THREE PRIMARY QUESTIONS

There are three primary market status questions we most frequently answer for homeowners, or those aspiring to home ownership:

How’s the market?

Translation: While this is a very broad question, when we dig deeper, most people are simply asking “How does it feel to be a seller or buyer in today’s market?”.

How are prices?

Translation: Most are actually asking about ‘values’ (the actual sale price) rather than ‘prices’ (list or asking price), and they are generally trying to determine if values are increasing, holding steady or decreasing… so they know how their net worth is trending.

What Are Mortgage Rates Currently?

Translation: since the vast majority of homeowners need a mortgage for their purchase, and mortgage rates dramatically affect the affordability of home purchases and ownership, most are really asking “Are Homes More Affordable Today?”.

EVERYTHING IS RELATIVE
For most, a snapshot of today’s numbers are meaningless without the context of the past trends… this context add value in answering questions like:

• What did I gain or lose since I purchased my home?

• How did I gain or lose by waiting to purchase or sell?

• Can I sell today and make enough profit to do what I want?

• If the market keeps its current pace, how much will I gain or lose?

• When will the market turn?

It’s for this reason, we like to provide a wide range of context for our clients:

Current Month: the most recently completed month. All of our stats are compiled on the 4th business day of the month

Compared With:

• Last Month

• January of the current year.

• Last Year.

• Three (3) Years Prior

• Five (5) Years Prior

• Ten (5) Years Prior

HOW’S THE MARKET

We can answer this question with 3 statistics

Inventory

This is the clearest representation of supply and demand in real estate and is calculated by dividing all homes for sale by the number of homes sold in the past month (Homes For Sale/Homes Sold).

Sellers Market: Less Than 4 Months of Inventory
When buyers are outnumbering sellers and competing for properties, we see marketing times of less than 14 days and sales prices which average 100% or more of list price. This tends to happen when we see less than 4 months of inventory and especially when inventory is less than 2 months.

Balanced Market: 4 to 6 Months of Inventory
Real estate economists believe 4 to 6 months of inventory represents a balanced market where home prices are appreciating 3-5% per year. In a balanced market, we see marketing times 14 to 30 days for well prepared and priced homes, and final sales prices average 96 to 99% of list price.

Buyer’s Market: More than 6 Months of Inventory
When sellers outnumber buyers, they must compete for buyers by offering greater value to be competitive. Most often this a tough adjustment for sellers, and it takes sellers time to catch up which is why we see days on market averaging 30-60 days (or more) and final sales prices lower than 95% as seller’s make one or two reductions in price in order to get the property sold.

Days on Market: the time it takes from listing a property to getting into contract with a buyer.

List to Sale Price Ratio: the difference between the initial asking price from the seller and the final sales price of the property (not including any non-price concessions such as closing costs, repairs or upgrades).

HOW ARE VALUES?

There are several answers… which one is right for you depends on your perspective.

Median vs. Average… first, we think you should focus on median (the middle of all prices ranked from bottom to top) rather than the average price because average prices are influenced by outliers such as properties which sell for more $10M+.

Residential vs. Condo vs. All - as our region grows, and we build with greater density we are seeing more attached and detached condominiums built. These condos provide more affordable housing options and help moderate the overall regional appreciation of home values when looking the ‘All’ types.

Residential - if you are looking for long term appreciation in the region, you may want to focus on residential. It will show the most clear picture of the appreciation of traditional houses and land. This tends show a greater degree of appreciation as land is increasingly more scarce, and so our houses on larger lots.

Condos - if you are looking for overall the trends for entry level affordable housing in the market, then you’ll want to focus on Condo prices.

All - for the best metric of the local housing economy, we prefer to combine Residential and Condos, as it indicates the balance (or lack thereof) between the growth of value of houses with the opportunities for entry level homes in the region.

What Are Mortgage Rates Currently?

A 1% change in mortgage rates will shift affordability by 10% which makes rates very important to purchase and ownership affordability. Mortgage rates vary widely based on borrowers income, credit and other qualifications, as well as the property purchased. For our reporting, we simply track the Federal Reserve’s Index of 30 year qualified conventional mortgages which assumes a 20% down payment.

To convert a percentage to something less abstract, we provide a real world example of how purchasing power a $2,000 principal and interest payment would provide at today’s interest rates.