Archive for October, 2010

Santa Clara Valley Real Estate Report September/October 2010

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HIGHLIGHTS for September 2010

– Prices up year-over-year for the twelfth month in a row.

– Pending sales lower than year before for the second month in a row.

– Sales fell 14.1% from the quarter before, and were down 19.5% year-over-year.

– Prices slipped in Jul-Sep 2010 with the median price dipping 0.1% from the previous quarter, up 12.4% compared to last year. The average price rose 1.7%, a yearly gain of 13.6%.

Statistics: The Good, The Bad, and The Ugly

Knowing how the market is trending is important in making astute decisions whether one is a buyer or a seller. For instance, if prices are trending upward, a buyer may decide to accelerate the purchase, while a potential seller may decide to delay.

With the proliferation of real estate statistics on the Internet, the “noise” level is increasing making it more difficult to know which statistics are important and which are irrelevant.

In this month’s report, we are going to start a primer on real estate statistics to help you separate the wheat from the chaff.

The first two principles of real estate statistics are:

Know the source of the raw data used, and
Understand the methodology used to crunch the raw data.

There are only two accurate sources of raw data, each of which has its pluses and minuses. The first is data from the county assessors’ offices. The main plus of this data, used by companies such as DataQuick and often cited by local newspapers, is that every transfer of real property is required by law to be recorded with the county assessor. This is the most accurate data available.

The minuses of county assessor data begins with the ability of buyers to ask the assessor not to reveal the sales price. This is usually done only with high-priced, or high-profile transactions and only affects a minute number of sales.

The other major minus of county assessors’ data is it ONLY contains sold properties.

The second most accurate data comes from the local Multiple Listing Services (MLS).

The drawback of this data is it contains only those sales in which a real estate agent is involved. Normally, this would account for 85-90% of all sales. In this market, with the high number of foreclosure auctions, which are not reported to local MLSs, the number of sales drops into the 70-80% range.

The real benefits of MLS data come in the type of data collected. The MLSs report on inventory, properties under contract to be sold, length of time it takes to sell, and the sales price to list price ratio.

This type of data is important for determining the direction of the market.

Bad, or inaccurate data, is rife on the Internet. Take Altos Research for instance. They scrape the Internet for properties for sale and build their reports around that. Nowhere on their site do they say their pricing graphs only reflect listing prices NOT sold prices. Here’s a quote from their FAQ: “Our system analyzes properties listed on the market for sale.”

Another major source of inaccurate data is Zillow. While they do have assessors’ data for sold properties, they also scrape the Internet for properties that are for sale and use an algorithm to determine market value. They have consistently over-valued my home by 25%.

Then there is Yahoo Real Estate where they don’t bother with an algorithm to determine market value, they just quote Zillow and eppraisal.com, which over-values my home by 60%.

In short, beware of the statistics you use. If the purveyor of statistics won’t say where they get their data, run for the hills! Focus on those statistics that come from reputable sources.

NEXT MONTH

This primer will continue with determining which statistics are useful for determining market trends and which are useless.

The three most fundamental statistics to track are:

Inventory on the market,
The spread, or the difference between the asking price and the sales price, and,
Time on the market.

We will discuss these and several more important statistics in the next installment.

Real Estate Report August/September 2010

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Prices for single-family, re-sale homes were up in August, year-over-year, for the eleventh month in a row. The median price rose 13.7%, while the average price was up 15.4%, reflecting a higher share of $1,000,000+ home sales.

Sales of single-family, resale homes continued to slide and were lower than the year be- fore for the third straight month: -13.1%.

In a turn, pending sales were also lower than the year before for the first month since March 2008: -6.9%.

Inventory was higher than last year for the second month in a row: 18.4%.

The sales price to list price ratio for homes dropped below 100% for the first time since June 2009: 99.6%.

The median price for condos was up 5.3% year-over-year. This is the tenth month in a row the median price has been higher than the year before. After nine straight months of year- over-year gains, the average prices for condos dropped 1.7%.

Condo sales were up 0.4% compared to last August.

Pending sales were down from June, and were lower than the year before for the first time since March 2008: -11.2%.

Inventory for condos was higher than the year before for the third month in a row: 40.9%.