Santa Clara County (SCC): How Absorption Rate Affects Prices
Absorption rate, also known as months of inventory, is the number of months it would take to sell all the homes currently for sale in the market.
Absorption rate is calculated by dividing the number of homes currently for sale by the number of homes that were sold in the previous month.
The National Association of REALTORS consider a six month supply of homes as a balanced market. That’s for the country as a whole. As you narrow the market, down to states or cities, a balanced market will be peculiar to that market.
In Santa Clara County, the average number of months of inventory since 2001 is 3.4 months.
As you can see in the chart below, there is a pretty direct inverse relationship between absorption rate and the median price of homes.
During the recent recession, the absorption rate spiked to 11.5 months, the blue line, while the median price, the black line, plunged to just over $400,000.
Where are we now? Well, the absorption rate last month was at 1.3 months, up from the 1.0 months, a record low in December.
Prices? The 3-month moving average median price was near an all-time high of $890,000, while the average price reached an all-time high of $1,231,650.
The absorption rate for Santa Clara County has gone up the past three months. What happens this spring will tell us where the market is heading.
The absorption rate is also helpful in calculating how much to list your home for when you sell. If the absorption rate is rising, then prices will soon soften. If it is falling, then prices will start to rise.
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March Stats (SCC)
Single-Family Homes
Year-Over-Year
- Median home prices increased by 9.4% year-over-year to $940,000 from $859,000.
- The average home sales price rose by 16.1% year-over-year to $1,290,580 from $1,111,550.
- Home sales rose by 6.8% year-over-year to 803 from 752.
- Total inventory* fell 13.9% year-over-year to 1,917 from 2,227.
- Sales price vs. list price ratio rose by 1.6% year-over-year to 107.3% from 105.6%.
Condominiums
Year-Over-Year
- Median condo prices increased by 9.2% year-over-year to $570,000 from $522,000.
- The average condo sales price rose by 13.3% year-over-year to $656,134 from $579,020.
- Condo sales fell by 9.5% year-over-year to 315 from 348.
- Total inventory* fell 27.2% year-over-year to 542 from 745.
- Sales price vs. list price ratio rose by 3.0% year-over-year to 106.9% from 103.8%.
* Total inventory is active listings plus contingent or pending listings. Active listings do not include contingent listings.
Call or email me if you have any questions.
For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.
Keeping Your Property Tax Base (SCC)
Under Proposition 60, California homeowners 55 and older get a one-time chance to sell their primary residence and transfer its property-tax assessment to a new one, but the market value of the new home generally must be equal to or less than the market value of the old home.
Prop. 60 was designed to help longtime California homeowners who want to downsize but don’t want to give up the low property-tax assessment they enjoy in their existing home.
Under Proposition 13, homes are reassessed for property-tax purposes when there is a change in ownership or new construction. In between ownership changes, the assessed value can go up by an inflation rate not to exceed 2% a year. (Homeowners can get temporary reductions when property values go down.)
Prop. 60 lets homeowners 55 or older transfer their base-year value from an existing primary residence to a new primary residence, but there are restrictions.
The new home must be in the same county as the old one or in one of ten counties that accept transfers of base-year value from other counties. The ten counties are: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, and Ventura.
Also, the new home must be purchased or built within two years – before or after – the sale of the original property.
If the new house is purchased before the old house is sold, the market value of the new house on its purchase date cannot exceed 100% of the old home’s market value on the date it is sold.
For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.
Mortgage Rate Outlook
Mortgage Rates Easing Back Again
March 27, 2015 –Mortgage rates retreated a bit this week, still comforted by the outlook the Fed provided about the timing and trajectory for interest rates last week. Although average interest declined for the week, most of the warm glow from the Fed had faded by the end of the period, as the cold reality that the Fed will be raising rates before long began to again creep back into the market.
That’s not to suggest there’s any kind of strong likelihood that rates will be shooting up before long, but absent truly terrible data about the domestic or global economy, interest rates seem unable to hold any interim bottoms they manage, and after each leg down, up we go.
