A "Sneak Peak" Of What's To Come?

May 6, 2016

You know about Black Friday, right? It’s the busiest day (and weekend) of the year for the retail industry and the start of the holiday shopping season. The significance of that weekend is it is often viewed as the “preview” of how the rest of the shopping season will go.

 

In real estate, I look at April like retailers look at Black Friday. It’s my opinion that sales data generated in April gives a good “preview” of what is to come during real estate’s busiest time of the year.

 

As I reviewed the sales data for April, the most revealing and impactful data point to me was the price to list ratio. For the first time since April 2012, the ratio declined on a year-over-year basis. Every year since 2012 the April ratio increased, peaking at 107.7% last year. This year it was 104.8%. That’s a considerable drop from last year and a clear indication that buyers are not as aggressive as in recent years.

 

So what’s causing the less aggressive buying pattern? It could be lower demand because of increased inventory. The data shows inventory levels slightly higher than last year at this time for a year-over-year increase for the 6th time in the last 7 months. While multiple bids and short time on the market are still prevalent, the intensity and ferocity of demand is not as evident as it was during the past couple of years.

 

Affordability might be having a measurable impact on buying behavior as well. Price appreciation in areas that average over $1.2M is decidedly less than areas that average around $750k. For example, Saratoga, Los Gatos, and Los Altos experienced average price declines while Cambrian, Blossom Valley, Santa Teresa and South San Jose had double digit average price increases.

 

I believe the general trend of the market will continue to favor sellers, but in a much calmer environment as compared to the last couple of years. Sellers can still expect good prices for their homes and buyers can make affordable deals. To me, this market can be good to all parties as long as expectations are reasonable.

 

Things can change quickly. I realize that. That’s why I encourage you to seek information from multiple sources before making any decisions. 

 

 

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