(Hurry everyone! Come watch paint dry, I mean, read this post!)
First, the bad news. Sales of detached homes for May in Scripps Ranch totaled only 13 (based on the early returns) versus 28 last year, according to the Sandicor Multiple Listing Service (MLS). While these are dismal sales numbers, the good news if you are a seller is that prices are up for the third straight month (sequentially) and, if I recall from my old statistics classes correctly, that’s what we call a trend.
By all measurements, average sale price, median sale price and average/median sale price per foot, prices have climbed for three consecutive months:
Month Avg. Sale price/price per foot Median Sale Price/price per foot
March $630,454 / $260.13 $630,000 / $258.06
April $693,057 / $268.69 $687,500 / $275.61
May $727,423 / $278.12 $720,000 / $285.25
This is not to say there will not be dips in the pattern. Kris and I have been saying for a while now that we expect the recovery to be one that bounces up and down off the bottom for a while until the overall economy stabilizes and we start see job and income growth in San Diego again. We are obviously not there yet. But at least we are seeing one positive sign in the 3-month sale price increases.
As of June 1, we are also seeing the inventory shrink in 92131. Currently there are only 66 detached homes for sale, an amazingly small amount of inventory (less than 1% of the total detached homes in Scripps Ranch). Even at the current slow pace of sales, this represents only an approximate 4.4 month supply. We used to call this a seller’s market, but by today’s standards I think it should suffice to call it a “balanced” market. From an agent’s standpoint, I can say that we and other agents we know have multiple buyers at the moment for this community and our biggest challenge is lack of inventory. So, while all is not yet great, at least we should take a moment to enjoy a little bit of very good news.
So, prices are going up. Woo-hoo! Only, I don’t think they are, at least not really. I know that the spirit of showing price “per square foot” was to take into account the occasional outlier that can wreak havoc on a small sample. Scripps Ranch sales, alas, are a very small sample lately, and that is the first problem with your conclusion.
The second flaw is that, while averages and medians are fun, this data doesn’t tell you what people are really buying. It tells you what the guy in the middle is buying. What we really need to know if we are to make sense of the numbers is what the herd in general is purchasing, particularly from the standpoint of size, because smaller homes will command a bigger price per square foot (we all agree on that point). Remember, inherent in the price of any home is the price of the dirt itself (the property, not the structure, being the most costly component in California).
So, and you will have to bear with me because I got a sudden urge to return to my traffic engineering roots, I decided to pull out the old distribution charts. Keeping in mind that I am not a statistician (and that I didn’t even pay much attention in class during college), I think the distribution of both sale prices and home sizes for Scripps Ranch over the past month is, if not really-really-really exciting, then curious.
I didn’t bother to plot the x axis values, because that is not really important. What is important is the visual. You could argue that the data generally follows a normal distribution pattern. But the sale price distribution was tightest (most clustered around the mean) in March, less so in April, and much less so in May. As for the size distribution, well, there isn’t much to learn here except that April was a little whack.
Now, here is where the traffic engineering part comes in. Speed limits have been historically set based on what is called the 85th percentile or, in English, the speed within which 85 percent of the drivers stay. (They actually do speed studies to figure this stuff out using radar guns and little clip boards; it’s really cool). The 85th percentile, for my fellow geeky friends, is not an accident (no pun) – It is roughly equivalent to one standard deviation above the mean of the sample. So, the theory is that most reasonable people will behave within this tolerance given the particular circumstances. There will be crazies, or outliers, at the high end of the chart, but they are the exceptions and not the rules.
For the one reader remaining (who didn’t get bored three paragraphs ago and move on to read Perez Hilton), 85% of home buyers (our herd) over the past three months bought homes smaller than or less expensive than the following:
DANG IT! This means that Steve was right. Prices are going up. Never mind.
However (I have to find a counterpoint somewhere lest my husband become insufferable), what this does tell us is that the data is more scattered lately; the difference between the 85th percentile and the median (or the standard deviation) is getting larger. Therefore we can conclude one of two things:
1. The market is becoming more volatile, which would suggest that we aren’t yet enjoying a return to normalcy; or
2. Buyer confidence is up, and buyers are finally boldly venturing back into the higher price ranges.
Or, it could just mean that our sample size is too small.