Local Sales Volume Surprisingly Low
Consumer confidence (Consumer Confidence Index – The Conference Board) continues to be an accurate leading indicator of what’s in store for the local real estate market. It was reported today that consumer confidence is currently at a 25-year low. Looking at the numbers from the first quarter of 2008, the public’s lack of confidence is clearly reflected in the extremely low number of home sales.
For this article, we will focus on two cities: Palo Alto and Los Altos [Please note: If you’d like Q1 data for your town, simply send us an email]. In Palo Alto, there were 65 single family home sales in the first quarter of this year – the 10-year Q1 average: 97 sales. That is the lowest number of home sales in Palo Alto on record. In Los Altos, there were 46 sales (tying the lowest number on record in ’01) – the 10-year average: 71.
However, average prices have not fallen, so far. The reason is that pick-of-the-litter homes are still garnering multiple offers and are still selling over the asking price. On the other hand, homes with perceivable “issues” (poor location, bad floor plan, etc.) have had to reduce their asking prices to obtain offers. So far, these two factors have been canceling each other out. The average percentage of list price received by sellers in Q1 of ’08 was 100% in both Palo Alto and Los Altos.
Sales prices are still well above last year’s. The Q1 – 2008 median sales price in Palo Alto ($1.62m) is up 7% from ’07. The Q1 – 2008 median sales price in Los Altos ($1.89m) is up 15% from ’07!
Days-On-Market (DOM) is another statistic that most of us watch closely, as an indicator of market trends. However, it can often be counter-intuitive. As market demand picks up, homes that have been sitting unsold start to sell, thereby lengthening the average DOM. Conversely, as the market cools, only the best-priced homes attract buyer attention and they typically sell quickly, thereby shortening the average DOM. This year, as one would expect, the average Days-On-Market is shorter than in it was ’07. The average DOM in Los Altos in ’08 was 31 vs. 65 in ’07. In Palo Alto: 20 vs. 43 in ’07.
For Q2, the big questions will be:
- Will the inventory of homes for sale rise?
- Will Buyers continue to hold off on purchasing homes?
- Will interest rates begin to rise as inflation takes hold?
- Will the median sales price begin to fall?
We’ll find out very soon.