Saturday, March 10, 2007

Sneak look at February sales, February new inventory, and a theoretical "fantasy gap"

For those of you who might be curious about such things, this is what my database and spreadsheets currently spit out in sales statistics for recent months:

STAT     DEC 2006   JAN 2007    FEB 2007
records        50         48          64
MEDIAN   $737,000   $724,500    $745,358
AVERAGE  $769,170   $762,005    $787,799
MIN      $400,000   $389,000    $387,500
MAX    $1,400,000 $2,100,000  $1,878,000

This chart compares the asking prices on 109 new inventory properties in February with the sale prices on 64 sold properties, all Redondo Beach. I always think it's instructive to compare what actually sells to what is coming on the market.

Here is a simple statistical comparison of Inventory asking price to Sale price:

             FEB          FEB
           INVENTORY     SALES
MEDIAN      849000      745358
AVERAGE    1131221      787799
MIN         439000      387500
MAX        4990000     1878000

Notice the median asking price is $849,000, but the median sale price was $745,358. To meet the expectations of new sellers, buyers will have to pay 13.9% more (the sellers' fantasy gap). To meet the expectations of new buyers, sellers will have to cut their asking prices by an additional 12.2% (buyers' fantasy gap). How much will this sub-prime mess affect these gaps?

I've noted in previous entries that a lot of new higher-end property is now on the market. 6.4% of new February inventory is in the $2 million plus range. 34 out of 109, or more than 31% of the new February inventory, is in the $1 million plus range. Yet only 14.1% of the sales in February fell in this range. 26.5% of the sales fell in the range up to $650,000, and 43.8% of sales fell in the range above $650,000 to $800,000. In particular, more than 1 out of every 5 sales fell in the $700,000-$750,000 range. Yet the new inventory certainly doesn't seem to be matching that apparent demand at the lower end.

Just so I'm clear, when I say "new inventory" I don't necessarily mean new construction, though there is a lot of new construction. My definition of new inventory is any property that is being listed for the first time since the end of September, so new inventory in February is anything newly listed in February that hasn't been listed since before the end of September, when I started keeping track of these listings.

It all kind of makes me wonder if new construction is betting too heavily on the high-end luxury market. Builders have been known to complain in recent months that it is too difficult to make a profit at the lower end because of too many rules and regulations. So are upscale buyers safely shielded from the sub-prime nuclear blast and subsequent fallout? If there is contagion, I wonder if the builders would have been better off trying to meet the needs of the lower end buyers and settling for smaller profits.

I've been noticing a lot of odd sales recently. I'll discuss them in my next post.

4 Comments:

Blogger wannabuy said...

Bearmaster,

Love the data! Well done as always. Its starting to paint a clear picture. That picture is that the market above a million is not healthy nor sustainable.

Its going to take over a year for people to wake up to that. Cest la vie. I'm certainly not buying in 2007.

As to all that new high end inventory? LOVE IT! Get my competition into that. :)

As to the sub primes... that contagion is going to spread very fast. I'm trying to find a "hard number", but using "Jim the realtor"'s numbers from San Diego, it looks to be around 15% in the 2.0M to 2.5M range were 0% down option ARMs.

Got popcorn?
Neil

10:07 PM, March 10, 2007  
Blogger author said...

You bring up an interesting question when you ask if the builders are relying too heavily on the luxury market. As potential buyers new to this area, we have been asking ourselves this same question. For example, on Manhattan Avenue in Hermosa is a $2.9 house.

I am wondering who the person is who:

a. can afford this home and,
b. finds this very vertical layout convenient or desirable and,
c. would be interested in spending this amount of money for this specific area

We ask ourselves if we have this kind of money would be buy here? No, most certainly not.

Then, who does fit this profile? Are we missing something?

8:38 PM, March 12, 2007  
Blogger bearmaster said...

We asked ourselves a similar question over a decade ago - if we had the money and could actually afford a home here, would we buy one? The answer was no, and we've never regretted renting and not buying.

If somebody held a gun to my head and said I had to buy something around here or else, I would look at houses in old Torrance. Maybe for the money old Torrance is just more my style. I hate high-density condominium mega-complexes with unbridled passion, though I will say that the new condos like Centex Fusion in Hawthorne have better floorplans than the claustrophia-inducing condos in the ancient building two doors down from me.

9:41 PM, March 12, 2007  
Blogger WannaSell said...

my handle is WannaSell but I've actually sold

we took about 13% less than we listed for... we didn't mean the list as a wish price, it was consistent with very recent comps, but it's uncanny now to see your data line up so well with our experience

keep it up

12:42 PM, March 13, 2007  

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