December Market Report

After 7 years of strong market recovery (or "up cycle"), there are preliminary signs of notable shifts in the market - but the magnitude of the changes vary considerably by statistic and by county. Though everyone wants to jump to definitive conclusions, it would be premature to confidently predict the course of a sustained, longer-term transition, if that is what is occurring. There are a lot of spinning plates in local, national and international economies and politics right now.

I am always hesitant to make too much of a single month's or a few months' data: Short-term fluctuations in median sales prices and other market statistics are not uncommon and don't always give definitive perspective as to where the market is heading on a longer-term basis.

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Many of the changes seen over recent months are substantial - and none more so than the sudden plunge in year-over-year median price appreciation rates illustrated below: a number of counties plummeted into negative territory in November, and the others saw drastic declines (see below). As a sample of county median price trends, the chart above is illustrating 3-month-rolling median price movements in SF itself - 3-month rolling data doesn't fluctuate as wildly as monthly prices sometimes do, though there are clear seasonal changes. It's not unusual for median sales prices to drop from springtime highs, but the drop this year in the median house price (the top blue line) has been somewhat longer and deeper than is usually the case: By November, it was $145,000 below the peak hit in April 2018.

Again: It is important not to make too much of short-term data. Indicators can also be somewhat schizophrenic at the beginning of a significant market transition - if that is what is occurring - as buyers, sellers and agents struggle to figure out a changing reality.

Bay Area Changing Reality

As a sample of a month by month progression over the past year: Santa Clara County may have been the hottest market in the country in 2017 through early spring 2018. Then it started cooling off more rapidly and more definitively than most other Bay Area markets. This shows up in a number of statistics, including declining year-over-year appreciation rates, as illustrated below.

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Listings vs. Sales

Though not especially high by historical standards, the overall supply of listings on the market has been appreciably increasing this autumn - to its highest level in 4 years - but sales volume in September-November 2018 was down about 12.5% on a year-over-year basis. That's about 2000 fewer sales.

Generally speaking, during the recovery since 2012, an inadequate and often decreasing number of listings met increasing and sometimes feverish demand from buyers, adding immense upward pressure on home prices. For the time being at least, that pressure is now subsiding as the balance between supply and demand shifts.

This is an amazing time for buyers to come jump in to the market, as long as they have a “hold” mindset when purchasing.

dpaul brown