Why market statistics?

The factors of supply and demand control prices

Real Options Realty is a recognized source for the interpretation of residential market statistics in Santa Cruz County. We are often quoted by the media.

Knowing market statistics can help you make informed decisions, because the factors of supply and demand control prices. Now you have access to this information anytime.

### Residential Market Statistical Graphs and Explanations

#### Number of Listings

The Number of Listings shows the supply, or how many properties are for sale. Is the inventory of listings increasing or decreasing, and is it seasonal?

April 2018: As of the first week in April, there were 351 listings, the lowest for this time of year in 22 years. The number of listings has been lower than the same month one year earlier for over five years with the exception of eight months.

114 of the 351 listings are under contract, and only 237 are active listings. 139 of the 237 active listings (59%) are priced over $1Million, and just 98 are priced under $1Million.

BACKGROUND: The number of properties for sale is seasonal. Each year, December and January have the fewest number of homes for sale, because people don’t like to show their homes during the holiday season. And each year, the highest number of homes for sale is in the summer, because it is more convenient to sell your home in the summer. Note this repeating annual pattern in the above graph.

April 2018: There were 85 listings as of the first week in April, exactly the same as 85 listings the first week of April 2017.

Additionally, 25 of the 85 listings are under contract, leaving just 60 active listings.

BACKGROUND: The number of properties for sale is seasonal. Each year, December and January have the fewest number of properties for sale, because people don’t like to show their homes during the holiday season. And each year, the highest number of homes for sale is in the summer, because it is more convenient to sell your home in the summer. Note this repeating annual pattern in the above graph.

The condo/townhouse graphs do not show as smooth a transition from month to month as the house graphs. This is because there are far fewer condo and townhouse sales in Santa Cruz County than house sales. In the field of statistics, a larger quantity of numbers makes a better statistic.

#### Number of Sales

The Number of Sales shows the demand, or how many properties closed escrow. Is the number of sales increasing or decreasing?

April 2018: There were 125 sales in March, 17% more than 107 sales in March 2017. Of the 125 sales, 55 (44%) were for more than $1Million, the highest percentage ever; however, the previous month had the lowest percentage (20%) of sales over $1Million in 25 months. Both the 20% and the 44% were abnormal, resulting in lower and higher median prices for the two consecutive months. Extremely low inventory is still holding back the number of sales, especially with only 98 active listings under $1Million.

Sales are seasonal, with more during the summer than the winter. Note this pattern in the 3-year graph above.

BACKGROUND: A sale, in this context, means a close of escrow. July sales mean houses that closed escrow in July, but probably went under contract in May or June. The number of sales is seasonal. Each year, January and February have the fewest number sales, because people are usually too busy to shop for homes during November and December. The highest number of sales is in June or July, because more buyers shop for homes in the summer. Note this repeating annual pattern in the above graph.

April 2018: There were 39 sales of condominiums and townhouses in March, up from 33 sales in March 2017. There were no short sales or bank-owned sales in March. Extremely low inventory is still holding back the number of sales.

BACKGROUND: The number of sales is seasonal. Each year, January and February have the fewest number sales, because people are usually too busy to shop for homes during November and December. The highest number of sales is in June or July, because more buyers shop for homes in the summer. Note this repeating annual pattern in the above graph.

The condo/townhouse graphs do not show as smooth a transition from month to month as the house graphs. This is because there are far fewer condo and townhouse sales in Santa Cruz County than house sales. In the field of statistics, a larger quantity of numbers makes a better statistic.

A >sale’, in this context, means a close of escrow. July sales mean condominiums that closed escrow in July, but probably went under contract in May or June.

#### Unsold Inventory Index

The Unsold Inventory Index is the most important predictor of future price movement. It is the inventory of properties expressed in time, or the current relationship between supply and demand. For example, if there is a 6 – 8 month supply of houses on the market, prices are stable. If there is only a 4 month supply, prices usually increase. If there is a 10 month supply, prices usually decrease.

April 2018: The March Unsold Inventory Index was 2.8 months. A year ago, in March 2017, it was 3.4 months. The Index has been below normal for 73 consecutive months, a trend that has put upward pressure on values.

BACKGROUND: The Unsold Inventory Index is the most important statistic used to predict value increases or decreases. It is the current relationship of supply and demand for the housing market. The index is created by dividing the current supply (number of listings) by the current demand (number of sales). The result shows the time it would take to deplete the inventory of houses for sale at the current sales rate. It is expressed in months.

Years of statistical analysis have shown that a 6 ‑ 8 month unsold inventory index is normal‑ meaning the market is balanced, and home prices are stable. When there is less than a 6 month supply, prices can increase. When there is more than an 8 month supply, prices can decrease. The further away from normal the index is, the stronger the influence on price movement.

