Sunday, February 26, 2006

Sunday excursion, February 26, 2006

This week is a milestone. It's the first week where I am seeing numerous real estate listings with asking prices around the Zillow Zestimate, or well within the Zillow value range, and not above that range. Maybe some of the sharper realtors are using Zillow to help their clients price their properties more realistically. Or maybe the more realistic pricing has been there and I'm just now noticing it.

Visitors on this blog have pointed out that the local papers are now reporting YOY average home prices, as opposed to median prices. The YOY median home prices are now starting to look less than rosy. Just look for the link on the sidebar that says "So Cal Monthly Resale Activity", which reports median home prices, and you'll see what we mean. All it takes is for a few luxury megabubble sales in a group of lower-end depressed sales to boost the average value in order to make the average look good. On the other hand, the median is selected from the middle of an ordered list of sold homes, which is more indicative of where some real activity is. The averages, on the other hand can be fantasy figures.

Also, do not be taken by number of home sales for any particular zip code. They vary too much YOY and are not particularly indicative of a trend in either direction. The number of sales have declined for many zip codes - yes - but they have declined at this time in earlier years prior to zooming up again. We could see higher home sales zoom up again - but perhaps at drastically reduced prices, if the median price figures are pointing the way to the future. When this debacle is is full force and the deceptions are clear, perhaps reforms will be made in how home sales data is reported.

In any case, it does not look like much future momentum is being built into some asking prices for the moment, as they have in prior years. That has been the pattern here - to build in future momentum in asking prices. Will this now come to a shrieking halt? For the sake of the sellers who want to sell their homes quickly, I hope so.

And now, here are some of the properties we've gone by this weekend:

3122 Ruofud #B 3 bed / 3 bath / 2310 sq ft is located across and from our white dog-owning neighbors.

(as of February 26, 2006)
Asking price: $799,900   
Zestimate:    $758,175
Value range:  $667,194 - $818,829

Price History:             Year built: 1998
Aug 94:  $250,000
Apr 94:  $200,556

If the sellers get their asking price right now, that's nearly a 220% increase in 11.5 years. That averages out to about 10.6% a year. That's definitely higher than the official rate of inflation over those years.

3582 Drakcnip Avenue 3 bed / 2 bath SFR We did not swing around to get a photo of this - maybe next week? This one is currently priced out of the Zillow range.

Asking price: $899,000  (as of February 26, 2006)
Zestimate:    $788,079
Value range:  $693,510 - $851,125

Price History:      Year built: 1943, updated 1956
Mar 99  $363,000 
Jan 94: $260,000

This house has a 1 bed / 1 bath detached addition.

If this property sells now for its asking price, that's a 147% increase in 7 years, about 13.8% annually. Compare that to the 39.6% increase in just over 5 years from the 1994 sale. If you average out the increase rate between 1994 and 1999, it's about 6.9% a year. Although higher than the official rate of inflation during those years, it's certainly more "normal" than the average 13.8% annual price increase between 1999 and now. This quantifies why we have suspected a bubble in this area for years.

9142 Tnarg Avenue #B 3 bed / 2+ bath 1603 sq ft No photo.

Asking price:  $729,500
Zestimate:     $762,527
Value range:   $671,024 - $823,529

Price History:     Year built:  2003
Apr 03 $506,500

If this unit sells right now for its asking price, that's a 44% increase in just under 3 years. That's an average 12.9% increase per year.

4291 Sitruc 3 bed / 2+ bath 2047 sq ft TOWNHOUSE

(as of February 26, 2006)
Asking price:  $779,999
Zestimate:     $757,835
Value range:   $666,895 - $818,462

Price History:      Year Built:  1988
May 98  $320,000
Aug 94  $250,000
Mar 94: $202,631

If the seller gets the asking price right now, that's nearly a 143% increase in just under 8 years, or about 11.8% annualized. From the March 1994 sale, that's a 285% increase in about 12 years, or about 11.9% annualized. Notice the multiple sales in 1994. This was a very bad time for real estate around here and when asset prices collapse, they can overshoot the bottom end, then recover.

Just so you know what we mean about pricing in momentum, look at the following property. It has been listed since 12/27/2005. Notice the relatively recent price history. Whomever bought this last September either changed their mind about owning it in a hurry or was in for a quick flip. The asking price is well out of the Zillow value range. (Thanks to the reader who sent this in.)

2181 Rellefekcor SFR. No photo.

Asking price:  $910,000  (as of February 26, 2006)
Zestimate:     $793,181
Value range:   $697,999 - $856,635

Price History:         Year Built:  1992
Sep 05: $825,000
Apr 93: $370,000

If the seller gets the asking price right now, that's a 10.2% increase in 6 months, or over 20% annualized. Compare that to the 123% increase from the 1993 sale to the Sep 2005 sale (about 6.6% average annual).


Blogger Rob Dawg said...

zillow has got a great scam going. They don't have anything like accurate data so they post what they got and rely on people to give them good data for free. If zillow works for your area it is either random luck or they've already gotten someone to do their work for them.

10:47 AM, February 27, 2006  
Blogger bearmaster said...

Although the data is not complete, what I have seen on Zillow so far in terms of price history correlates pretty well with what I've pulled from domania.

Can you give a specific example of inaccurate data?

12:00 PM, February 27, 2006  
Blogger Rob Dawg said...

Zillow is okay for tract areas with lots of sales history but my neighborhood ($1m plus zip 93010) is all semi-custom with low turnover. They obviously cannot track remodels and improvements either.

6:40 PM, February 28, 2006  

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