How is the market doing?
Let’s look at the stats for Conejo Valley first. I am changing the periods that we are comparing with previous posts. It is always a challenge to get the right one. Do we compare one month, two, or longer? Do we compare the same three months from last year, or the previous three months? For today, let’s look at January 1 through March 9, this year versus last year.
Inventory has grown by over 100 listings, up 46%. Price averages and medians are up 15% from last year, we have closed 4% fewer escrows, and we have gained almost a month worth of inventory.
For Simi/Moorpark, inventory has grown by over 160 listings, up 261%, price averages and medians are up 20% from last year, we have closed 21% fewer escrows, and we have gained a month and a half worth of inventory.
Percentages can be misleading, as can months of inventory calculations. Both areas have seen a rise in inventory, but because Simi/Moorpark had such a low inventory a year ago, the percentage increase is huge. However, don’t be mistaken, the increase in inventory is huge. Of more concern is the decrease in the number of sales in Simi/Moorpark, down 21% from a year ago. You will see this on the graphs below.
Another important calculation involves Months of Inventory. The numerator is affected by rising inventory, and the denominator is affected by lower sales numbers. Therefore, we have had a bigger increase in months of inventory in Simi/Moorpark than in Conejo. Simi/Moorpark has been dealing with a very low inventory level all last year. Our original analysis was that we would sell more homes if we had more inventory. We now have more inventory, and it is growing rapidly, but we also have lower sales. This may be what the stock analysts call a market correction. We need a little more time to tell.
Let’s look next at the inventory graph for Conejo, and the closed escrow chart.
Inventory is growing, slowly, similar to 2013. This is the type of seasonal growth we expect. We did not get that growth in 2012, a year of constantly declining inventory, but the other years shown were “normal” for inventory growth through the summer and decline in the fall.
Sales for Conejo seem consistent with the past, and although off 4% from last year, the 8-week moving average line shows strength, turning upwards with the low a little higher than last year.
Simi/Moorpark inventory is actually rising more rapidly.
For Simi/Moorpark, 2012 was a year of constant decline, 2013 was more normal. But for 2014 inventory is rapidly increasing, an increase that bears watching. That increase is a result of the usual number of homes coming onto the market, but 20% fewer homes being sold, which adds to the growth of inventory.
The 8-week average line has dropped below the past four years, not something we like to see. That is part of the reason for the inventory increase. A 21% decrease in the number of sales compared to last year seems to contradict the theory that we could sell more homes if we had more inventory.
In summary, we seem to have a complex market, maybe two complex markets. We know all real estate is local, but it is more than that.
Let me suggest a way of looking at this that comes from Mike Hanley, a good friend and last year’s association president. We can call it the boiling water theory.
Sometimes if you watch a pot when trying to boil water on a stove, you can see bubbles form at the bottom of the pot, starting to boil. Yet if you measured the temperature of the water at the top of the pot, it is not ready to boil. It is cooler. You can dip your finger in the water at the top and not burn your finger. (Please, don’t go home and try this. )
We have had that market a couple of years ago, maybe into the first half of last year. The homes at the bottom of the price pot were boiling, but the top priced properties were not ready to join the market. The different price levels of market are not hot at the same time. Given time, the lower boiling spreads to the higher levels, but they do not all move up or down at the same time.
That’s why you are so important to your clients. You understand the market, you know what is hot, and what is not. When you read the NAR statistics, and even the CAR statistics, you are dealing with a much bigger pot. Your clients want to know what their local market is doing.
How are you passing this knowledge on to your clients? To be known as the expert in your area, you not only need name recognition, you need to constantly share valuable information with your clients. Even if they don’t plan on selling a stock, they still check on the stock price. Even though they might not want to buy or sell a home this month, they still want to know what is going on in our local market.
Need information on good ways to share this information? See me.
Have a prosperous week.