The Real Estate Market

Greetings to one and all and Happy New Year!

The results are in and the year ended on a positive note. Yes, the market continues to improve.

First, let’s report the real good stuff. Average residential prices increased to $161,000 which is a 10% plus increase over the $146,000 reported at the end of 2015. That’s significant and something we haven’t seen since 2006 when prices rose 9%! And the first time in 9 years that there’s been an improvement for end of the year prices.

Based on MLS data the absorption rate declined which is also good news. Remember, absorption is nothing more than the # of sales per month divided by the existing inventory available. For example, there were 203 homes sold in December of 2016. and we had 1,933 homes for sale for the same period. Therefore, the absorption rate is 1,933 divided by 203 which results in 9.5 months. The MLS has a complex way of calculating the rate but the concept is the same.

One of the more interesting findings was that activity (number of sales). It increased about 3% year over year. In 2015 there were 2,256 residential homes sold while there were 2,325 sold in 2016.

Another noteworthy finding is that properties over $400,000 experienced a very big increase. In 2015 there were 68 properties over $400,000 which sold. In 2016, there were 105 properties over $400,000 which sold. That’s a 54% increase and a metric worth crowing about.

The average cumulative days on the market was 216 days as compared to 206 days in 2015. We don’t like to see properties linger on the market any longer than they have to but this figure is not alarming.

Pending sales at the end of the year totaled 122 for 2016 versus 127 pending at the end of the year in 2015. Again, the difference is not alarming and I don’t think portend any change in the direction of the market.

The chart on the left shows the trend in average residential prices. You will note that prices have not rebounded to where they were in the height of the real estate boom but it looks like we’ve made an important turn.

The big question is ..”are even better times ahead.” Naturally, no one knows but there seems to be something happening that hasn’t happened for a long time…..that’s optimism.

Let’s hope that the passing of the torch gives us not only the spirit of optimism but the results optimism portends. Happy New Year!

Consumer Confidence

Consumer Confidence, we all hear the term but what is it? In this article, I’ll try to answer that question.

In the United States consumer confidence is issued monthly by The Conference Board, an independent economic research organization, and is based on 5,000 households. The Index is calculated each month on the basis of a household survey of consumers’ opinions on current conditions and future expectations of the economy. Some explain it is by saying it the degree
of optimism that consumers have in the overall state of the economy.

Essentially, the thinking is that if consumer confidence is high, consumers will be making more purchases and if it is low they won’t. It’s really consumers reaction to the economy.

The Consumer Confidence Index (CCI) is produced by the non-profit business group The Conference Board and has been doing so since 1967. The CCI is designed to assess the overall confidence, relative financial health and spending power of the US average consumer. The Conference Board releases the headline Consumer Confidence Index figure each month.

As noted the CCI is based on the data from a monthly survey of 5,000 US households. The data is calculated for the United States as a whole and for each of the country’s nine census regions. Opinion on current conditions make up about 40% of the index while consumer expectations represent about 60% of the questions about the future. After the surveys are collected, each question’s positive responses are divided by the sum of its positive and negative responses. The resulting relative value is then used as an “index value.”  This is then compared against a period which is considered a benchmark. 1985 was arbitrarily chosen because it is neither a peak nor trough in the business cycle and thus was given an index of 100.

Though it’s called an index, the report is actually a poll done through the mail. While 5,000 households are contacted only about 3,500 respond. The participants are asked to respond to five questions:

  • current business conditions
  • business conditions six months hence
  • the current employment conditions
  • employment conditions in the next six months
  • their own total family income in the next six months

The Consumer Confidence Index rose to 113.7 up from 109.4 and consumer expectations grew to 105.5 the highest since December 2013. Maybe brighter days are ahead!

 

Click for some graphs that might be of interest!

Nick D’Andrea

Appraiser and consultant

In today’s environment it’s very important to have access to an experienced consultant and whether its an appraisal assignment, a contemplated purchase, a property tax matter or a valuation issue, I think I can be of help.

Since 1970, I have trained and developed sales teams, appraised residential and commercial properties, provided consulting service, shaped the pricing structure of homesites and housing, developed property, tailored sales strategies, taught real estate and appraisal courses, molded marketing initiatives, managed communities and a building company. I have been involved in virtually every aspect of the real estate industry including, selling, managing, training, planning, development, financing, appraising, consulting and building. I’m confident that if you have a real estate challenge I can help.