—so why do we need to punish ourselves and go back to take another look? Because, our impression of what was going on may have been jaded by our colleague’s bewilderment in having a home on the market for more than two weeks, or our own empirical evidence influencing our vision of the market. And in this case, that’s exactly what happened—a confluence of comrades in the same trenches with us but with different views on the outcome of the battle and espousing them at every turn, causing at times a doomsday, or at least caustic, view that spreads like the flu this time of year.

The housing market just “feels” different—perhaps it’s the sentiment championed by frustrated buyers or even agents. We wouldn’t call the current market a leveling off—we believe it’s past that point.Q4 was quite tempestuous with the midterm elections in November and then the stock market woes leading to worries about our economic future. We did a blog article about the state of the markets around election time.

So we went back to compare 2016 (another important election year) to 2017, and finally 2018, which just ended. We expected to see signs of a dire slowdown, but the numbers tell a more tepid story.  

We’ll start with the median home price, since after all that’s really what most homeowners care about.

MEDIAN HOME PRICE
2016	$1,500,000
2017	$1,660,000	10.7%
2018	$1,824,500	9.9%

As one can see, the rate of appreciation slowed slightly, which is to be expected at the tail end of a nine-year sustained rebound. A further adjustment can be made since more larger homes sold in both 2017 and 2018 as compared to the year before—leading to a somewhat misleading result. So while prices appear to have increased 10.7 % in 2017 over 2016, the size of homes sold in that year were 5% larger. And while prices went up again in 2018, the size home was again 2.8% larger than 2017.  

DAYS ON MARKET (DOM)

2016	16
✔︎2017	15
2018	16

The average time a home stayed on the market in the 2018 election year was 16 days, marginally higher than 15 days in 2017, but equal to the 2016 election year.

HOMES SOLD (VOLUME)

2016	197
✔︎2017	219	11.2%
2018	192	-12.3%

TIMING OF SALES

First Half	Second Half
2016	113	84
2017	95	124
2018	84	108

Looking to the total sales of homes in these periods would suggest that there was a similar dampening effect on home sales (down 11-12%) in both the Presidential (2016) and Congressional (2018) election years.

The back-loaded increase in sales in 2018 seems to defy logic as that is not only when the election occurred, and interest rates began rising, but also when the stock market was putting everyone on edge. But when we looked closer at the sales in each of the six months comprising the second half, an explanation begins to unfold.

Taking into consideration that sales numbers indicate when the home closes escrow, and not when it actually sold, the reported sale lags the date of sale by about a month. So conceptually, the decline in sales beginning in August as shown is more likely a reflection of diminishing buyer sentiment beginning a month earlier in July. If one corrected for this lag, the 2018 second half sales would likely be lower than the first half.

When we examined how sellers fared during these periods, a similar trend is observed.

% OF ASKING RECEIVED
High	Median	Low
2016	136.8%	107.0%	79.8%
✔︎2017	163.5%	✔︎110.1%	78.1%
2018	147.8%	107.8%	78.1%

PRICE REDUCTIONS
2016	23
✔︎2017	16
2018	24

CANCELLED LISTINGS
2016	13
✔︎2017	10
2018	14

SALES vs ASKING
	Over Asking	At Asking	Under Asking
2016	160	10	27
✔︎2017	174	7	24
2018	148	11	33

We wouldn’t go so far as to say the market is crashing, as many homebuyers are counting on, but it does appear to finally be correcting itself as we discussed in this blog post. Stepping back, either 2018 was just another year influenced by elections, or it’s entirely possible that we may very well have passed the peak of the Bay Area red hot housing market of 2017 without really knowing it, at least for now…

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.

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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.