Time for a first glimpse at the August housing numbers as we approach the mid-point of the month. Bear in mind we are dealing with real time data here, which should be subject to even more scrutiny than the average statistical analysis. As is our habit for these articles, we are also excluding distressed properties from the data.
The great thing about working with real time data is that while other folks are still writing articles about the amazing run up in values over the last 7 months, we are writing about the healthy taper the market is experiencing here in the East Bay. We repeat, this does not look like a bubble. There are no bubbles anywhere in sight.
What do the numbers at this point in August show? Last month we saw a reverse of Days on Market (DOM), which until July had been trending downward month after month as investors and eager buyers snatched up properties left and right. This trend leveled off in March of this year, meaning that the descent in Day on Market slowed noticeably. In July we saw an increase, albeit a small one, and August so far is trending the same way, increasing DOM from 19 to 20.
At the same time, we are seeing a predictable leveling off of List to Sale Ratio. This likely signals an end, at least for the moment, of the intense bidding wars that were in small part responsible for the month over month (MOM) price increases we have been seeing.
What does all that mean for current real estate values? Median Sales Price over the last two months has begun to level off, and even drop slightly in some markets. Bear in mind that, just as was the case with the run up in median values, some of this is a factor of the types of inventory that are hitting the market and selling. In other words, we are not necessarily comparing apples to apples when we say prices are up or down in this community or that.
That being said, July and August have brought a healthy and modest correction to the real estate market. Quite unlike a bubble bursting, this market has is going through a healthy, predictable correction. A portion of this price easing was a direct response to the Fed’s repeated, sometimes left-handed references to a tapering of their bond buying, or Quantitative Easing program. Interest rates have leveled off and in turn risen slightly in response, which ultimately is probably a good thing for the markets.
In sum, when we look at these real time graphs, we can see what appears to be the gentle release of some hot air from a balloon – there is no bubble to be seen. Consumer demand remains strong, inventory is still rather limited, but improving slightly as overbidding decreases. This trend is likely to accentuate slightly as we enter the fall and winter months. What will be very interesting to watch is, all things remaining equal (which of course they never do), what will happen to demand and home prices as we enter the summer of 2014.