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Market Commentary – 2012 August


  • Sacramento County median jumps 5.4% compared to July 2011.
  • El Dorado County median jumps 8% compared to July 2011.
  • Placer County median jumps 10.5% compared to July 2011.
  • Days-On-Market is extremely low for “normal” home sales.
  • Only FHA purchases showed an increase; Cash and Conventional purchases decreased.
  • 42 of 51 zip codes tracked show a momentum Up Tick in July (indicates “sell” opportunity).
  • 13 of 51 zip codes have a positive momentum value (indicates “buy” opportunity).
  • Mortgage interest rates are showing some upward movement since July.
  • Major Indicators —-  Community Indicators

Commentary, July 2012:  The stars are strangely aligned for both buyers and sellers.  On one hand, inventory is low and buyers are clammering for the best listings.  Over 55% of the listings are in contract in less than 31 days.  This is encouraging for many sellers whether Short or otherwise.

On the other hand, the cost of money is historically low, prices in many zip codes are at relatively low points, and lenders are moving more quickly with short sale approvals.  This is encouraging for buyers AND sellers.

When looking at the trends and possible directions in the future, we can see how real estate is much more connected to Main Street than is the stock market.  While some stock analysts put values on company stocks, there are no appraisers protecting the buyer from over-paying.  Think of where Apple would be priced if buyers were “corrected” by an appraiser before each purchase.  (To you Apple fans, it is not my intent to disparage the company.)

All 3 counties show increased median prices.  Many zip codes are experiencing a positive momentum shift.  If you are sitting on the fence to buy or sell, this could be the season for you.  We have no visibility into the shadow inventory but, at some point, the owners have to come out of the shadows [or grow wet and moldy].  This increase in inventory won’t be perceptible until it happens. Any increase in supply will have a dampening effect on prices, all things remaining equal.

But all things don’t remain equal.  Buyers are getting discouraged, are on summer vacations, or are getting kids back into school. This is a decrease in demand which also has a downward effect on prices.  Watching the supply and demand indicators will quickly help you understand how equilibrium is changing.  On a daily basis, we watch the number of New Listings as compared to Pending Listings.  When New exceeds Pending, that means supply is building (more input than output).  And vice versa (and regular in today’s market), Pending exceeds New which means supply is getting depleted (more output than input).  When there is only 1 gallon of milk at the store, consumers will bid the price upward.  It’s Economics 101 — this is a economic rule that the White House does not understand.

My job is not to educate the White House, although they need it more than anyone.  My job is to help sellers find buyers and help buyers find a home.  It’s a great job and my clients rave about my diligence, knowledge, and strategic approach to reaching their goal.  Call me if you want a professional, Masters Club Broker.

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