Arn Cenedella

Archive for the 'Real Estate Data' Category

A historical perspective – The Sky is not falling (part 5)

Gary Watts, a real estate economist, recently gave several conferences to San Francisco Bay Area Coldwell Banker agents.

 Here are some of his comments:

 Brief History of Real Estate

We are in the 24th month of the current housing downturn. Historically, housing downturns average 27 months so we may be near the end. Although there has been a significant decline in sales volume, the Bay Area’s home prices have continued to show small amounts of appreciation – excluding the Napa, Solano, and Sonoma areas. With the Fed cutting interest rates in the near future and the financial markets calming down,  shortly money will begin to flow back into mortgage securities.  It may be wise to give our client’s a little historical perspective about real estate cycles.

1970 to 1980:

                “The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000.” – Business Week – 1969

    In 1972, interest rates were 7%, but these rates would not be seen again for over 24 years.
    In 1973, OPEC doubled the price of oil, banks had a run on deposits and, for approximately 8 months, there were no lenders who were in a position to make loans to any home buyers.
    By the late ‘70s, both interest rates and the inflation rate were exceeding double digit numbers.  
    By the end of the decade, California home prices experienced a yearly return in excess of 11.5%!
     
                “The median price of a home today is approaching $50,000 . . . housing experts predict price rises in the future won’t be that great.” – National Business – 1977

1980-1990

 In the early ‘80s, inflation hit 21.5% and home loans were reaching 18%! 
 A recession was taking place and job losses were increasing – leading to home foreclosures.
In 1984, California home prices had their first decline since the Depression – they declined 0.10%!
   
                “The golden-age of risk free run-ups in home prices is gone.” – Money Magazine – 1985

The savings and loan scandal hit the financial markets but the government bailed them out in 1988.
By the end of the decade, interest rates had decreased to single-digit (9.5%) rates.
From ‘86 to ‘89, California home prices rose 46% and ended the decade with a yearly return of 7.95%! 

1990 to 2000:

On Nov.11, 1989 the Berlin Wall came down and, by January of 1990, Congress cut the defense budget.
In a short period of time, a lot of highly-paid workers in defense and manufacturing had lost their jobs.
California home prices declined from 1990 to 1996 by less than 2% annually, for a total of 12%. 

                        “A home is where the bad investment is.” San Francisco Examiner – 1996

In the following 3 years, California home prices rose 19.7%, wiping out all the losses of the early ‘90 and ending the decade with a net gain of 9.35%.
From 1995 to 1999, the Bay Area’s median home prices rose a whooping 25%.
The median price of a home in California has not declined since 1996, and the 38 year average rate of appreciation for homes in California is 7.75%! 
 
          Source: Researches by QTVN (regarding interest rates), U.S.  Dept. of Commerce, CAR

The Sky isn’t falling ! (part 4)

NAR in its most recent statistical update estimates that 5.336 Million homes will be sold this year.

Everyday we read in the newspapers how terrible the real estate market is.

I have consistently maintained that while the market has slowed it is not a disaster but rather just a return to a more normal market.

Let’s look at US homes sales over the past 10 years.

Here is the data:

Over the past 10 years, on average 5.205 Million homes have been sold per year.

So assuming NAR’s projections are correct; the number of homes sold in 2007 shall be slightly above the 10 year average number of sales.

This certainly is not a collapse but more a return to a normal market.

It would not suprise me if the NAR projection for 2007 sales is reduced from the current 5.336 Million estimate. Even if this should comes to pass, the number of sales will be basically average for the past 10 years.

Looking more locally – i.e. to the San Francisco Peninsula – August is typically a very slow month for homes sales – Sales typically pick up once Labor Day is over. It willbe interesting to see what happens in the next few weeks.

In a follow-up post, I will provide California sales data for your consideration.

Suunyvale Sales data

Sunnyvale again presents a different picture than either Palo Alto or San Carlos.

Here is the data:

Sunnyvale home sales in the first 8 months of the calendar year increased from 2003 to 2004 – reaching a peak of 698 in 2004.
2005 sales dropped about 10% from 2004 sales.
2006 sales were about 40% below the peak year of 2004.
2007 sales have actually increased about 8% over 2006 sales.

