Welcome everyone, this is Tom O’Grady, CEO of Pro Teck Services and we are here with our May Home Value Forecast Market Update. Pro Teck brings you a monthly update through our Home Value Forecast in collaboration with Collateral Analytics, and in this month’s update we explore the list-to-price ratio and how it can predictably identify turns in markets one or two quarters out.
The 2013 residential real estate market has been all about rising home values due to lack of supply, despite many housing market analysts’ prediction that the huge supply of REO and shadow inventory would keep the real estate market depressed for many years. This shortage has resulted in bidding wars and multiple offers over asking price, resulting in large gains in home prices in many markets. An interesting leading indicator we follow is the list to sale ratio that normally shows sale price running at the 92-98 percent of list price, but in hot markets it can exceed 100 percent. This graph shows the Honolulu CBSA condo median price annual percentage change and the sold to list price ratio. It’s this relationship between these two that we wanted to highlight here in our May update. This indicator has historically led changes in home prices over the past three real estate cycles as you can see here and its turning points have been excellent signals for the same in condo prices. Notice the most recent upturn that you can see here in 2012.
Here we look at the Tucson single family price per living and sold to list price ratio. As seen, during the peak of the bubble period in 2006, the sold to list price ratio exceeded 100 percent. That was indicative of a very overheated market and home prices peaked shortly after.
At Home Value Forecast we track many leading market indicators, and with those leading indicators we score all markets across the country, and in our monthly update we identify the top 10 and bottom 10 of the market for that month. A new entrant into our top 10 list this month was the Nashville, Tennessee CBSA. It actually had the highest score based on our collection of market indicators. Nashville was not as overheated and overpriced as many of the country’s hardest hit markets in the recent recession, and appears to be experiencing overall improving economic conditions. This metro has always been one of the most affordable in the US, and as seen here is currently exhibiting its highest readings in 30 years.
We hope you’ll visit our Home Value Forecast. You can read the full May HVF update here, as well as view trending charts for 30 major metros and read all our past papers and updates on the US housing market.