The inventory levels and median price confusion are about the same in Huntington Beach as they are for Orange County as a whole. So, the below article written by Steven Thomas of ReportsOnHousing.org on January 20th 2013 is also useful for us real esate owners here in Huntington Beach:
With reports of a crazy increase in the year over year median sales price, too many sellers are jumping to the wrong conclusion.
Median Sales Price: The median gives a sense of direction but it is not an exact indicator of pricing.
With reports of the median sales price up 17.5% in December 2012 compared to December 2011, it is no wonder that there is a lot of excitement centered on the housing market. Yes, the housing market is on fire and properties are appreciating. However, homeowners and sellers should not get too far ahead of themselves; properties did NOT appreciate 17.5%, the median sales price did.
Confused? That is completely understandable. Everybody relies on the median sales price as a gauge of housing health, but there is no really good gauge as to how much prices have changed. Let’s take a closer look at the median sales price and what it means. When you list all of the sold prices of every home that changed hands in the month of December from highest to lowest, the exact “middle” value was $470,000, the median sale. That was up from $400,000 in December of 2011. Home prices did not go from $400,000 to $470,000, or 17.5% throughout Orange County. Instead, there were a lot more higher priced, luxury homes that changed hands last month compared to the prior year. In December 2011, there were 148 homes over $1 million, 6.5% of all sales. In December 2012, there were 300 homes over $1 million, 11% of all sales. This difference alone will account for a higher median sales price.
When there are a lot of homes that sale in the lower ranges, the median is skewed downward and can over exaggerate a drop in the median sales price during a depreciating market. That occurred all of the time during the downturn. Similarly, when a lot homes sale in the upper ranges, the median sales price is skewed upward, over exaggerating an increase during a robust, appreciating market. That is what is occurring today.
It is so frustrating to hear reports of a gigantic increase in the median sales price right now because I know how homeowners will react. They assume that their homes appreciated 17.5%. Prices have gone up, but they must rely on the expertise of a REALTOR® to help establish the actual market value of a home. Homes appreciate differently from city to city, and neighborhood to neighborhood. There are condominium complexes that dropped 50% in value during the downturn, dropping far more than they should have due to the unloading of a disproportionate number of distressed sales. These same complexes are now realizing giant jumps in their values because they look like a fantastic deal compared to the rest of the market. But, this is the exception to the rule.
My biggest concern is the number of overpriced listings that are already coming on the market. Many homeowners are way too zealous and are pricing their homes at ridiculous levels. Many think they have the luxury to test the market and wait and see if there are any takers as they initially overprice their homes. There is a major problem to that theory; the most activity takes place upon listing a home. Buyers and agents are anxiously waiting for new inventory to be placed on the market, so they are checking the Internet regularly for updates daily. Even in this market with no inventory, some homes are sitting on the market for a long time because their price is just way too far out of whack. Now, when they do decide to lower the price, they do not get the same amount of activity as when a home is initially listed. It lost the initial excitement and fanfare that a new home to the market attracts. Sellers are left wondering why there is not a wave of showings. Proper pricing is crucial in capitalizing on the market.
In a nutshell, the median sales price is a great barometer of the direction of pricing, currently up, but is not an indicator of precise appreciation. Instead, carefully combing through most recent comparable and pending sales is a sure bet on figuring out the fair market value of a home.
Active Inventory: The drop has stopped!
For the first time since June of 2011 the inventory went up, ending a 19 month drop. In the past two weeks, the active listing inventory went up by 88 homes and now sits at 3,249, a 3% rise. It simply had to eventually go up. Even with the increase, there simply is very little on the market. More homes are finally coming on the market, just not at the rate customary for the very beginning of the year. Over the past month, there were 16% fewer homes that were placed on the market compared to the same time last year, or 442 fewer homes. When nothing is on the market, like today, 442 additional homes would equate to more opened escrows since homes are flying off the market.
The anemic levels are here to stay until the Spring market starts to rev its engine with more homes placed on the market, cyclically around the Super Bowl. The inventory will not skyrocket higher though and will continue to be an issue throughout the year. Last year at this time there were 8,080 homes on the market, 4,831 more than today.
Demand: The low inventory continues to mute demand.
It does not matter how badly buyers want to purchase, there just are not enough homes to come even close to satiating the true demand. In this report, demand is counted by the number of homes placed into escrow within the last month. Yet, with so few homes for sale, the figure does not capture the enormous pent up demand of first time home buyers, renters, investors, and buyers waiting in the wings for more homes to be placed on the market.
In the past two weeks, demand increased by 141 pending sales, a 7% increase, and now totals 2,172. Last year at this time there were 351 additional pending sales, a 14% difference. With 8,080 homes on the market and an additional 442 placed on the market within the prior month, inventory was not an issue and it did not mute demand.
The Distressed Market: The distressed inventory dropped by 41 homes, a 10% drop.
The distressed inventory stopped its unabated 15 month drop two weeks ago and actually increased by three homes. After increasing by such a small amount, it just shed another 10% and now sits at 359 total foreclosures and short sales, a low last achieved in April 2007. Only 11% of the total active inventory and 33% of demand is distressed; compare that to 37% of the active inventory and 59% of demand last year.
In the past two weeks, the foreclosure inventory decreased by 23 homes, totaling 101, and has an expected market time of 17 days. The short sale inventory decreased by 18 homes in the past two weeks, totaling 258, and has an expected market time of 15 days. The expected market time is only 12 days and continues to be the hottest segment of the housing market. Short sales remain the hottest segment of the Orange County housing market.
It has become clear in recent months that more Huntington Beach homes would be selling IF there were more homes on the market. Most buyers have seen everything currently on the market and are waiting for new listings. If you are thinking about selling, contact Scot Campbell and tell him about your property and moving plans. Scot may already be working with the perfect buyer for your home!
Scot Campbell will PAY for a pre-marketing apprasial for your home to make sure you list at the right price!
For questions about buying and selling real estate in Orange County, contact Scot Campbell.He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA.
He has been a licensed broker for over 21 years and has brokered over 1000 homes and just about every type of transaction imaginable.
Read his profile and client reviews at www.ScotCampbell.com
He can be reached at 714-960-0700 at the office, 714-336-0394 on his mobile number or via email at Scot.Campbell@ColdwellBanker.com