Hello,

Our first edition of Real Estate Market Update was a huge success! I’m so glad to hear that so many of you were appreciative of the numbers and happy to share it with your clients.

Market Commentary: For starters, I’d like to congratulate all of our offices on their hard work over the last several months. Earlier this week I was reviewing our annual goals and already two thirds of our offices have exceeded their 2011 goals—in some cases by as much as 200%. We can attribute much of that success to the tremendous growth of our company as well as the hard work and commitment that our Agents set forth each day as we tackle this ever changing market.

• The word for the month is inventory—lack of that is. In fact, over the last month we have seen inventory numbers drop significantly. In the $0-$250,000 market (Tri-County combined), inventory levels dropped by 7% month over month and by 18% year over year. In the $250,000-$500,000 (Tri-County combined), inventory levels dropped by 3% month over month and by 24% year-over-year. In the $500,000+ (Tri-County combined) niche, inventory levels dropped by 6% month over month and by a whopping 26% year-over-year. What does this meant for our market? Well the bottom line is, scarcity creates value. As inventory levels drops and thus options for buyers drops, the market becomes more competitively paced and prices will eventually begin to rise.
• Another major bright spot for us is absorption rate.Absorption rate is the total new listings coming on the market divided by the number of contracts written. Essentially, when we see increases in absorption rate, it means we are writing contracts faster than listings are coming on. As you’ll notice, the brightest spots of the market right now continue to be the entry-level and the upper-end. The move-up market, though showing great strides, continues to be the hardest hit of the three levels. What we can extrapolate from this is that the entry level continues to be driven by investors and first time home buyers while many cash buyers and Bay Area buyers are driving the upper end. Our move-up market, however, continues to feel the challenges as buyers seem resistent to selling their home even though they may see the benefits of the move-up market. Here’s what we are seeing on a statistical level:
  • Tri-County market combined: With a 78.2% absorption rate, we saw a 13% increase month over month and a 38% increase year over year.
  • Entry level*: Standing at 85%, we saw a 16% increase month over month and a staggering 46% increase year over year.
  • Move-Up**: With a rate of 69.7% rate, we saw a 4% increase month over month and a 20% increase year over year.
  • Upper-end***: With a 53.2% rate, we saw a 17% increase month over month and a 30% increase year over

Click on the following graphs to further analyze the latest market conditions:

• Months Supply of Inventory. I mentioned this last month as well but we continue to see a decline in months supply of inventory. Monthly Supply of Inventory is a good indicator that supply and demand are becoming more in balance. Right now the entry level market is at 3.8 which is really good, especially as compared to the last few years. This month the trend continued:
  • Tri-County all price points combined: 4.1 (August 2011)/5.9 (August 2010) – 31% decrease
  • Entry level: 3.8 (August 2011)/5.6 (August 2010) – 32% decrease
  • Move-up: 4.1 (August 2011)/5.25 (August 2010) – 22% decrease
  • 9.0 (August 2011)/10.9 (August 2010) – 17% decrease
• Prices continue to remain relatively flat or stable. Here’s a lot at median price changes year over year of sold listings:
  • Tri-County all price points combined: $185,000 (August 2011)/$203,000 (August 2010) – 9% decrease
  • Entry level: $150,000 (August 2011)/$156,000 (August 2010) – 4% decrease
  • Move-up: $323,000 (August 2011)/$325,000 (August 2010) – 1% decrease
  • Upper-end: $600,000 (August 2011)/$615,000 (August 2010) – 2% decrease

Of course, the question on everyone’s mind is, “When will this market ever begin to change?” Well I’m not one to guess the future but what I can say is that there are multiple factors that suggest a stabilization of the market. Agents are really busy, we have a ton of buyers (many of whom are cash) who are scooping up the inventory and we continue to see historically low interest rates (and it seems as if they just keep getting lower).

Many buyers are also weighing the pros and cons of renting versus buying right now. Interestingly, an article was just released by Time Moneyland noting the Top 10 Cities to Buy vs. Rent. Sacramento was listed as No. 6 in the nation. The report noted, “It’s actually cheaper to buy than rent in 74% of major U.S. cities, according to data from real estate search engine site Trulia.”

So while I won’t predict the future, I’ll leave you with this, the sweet spot has gotten even sweeter. Supply and demand are much more in balance than we have seen them in years, the indicators of a market stabilization continue to be prevalent and August was a notable month with inventory levels dropping dramatically. Make what you will of that and let’s watch next month’s numbers to see if we see a continued trend.

That’s it for now. Make it a great month.

Sincerely,
Kris

* Entry level: $0-$250,000 | **Move-Up: $250,000-$500,000 | ***Upper-end: $500,000+

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As you might guess, this document is a compilation of information from our own efforts as REALTORS, as well as input from other REALTORS in our Coldwell Banker office.  I hope it has been of value to you.  Don’t hesitate to email us with any suggestions that will make this document better for you and your fellow home owners!
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