A Look Back at 2006 and a Peek Into the Future
The Scripps Ranch market of 2006 may be best characterized as transitional. After many years of record sales and price appreciation, the market had to adjust and it did. When measured against the performance of 2005, the biggest statistical hit was to the number of sales – a reduction of 28% and 35% for detached and attached home sales, respectively (all statistics from the SANDICOR Multiple Listing Service).
Sale prices fared better than expected with a 3.2% decline on average versus 2005 for detached homes. Prices of attached homes were down an average of 6.2% from the prior year. All things considered, not apocalyptic. Some homes faired better of course, while others faired far worse.
The highest price paid in Scripps Ranch for a detached home in 2006 was $1.825 million; the lowest price paid was $430,000. For attached homes, the highest price was $655,000 and the lowest was $235,000.
Besides the decline in sales and prices, the most significant trend was the increase in market time, a result of sellers (and/or their agents) not acknowledging the changing market. This resulted in numerous list price reductions (in many cases, multiple reductions on the same home) prior to finally selling. A byproduct of this trend was a substantial increase in the number of canceled, expired and withdrawn listings from the market. Market times were actually much longer when these are considered due to the MLS software not being able to acknowledge “repeats” to the market.
A positive trend that occurred during the past six months of 2006 was the steadily shrinking inventory of homes for sale. For example, at one point in July, there were 158 detached homes on the market in Scripps Ranch. As of December 31st, that number had dwindled to 75.
So what lies ahead? Based upon the current trends, we would expect a slight but steady increase in the inventory as we head into the traditional Spring and Summer peak selling season. Sale prices should stabilize as long as inventory does not grow too quickly. Presently, we have less than a four-month supply of homes, assuming the average monthly sales rate of 2006 (25 closed escrows per month). This is a significant improvement over the 8-month supply we had this past summer and should support a firming in values.
The key wild card remains interest rates, which behaved very well throughout 2006 and are expected to remain low throughout the coming year. Let’s hope this is indeed the case.