All data in this report is for detached, non-distressed properties in Contra Costa county.
Are we facing a bidding war, or just a minor skirmish?
“This porridge is too hot,” said Goldilocks. “This porridge is too cold. Where is the porridge that is just right?”
Life always vacillates between extremes, it is only our perception of time and therefore history that leads us to conclude there is a ‘normal’ state of affairs. That is a bit of a scary thought, of course, as most business thrives on ‘normalcy’ and predictability.
We have not seen a lot of predictability in the housing market over the last year. Almost overnight we went from a very slow moving market to one in which inventory disappeared and prices started climbing dramatically. Suddenly, the porridge which had been too cold was getting too hot. Financed buyers were caught on the sidelines as all-cash investor buyers snapped up inventory in local markets where the fundamentals lend themselves well to rehabbing for sale or rent.
Key market indicators at a glance:
- Median sold price for detached homes in Contra Costa County rose for the 6th straight month, with a MOM increase of 15k (from 600 to 615k) or ~2.5%.
- Days on Market, an important indicator of inventory and buyer interest, increased slightly from 17 days in June to to 18 days in July. While a miniscule increase in real terms, this is potentially significant as it is the first time in 5 months that this number has not been driven downward by frenzied buyer activity.
- Inventory levels were essentially flat, with a very slight decrease in both pending properties and new inventory.
As all cash investor dollars move elsewhere, the local market looks healthy
The impressive gains in home prices over the last 7 months can be seen depicted in the infographic below (click the image to enlarge). This graphic compares median values for these core MLS Areas in January of 2013, with where they were at the end of July, 2013.
As you can see, certain areas have benefited more from this recovery, typically because they suffered more during the downturn. It is also important to understand that while median, unlike average, inherently protects against wild swings in the data caused by a single very expensive (or inexpensive) piece of inventory, in small data sets we can still see profound skewing of data. This is the case for Orinda, for example, which just so happened to see some very expensive inventory move in January, thus making it appear as though prices have dropped.
This exposes a key truth behind statistics.
While we are seeing dramatic gains in home prices, a part of that equation is what kind of inventory is selling. A comparison of same property sales (e.g. comparing a home that happened to sell in January and then sold again in July in largely the same condition) would help to bring these numbers back down to earth a bit. Unfortunately it is very hard to find statistically significant samples of these sort of transactions.
We don’t know what the future holds, but we do know that the economy as a whole continues to grow, interest rates remain low, and the local economy feels very strong. This translates into continued buyer demand. In many areas of the East Bay (San Ramon for example) there simply isn’t space to zone for new housing developments. Even where there is such space, it will take time for builders to ramp up and help alleviate this pent up demand, and until that happens, we can expect to continue to see prices increase.