Lately it's been hard to open a newspaper or turn on a TV or radio and not be bombarded with stories about the sub-prime implosion and the ailing real estate market. More often than not, there is an economist being interviewed or quoting figures on national stats. The funny thing is that while these national statistics may be useful for economists, they often don't mean much for someone who is actually looking to buy or sell a home.
For buyers and sellers, what really matters are the market forces acting on their home-- in other words, THE LOCAL MARKET. What's happening in aggregate at the national level isn't necessarily what is happening locally, and is often just distracting noise. (Jonathan Samuel had a good post about this on the Matrix blog, entitled, "There is no National Housing Market").
The other important thing to note is that at the local level, the market often behaves very differently at different price points. In one area you may find a glut of mid and lower-priced homes and the bulk market may be flat or trending down in price, while at the same time, high-priced luxury properties are in short supply and appreciating nicely. Chances are, the typical MLS summary stats won't show this. You have to look at the market by price segment to see the real story. And it's the real story that buyers and sellers want from you.
So let's look at some graphs from Altos Research. Here is 7-day rolling average Median Price for Sacramento:
The orange line represents the overall market in aggregate and the black line represents the top quarter of the market (by price). This market is behaving the way many people might expect--there seems to be a high degree of correlation between the price segments and the top quarter of the market is moving in tandem with the Sacramento market as a whole. The price drops are also in keeping with the media buzz about a declining "national real estate market".
But if we look at the market in Dallas, we see a pronounced upward trend in top quartile prices over the past month or so as compared to the overall market, and a move to a price level at or above the average and peak for the past twelve months:
The situation in Houston looks somewhat similar with more pronounced volatility and again a pronounced upward price trend for the top quartile, but not quite up to the peak in price levels seen briefly last summer:
What's happening in Beverly Hills 90210? Well, the overall market is flat, with a median list price of about $4 million. But look at prices in the top quartile. They have just hit a new high.
Smooth out the curve with a 90 day moving average and we see that we are near the top of a 6 month upward trend in list price.
The bottom line?
Market knowledge breeds confidence.
This is an important subject to discuss with your buyers and sellers. Not only will you get the opportunity to hear and address their issues and concerns, you can ensure that they are knowledgeable about your local market conditions, particularly those at their price point, and help them develop a strategy. Putting your buyers and sellers on solid ground with good market insights can help them achieve the confidence and comfort they need to take action.
The graphs above are compliments of Altos Research. While they don't cover the whole country yet, they are one of the best sources for real-time market data, graphs, and insights (their data is as near "real-time" as one can get, as it is based on current active listing data, not historical transactions). They have some great tools for Realtors too!
Members of The Institute can also use My Market Graphs to assist in their market analysis and produce graphs for their presentations and marketing materials.
