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Lessons from the Data: Ranking Relative Housing Markets

Recently, Home Value Forecast has been sifting through housing data to rank housing market trends at the macro and micro level. We have developed an overall market condition scale to rank individual markets as:

  • Hot
  • Strong
  • Good
  • Normal
  • Soft
  • Weak
  • Distressed

We use a variety of scoring indicators including price trends, inventory trends, foreclosure trends and more to provide a score that reflects both current conditions and the trend in the conditions. We thought it might be useful to review some current 2012 results for markets that fit these categories. At the same time, we want to remind everyone that markets are granular and we can always find better-than-average or worse-than-average local neighborhoods within these metropolitan generalizations. As of the First Quarter, 2012:

  • Hot Market Example: None
  • Strong Market Example: Midland, TX
  • Good Market Example: Rochester, NY
  • Normal Market Examples: San Francisco, CA
  • Soft Market Example: Salt Lake City, UT
  • Weak Market Example: Cleveland, OH
  • Distressed Market Example: Yuba City, CA

Each of these will be reviewed in turn, using San Francisco for the normal market example, and noting we have no hot markets in the US right now. Below, a variety of charts are used to examine market trends. There is no way to provide all possible charts that would paint a complete picture of the trends, but we note that weaker markets tend to have much higher foreclosures and REO sales as a percent of total sales. 

Strong Market Example: Midland, TX

Here we see the combined REO and regular sales prices have been trending up:

Months of remaining inventory is quite low across the board, indicative of strong markets:

Good Market Example: Rochester, NY

When REO sales as a percent of total sales are well below 10%, as shown here, the market is in relatively good shape. Here we see that REO sales as a percent of total sales are extremely low compared to the rest of the country:

Many of the over-priced listings have been withdrawn from the market and we see that active, pending, and sold prices have converged indicating a move to equilibrium:

Normal Market Example:  San Francisco, CA

Average prices have stabilized and in the recent quarter turned positive. Still the trend shows some volatility:

In the chart below we see that months of remaining inventory are extremely low, suggesting very few soft submarkets when sorted by price range:

Soft Market Example: Salt Lake City, UT

In Salt Lake City, we see that the percent of REO sales compared to the total is over 10% in many price ranges, thus contributing to the soft market conditions:

We also observe average sold price per square foot of living area trending down:

Weak Market Example: Cleveland, OH

In Cleveland, we observe relatively high REO sales as a percent of total sales, averaging near 30% which contributes to the weak overall market condition:

The average new listing price continues to fall and it is not clear if the market has hit bottom yet:

Distressed Market Example: Yuba City, CA

Here we examine the significant volume of distress still hitting the market. As a percent of sales the distress volumes here are very high affecting the regular sale prices in many neighborhoods:

Average new listing prices have plummeted and the market remains in distress with no bottom in sight:

Drilling Down By Price Range

When we drill down by price range we often note that the months of remaining inventory is much higher for the higher priced markets, but there are exceptions. In Cleveland, the mid-level price ranges have significant excess inventory:

In San Diego, we see that the lower price ranges (for San Diego) have fairly low inventories:

 

Drilling Down by Neighborhood

Below we have two neighborhoods in the same metropolitan area where dramatically different price trends have occurred; highlighting how looking at average/median price trends in a CBSA can be deceiving. In the San Diego Metro market, Chula Vista (ZIPs 91909-91915) has seen distressed sales have a dramatic impacted on prices:

In La Jolla (ZIP 92037), REO sales have had a more modest impact:

Conclusions

The vast majority of housing markets are improving as of the first quarter of 2012. Chalk that up to an improving jobs picture, low interest rates and a slowing of distress sales on the market as a percentage of all sales. Many markets remain weak but even within weak markets there are bright spots such as low inventories within the lower priced segments.

Real Estate is local. As we’ve shown in these graphs, one needs to examine not only local geographies but also specific price ranges for assessing market conditions. Several markets appear to be doing very well, with very low inventories and a convergence of buyers and sellers views on the current market prices. This can be seen by a reduction in listing prices relative to recently sold properties.

Our overall market condition scores are supported by multiple leading market indicators that provide a view into the strength and trend of both macro and micro markets. While national, regional and metropolitan trends are interesting, to understand the impact on any given property, one needs to observe what is happening within micro markets, which can vary significantly from broader market averages.

………………………………………………………………………………………………..

James R. Follain, Ph.D.
James R. Follain LLC and Advisor to FI Consulting
jfollain@nycap.rr.com

Norm Miller, PhD
Professor, Burnham-Moores Center for Real Estate
University of San Diego
nmiller@sandiego.edu

Michael Sklarz, Ph.D.
President
Collateral Analytics
msklarz@CollateralAnalytics.com

About Home Value Forecast

Home Value Forecast was created from a strategic partnership between Pro Teck Valuation Services and Collateral Analytics. HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs. Each month, Home Value Forecast delivers a monthly briefing along with “Lessons from the Data,” an in-depth article based on trends unearthed in the data.

HVF is built using numerous data sources including public records, local market MLS and general economic data.  The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a subscription to the service.  A trial subscription is available upon request.  Please visit the Contact Us page to reserve your trial.

To see how Pro Teck and Collateral Analytics can help your company with its valuation needs, please call 800.886.4949 or email sales@protk.com.