The more data you have, the easier it is to spot a trend.
Now that the first quarter is behind us, we can use the results to modify our original forecast for the year.
Let’s begin today with the statistics for both Conejo and Simi Valley. These were formulated using the first three months of 2014 compared to the same period 2013.
CONEJO VALLEY
Inventory, up 46%, a significant number. Number of sales, down 5%, certainly below what we expected and not in line with the theory that we could sell more homes if only we had more inventory. Computing months of inventory, influenced by both inventory (numerator) and sales (denominator), we are at 3.0 months of inventory. Historically, for us, that is a balanced market, one that does not favor either the buyer or the seller.
Prices are up year over year, but what is happening in the past few months is more important.
From the chart, you can see that prices are actually stable. Buyers have noticed that, but sellers are still expecting price increases. That makes negotiations very difficult. Listing prices that are in line with recent sales will do well, properties with price increases will stay on the market for a while. When we have a large price increase, as we had in the beginning of 2013, the market price will usually stabilize or adjust before it begins the expected 2-4% increase this year.
Looking at the graph of closed escrows, so we can see how we compare with past years, shows that the market is behaving as usual.
The 8-week moving average line has turned the corner, and the market appears to be following the normal trend expected as we proceed into the summer selling season. No surprises here. Let’s finally look at the inventory, and how it is doing compared to previous years.
Pretty normal, Conejo Valley is a reasonably healthy market. Prices stable, a balanced inventory versus sales market.
Now let’s look at Simi Valley and Moorpark.
SIMI VALLEY
Inventory is up 163%, a very large increase. Number of sales, down 27%, terribly below what we expected and certainly not in line with the theory that we could sell more homes if only we had more inventory. Computing months of inventory, influenced by both inventory (numerator) and sales (denominator), we are at 3.0 months of inventory, versus less than a month a year ago. Prices are up year over year, but what is happening in the past few months is more important.
As I drew these lines, I could very easily have described a downward trend. Certainly prices are not rising, not the mean and not the average. Of course, all real estate is local, and these averages do not hold true for a particular home or tract. But looking at the big picture, it is not show price optimism. Much of the reason is the drop in sales.
Sales are very erratic, up one week, down the next. The trough the 8-week average goes through as we come out of the winter months is deeper than previous years. And inventory has been increasing rapidly.
Inventory growth is much more pronounced than what we expect, and this growth will obviously put pressure on the supply/demand ratio, and prices are experiencing significant pressure.
This is a market to be watched. It is not stable, it is much more volatile than we want. There are pressures for prices to decrease over the short term. Buyers can feel it. If sellers do not know that, their properties will be on the market a long time.