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?

February 2018: As of the first week in February, there were 247 listings, down 6% from 263 listings the first week of February 2017, and the fewest February listings 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 seven months.

76 of the 247 listings are under contract, and only 171 are active listings. 97 of the 171 active listings (57%) are priced over $1Million, and just 74 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.

February 2018: There were 58 listings as of the first week in February, down 15% from 68 listings the first week of February 2017, and the fewest listings for any February in 22 years.

Additionally, 8 of the 58 listings are under contract, leaving just 50 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?

February 2018: There were 114 sales in January, about the same as 115 sales in January 2017. Of the 114 sales, 32 (28%) were for more than $1Million, and 82 were for less than $1Million. Extremely low inventory is holding back the number of sales, especially with only 74 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.

February 2018: There were 33 sales of condominiums and townhouses in January, down 13% from 38 sales in January 2017. There were no short sales or bank-owned sales in January. 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.

February 2018: The January Unsold Inventory Index was 2.2 months. A year ago, in January 2017, it was 2.3 months. The Index has been below normal for 71 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.

February 2018: The Unsold Inventory Index in January was 1.8 months. A year ago, in January 2017, it was also 1.8 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?

February 2018: The median sales price for single family homes in January was $787,000. The percentage of sales over $1Million was the lowest (28%) since last April, and the percentage of sales in the more affordable areas of San Lorenzo Valley and Watsonville was the second highest (34.2%) in 14 months (exceeded only by the previous month at 34.3%). Both of these numbers affect the mid-point of sales prices for the month. One year ago, in January 2017, the median price was $810,000. The median price is often lower in January and February than the preceding or succeeding months.

There was one bank-owned sale, and two short sales in January.

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

Sales over $1,000,000:

- 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)
- March: 28% of the sales (Overall median was $836,000)
- February: 31% of the sales (Overall median was $805,000)

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.

February 2018: The median sales price for condominiums and townhouses in January was $637,500, an all-time record high. A year ago, in January 2017, it was $486,000. 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?

February 2018: The average sales price for single family homes in January was $858,940. A year ago, in January 2017, it was $861,675.

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.

February 2018: The average sales price for condominiums and townhouses in January was $650,410, an all-time record high. A year ago, in January 2017, it was $529,513. 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.