Some days, I have so many words that I just can’t get them out fast enough. Other days, I’ve got nothin’. This being one of the “other days”, it seemed like a good time to delve into the Scripps Ranch real estate trends.
Summer of 2005 is an event like the first moon landing (or, for our younger audience, the announcement that Wham! would be disbanding) – You always remember where you were and what you were doing that “day”.
To an agent, mid-2005 marked the peak of our most recent real estate boom. With prices and, more importantly, the number of home sales having steadily declined since that historic summer of love, estimating a home’s value in today’s market is becoming increasingly challenging. Sometimes we find that we must resort to the “you paid X and the market has since done Y ” approach. (Math hint: Y is a negative number.)
So, what is “Y”? Yes, I know it is negative, but how negative? Thanks to Altos Research, we know what the sellers are up to. Asking prices are still trending upward which, as I noted recently, is counter-intuitive to our current declining market. However, it is the sold side of the equation that gives us the insight into all-important buyer behavior.
Using data from Sandicor, our San Diego Multiple Listing Service, here are the trend lines for Scripps Ranch, 92131. This information represents third-quarter activity from 2003 through 2007.
Average price per square foot and median sale price, at least in Scripps Ranch, have not declined as dramatically as the media would have us believe. The number of homes sold in our little community is another story. For sellers (and agents, I might add), competition is fierce.
So why aren’t the buyers buying in the same numbers? Interest rates have been fairly stable, recent lending “crisis” aside. In any case, you can’t blame the poor performance in the 3rd quarter of 2006 on strict underwriting policies or tight lending practices. Is it affordability? I don’t think so. Prices have come down slightly, but the buyers who are buying are not paying dramatically less on average for the homes they are purchasing.
The average sale price graph above, showing a slightly sharper dip than the median price graph, tipped me off. Remember, larger homes will typically command a lower price per square foot (as the biggest component of value in our market is the dirt). I think this next chart says a lot.
What buyers want today, always want, is value. Those who are committing to a purchase aren’t necessarily spending less, but they are expecting and getting more for their money. Value.
Perceptions, like markets, are cyclical. Today, everything the consumers hear and everything they read suggests that purchasing a home in this market is about as good an idea as having polka music at, well, anywhere. Demand for housing (unlike polka music) of course will continue to exist; the demand will remain latent however until value is widely perceived.