Here’s my monthly analysis of the single-family home market in Nevada County. Please see the attached charts for specific numbers and other details.
Buyer Demand Continues at 10 Year Highs: July was the 2nd highest month in 2015 for new escrows with 150. The buyer demand in 2015 continues to be higher than we’ve seen over the last 10 years. A fair number of escrows cancel out, as the number of sold homes is about 5% lower on average from the number of pending sales. The cancellation rate overall of all escrows is probably 10 – 20%, so with the number of closings only 5% lower than pending sales, we can see that most of the buyers canceling one escrow quickly get into escrow on another property they end up buying.
Inventory is Up Slightly but Still Undersupplied: The number of new listings hitting the market has decreased every month since the 2015 high seen in March. Over these last three months, we’ve had 10.6% fewer new listings than compared to the same months in 2014. Based on pending sales, we have only 3 months of inventory, the theoretical number that shows how long we would sell everything currently available if no new listings hit the market. Anything under 6 months of inventory is considered a seller’s market where price appreciation is expected simply due to supply and demand forces.
If Demand is High and Supply is Low, Why are Average Sold Prices Down? It’s true that the average sold prices have come down slightly every month since the 2015 high recorded in April at $388,000. July’s average sold price was $347,000. The answer is simple: Average sold prices are down because the new listings hitting the market are lower priced. Listings that are priced right sell quickly (45% of all new escrows are on listings that have been marketed for only 21 days or less). The listings that have entered the market have been lower priced (smaller homes) which results in lower average sold prices. This interpretation is supported by the fact that the median sold price is lower than the average (there are more lower priced homes selling than higher priced homes), and by analyzing the average asking price of active listings. The average list price from December 2014 through February 2015 was $521,000. The average list price from March through July 2015 was lower at $492,200. The months of March and April showed an average list price of $481,500, which was down over 7%. It’s no wonder that the average sold prices are down since the homes available for purchase are smaller, lower priced homes.
The average sold prices from May – July 2015 are 12.7% higher than those same months in 2014.
So even though the average sold prices have been down month over month (due to lower priced homes hitting the market – see below), price appreciation year over year is very substantial.