It is interesting to discover that the three cities present three slightly different data scenarios. Typically the peak sales period was found in 2004. From 2004, the number of sales in all three of these cities have decreased in years 2005, 2006, and 2007. I will check the historical data but my sense is that sales in 2005, 2006, and 2007 were similar to what we found in 2001 and 2002.

It is interesting to note that there HAS NOT been any collapse in sales from 2006 to 2007. Sales have actually increased in Sunnyvale this year – and have remained the same in San Carlos and have decreased slightly in Palo Alto.

It is just a normal market – sales go up and sales go down – nothing new there.

Hopefully having some longer-term perspective helps both buyers and sellers gain a sense of security in the market.

 I will continue to explore the data and report this data to you.

San Carlos Sales data

San Carlos presents a slightly different data picture than found in Palo Alto.

Here are the number of home sales in San Carlos during the first 8 months of years 2003 through 2007.

The peak for numbers of homes sales in San Carlos was 2003 and 2004.
2005 sales show about a 20% from the peak years of 2003 and 2004.
2006 and 2007 sales show about a 33% drop from the peak years.

2006 and 2007 sales data is very similar.

Sunnyvale will be next.

The sky isn’t falling (part 3)

Over the past month or so, many people have come up to me and said: “I hear this is a terrible market” or they ask me: “How bad is the market?”.

I tell them not nearly as bad as the media would have you believe.

Let’s look at the numbers:

Here are the number of Palo Alto homes sold in the first 8 months over the past five years.

2003 346
2004 430
2005 372
2006 370
2007 341

In looking at the numbers:
2007 sales are about 10% below 2005 and 2006 sales.
2007 sales are about 20% below 2004 sales which is an all-time record.
2007 sales are about the same as 2003 sales.

So – Yes, the 2007 market is slower than the proceeding years but only marginally so.

The sky isn’t falling.

I will be interested to see what the data says for San Carlos and Sunnyvale.

I have picked those 3 cities because they are very representative of the Peninsula market as a whole. Palo Alto of course is an outstanding community with superior schools. San Carlos is a typical San Mateo County community with a family orientation and good schools. Sunnyvale is similar to San Carlos but perhaps more representative of Silicon Valley.

Cheers….

PS My fantasy football team won this week – Jon Kitna, Joseph Addai, Adrian Peterson, Reggie Wayne, and the Minnesota D lead the way as the Stingers move to 1-0.

Is our local market seasonal?

One of the most common questions I am asked by buyers and sellers alike is: “When is the best time to buy or sell?”

In a coming series of posts I will track sales in 3 peninsula communities on a monthly basis from January 2003 to present.

Here is the data for Palo Alto.

1/2003 21
2/2003 19
3/2003 49
4/2003 44
5/2003 52
6/2003 52
7/2003 53
8/2003 56
9/2003 47
10/2003 57
11/2003 51
12/2003 36
1/2004 29
2/2004 25
3/2004 51
4/2004 65
5/2004 54
6/2004 80
7/2004 68
8/2004 58
9/2004 38
10/2004 43
11/2004 50
12/2004 34
1/2005 22
2/2005 36
3/2005 51
4/2005 56
5/2005 38
6/2005 68
7/2005 53
8/2005 48
9/2005 45
10/2005 41
11/2005 38
12/2005 38
1/2006 22
2/2006 28
3/2006 46
4/2006 50
5/2006 68
6/2006 67
7/2006 46
8/2006 43
9/2006 34
10/2006 44
11/2006 41
12/2006 27
1/2007 16
2/2007 31
3/2007 52
4/2007 46
5/2007 58
6/2007 58
7/2007 41
8/2007 39

In looking at this data:

Please note this data is for closed sales in any given month – it is more reflective of the level of market activity in the prior month. Sale closings typically start slowly in January and February – increase significantly in March – peaking in June and July – August typically is slowing – the market perks up a bit as we get into September and October and then slows again in December.

Data for San Carlos and Sunnyvale will follow in the next few posts.

If you would like data for your city, just let me know.