April 2018: The Unsold Inventory Index in March was 2.2 months. A year ago, in March 2017, it was 2.6 months. It has been consistently below normal for over five years. This has kept upward pressure on values.

BACKGROUND: The Unsold Inventory Index is the most important statistic used to predict value increases or decreases. It is the current relationship of supply and demand for the housing market. The index is created by dividing the current supply (number of listings) by the current demand (number of sales). The result shows the time it would take to deplete the inventory of condos for sale at the current sales rate. It is expressed in months.

Years of statistical analysis have shown that a 6 ‑ 8 month inventory index is normal‑ meaning the market is balanced, and home prices are not increasing or decreasing. When there is less than a 6 month supply, prices can increase. The further away from normal the index is, the faster the price changes can occur.

#### Median Price

The Median Price shows the price at which there were an equal number of sales higher than or lower than that price. Have prices been increasing, decreasing, and how fast?

April 2018: The median sales price for single family homes in March was $935,100, a new all-time high. The record high is likely because the percentage of sales over $1Million (44%) was an all-time high, following a 25-month low (20%) the month before.

The percentage of sales in the more affordable areas of San Lorenzo Valley and Watsonville was also low (22%), following the highest in over a year (37%) the month before. Both of these numbers affect the midpoint of sales prices (median) for the month. One year ago, in March 2017, the median price was $826,000.

There was one bank-owned sale, and no short sales in March.

These numbers show how the mix of sales influences the overall median price (midpoint of sales prices) each month.

Sales over $1,000,000:

- March: 44% of the sales (Overall median was $935,100)
- February: 20% of the sales (Overall median was $800,000)
- January: 28% of the sales (Overall median was $787,000)
- December: 30% of the sales (Overall median was $828,000)
- November: 35% of the sales (Overall median was $865,000)
- October: 37% of the sales (Overall median was $880,000)
- September: 33% of the sales (Overall median was $850,000)
- August: 33% of the sales (Overall median was $828,500)
- July: 32% of the sales (Overall median was $815,000)
- June: 33% of the sales (Overall median was $858,000)
- May: 29% of the sales (Overall median was $875,000)
- April: 26% of the sales (Overall median was $830,000)

BACKGROUND: People who keep statistics argue whether the median price or the average price is a better indicator. The average price is calculated by totaling the sales prices and dividing by the number of sales. The median price is that price where an equal number of sales occurred at a higher price and a lower price than the median.

April 2018: The median sales price for condominiums and townhouses in March was $585,000. A year ago, in March 2017, it was $575,000. The median price for condominiums and townhouses is generally less consistent because of the relatively small number of sales.

BACKGROUND: The condo/townhouse graphs do not show as smooth a transition from month to month as the house graphs. This is because there are far fewer condo and townhouse sales in Santa Cruz County than house sales. In the field of statistics, a larger quantity of numbers makes a better statistic. Here, we are working with very few numbers (25 to 75 sales per month). Occasionally, a few very expensive condos sell in the same month, and the graph takes a jump that month.

People who keep statistics argue whether the median price or the average price is a better indicator. The average price is calculated by totaling the sales prices and dividing by the number of sales. The median price is that price where an equal number of sales occurred at a higher price and a lower price than the median.

#### Average Price

The Average Price shows the sum of all sales prices divided by the number of sales. Have prices been increasing, decreasing, and how fast?

April 2018: The average sales price for single family homes in March was $1,092,745, the first time is has been over a million dollars (see Median Price commentary and Sales commentary for additional information). A year ago, in March 2017, it was $917,153.

In Santa Cruz County, we have a few very expensive homes, such as those fronting Monterey Bay. Because of that, the average price tends to be a higher number than the median price here.

BACKGROUND: People who keep statistics argue whether the median price or the average price is a better indicator. The average price is calculated by totaling the sales prices and dividing by the number of sales. The median price is that price where an equal number of sales occurred at a higher price and a lower price than the median.

April 2018: The average sales price for condominiums and townhouses in March was $607,812. A year ago, in March 2017, it was $576,761. The average price for condominiums and townhouses is generally less consistent because of the relatively small number of sales.

BACKGROUND: The condo/townhouse graphs do not show as smooth a transition from month to month as the house graphs. This is because there are far fewer condo and townhouse sales in Santa Cruz County than house sales. In the field of statistics, a larger quantity of numbers makes a better statistic. Here, we are working with very few numbers (25 to 75 sales per month). Occasionally, a few very expensive condominiums sell in the same month, and the graph takes a jump up in that month.

People who keep statistics argue whether the median price or the average price is a better indicator. The average price is calculated by totaling the sales prices and dividing by the number of sales. The median price is that price where an equal number of sales occurred at a higher price and a lower price than the median.