HSH.com’s broad-market mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages declined by seven basis points this week (0.07%), falling back to 3.81%. The FRMI’s 15-year companion also shed seven basis points, sliding to an average rate of 3.16%. Popular with first-time homebuyers, rates on fully-insured FHA-backed 30-year FRMs remain well below their conforming counterparts but sported a decline of only three basis points this week, posting an average rate of 3.65%. Finally, the overall 5/1 Hybrid ARM fell by seven basis points (0.07%), slumping to 2.97% on average for the week. All the averages are far closer to 2015 bottoms than tops at the moment.
Sales of existing homes edged 1.2% higher in February. Sales growth has been muted for a while now despite generally lower mortgage rates. However, there are limits to how much help low rates can provide when income growth is as slow as it has been throughout the recovery as it fails to provide much offset for rising home prices. That said, for many borrowers, affordability remains strong (if somewhat diminished) and the issue is access to credit. Market forces and government regulation changes are seeing to this, with lower FHA insurance costs and 3% down loans back in the market. However, all this has done is add somewhat more demand at the margins of the market at a time when there is little housing supply to satisfy it. Inventory levels of unsold homes remain very thin and are likely the cause of sluggish sales growth in recent months; for many would-be home buyers, not only is there nothing desirable to buy, but it is relatively expensive, to boot. More than rates or prices, this situation could keep the spring home buying season from gaining much traction this year.
Investors Corner
Rise in Home Prices Paced by Denver, Miami, and Dallas According to the S&P/Case Shiller Home Price Indices
New York, March 31, 2015 – S&P Dow Jones Indices today released the latest results for the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices. Data released today for January 2015 show that home prices continued their rise across the country over the last 12 months. However, monthly data reveal slowing increases and seasonal weakness. More than 27 years of history for these data series is available, and can be accessed in full by going to www.homeprice.spdji.com. Additional content on the housing market can also be found on S&P Dow Jones Indices’ housing blog: www.housingviews.com. Read more at http://goo.gl/yZ9J71
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San Mateo County (SMC): How Absorption Rate Affects Prices
Absorption rate, also known as months of inventory, is the number of months it would take to sell all the homes currently for sale in the market.
Absorption rate is calculated by dividing the number of homes currently for sale by the number of homes that were sold in the previous month.
The National Association of REALTORS consider a six month supply of homes as a balanced market. That’s for the country as a whole. As you narrow the market, down to states or cities, a balanced market will be peculiar to that market.
In San Mateo County, the average number of months of inventory since 2003 is 3.1 months.
As you can see in the chart below, there is a pretty direct inverse relationship between absorption rate and the median price of homes.
During the recent recession, the absorption rate spiked to 7.6 months, the blue line, while the median price, the black line, plunged to just over $550,000.
Where are we now? Well, the absorption rate last month was at 0.8 months, up from the 0.7 of a month it has been for the past three months, which is a record low.
Prices? The 3-month moving average median price was at an all-time high of $1,176,667,000, while the average price reached an all-time high of $1,525,280.
The absorption rate for San Mateo County has bounced off its low. What happens this spring will tell us where the market is heading.
The absorption rate is also helpful in calculating how much to list your home for when you sell. If the absorption rate is rising, then prices will soon soften. If it is falling, then prices will start to rise.
March Stats (SMC)
Single-Family Homes
Year-Over-Year
- Median home prices increased by 12.5% year-over-year to $1,290,000 from $1,147,000.
- The average home sales price rose by 7.2% year-over-year to $1,603,060 from $1,495,220.
- Home sales fell by 2.4% year-over-year to 328 from 336.
- Total inventory* fell 30% year-over-year to 692 from 989.
- Sales price vs. list price ratio rose by 2.8% year-over-year to 109.4% from 106.4%.
Condominiums
Year-Over-Year
- Median condo prices increased by 5.8% year-over-year to $665,000 from $628,500.
- The average condo sales price rose by 11.9% year-over-year to $721,306 from $644,405.
- Condo sales fell by 22.4% year-over-year to 111 from 143.
- Total inventory* fell 30.9% year-over-year to 199 from 288.
- Sales price vs. list price ratio rose by 2.5% year-over-year to 106.9% from 104.3%.
* Total inventory is active listings plus contingent or pending listings. Active listings do not include contingent listings.
Call or email me if you have any questions.
For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.
