Home Price Survey

The 2006 Coldwell Banker “Home Price Survey” evaluated home prices in a total of 384 markets, including, for the first time, 42 international markets outside of North America. The study compared a 2,200 square foot single-family dwellings, with four bedrooms, two and one-half baths, a family room (or equivalent) and a two-car garage in 384 total markets across the United States, Puerto Rico and Canada.

The cumulative average sales price of the homes surveyed in the 317 U.S. markets (and one in Puerto Rico) is $423,950, a six percent increase over $401,767 from the same period in 2005. In 2001 the same study showed a national average price for the subject home to be $269,241.

The study found that home prices (all figures in U.S. dollars) in Amsterdam, the Netherlands ($483,513) are comparable to those in Bend (OR) ($482,750); Dubai, United Arab Emirates ($374,332) matches up to Portland (ME) ($375,500); prices in Warsaw, Poland ($317,586) are similar to those in Atlanta (GA) ($322,210); and Sydney, Australia ($683,109) is on par with Bellevue (WA) ($658,000). Interestingly, Vancouver ($887,762) is the most expensive city in Canada just as the West Coast leads the U.S.

Some interesting highlights were:

Beverly Hills (CA) replaces La Jolla (CA) as the study's most expensive market in 2006 ($1.8 million). Minot (ND) returns as the most affordable market, at $132,333. The price difference between Beverly Hills and Minot is $1.67 million for a similar 2,200 square foot home. There is a $1.68 million difference between Milan, Italy and Minot.

Once again, nine of the top 10 most expensive markets in the U.S. are in California. Greenwich (CT) is again the lone market in the top 10 not in the Golden State, ranking eighth with an average sales price of $1.4 million.

Markets that rank nearest to the national average sales price of $423,950 include Minneapolis (MN) ($421,433) and Northampton (MA) ($431,000).

The most expensive international markets included (prices converted to U.S. dollar as of September 5, 2006): Milan, Italy ($1.81 million); St. Thomas, V.I. ($1.45 million); Bermuda ($1.44 million); Dublin ($1.41 million); and Rome ($1.26 million). The most affordable international market tracked was Bogota, Colombia, at $56,522.

"The Anderson Forecast"

I have found when talking about wine, politics or the future of the real estate market everyone has an opinion. The UCLA Andersons Forecast has traditionally been predicting doom and gloom for the California economy and the housing market. Their third quarter report was much the same but surprisingly not as negative as I expected. Their report “Soft Landing" says the economy will sustain growth in the next few quarters but not suffer the knock out punch of a recession and real estate will come out of it with only a few bruises.

Looking a bit rougher than the soft landing housing analysts had been expecting, the current housing downswing is unlikely to lead to economic calamity. That is largely because interest rates are historically low, the overall economy still is moving ahead, and builders are stepping up efforts to get their unsold inventories under control.

In the absence of a national recession, however, California's home prices are unlikely to experience significant declines, the Anderson report says. However, it also indicates short term buyers won't realize much, if any return on their money for half a decade.
The forecast predicts the Federal Reserve will cut the funds rate to 4.5 percent and unemployment will rise as sectors related to real estate suffer declines. However, strong business investments and the trade sector along with cheaper housing will serve to take the economy off the ropes for a 3 to 4 percent growth rate by 2008.

In California, existing home price declines began a year ago and are spreading to new regions each month, but non-real estate sectors will help keep the economy afloat as real estate takes a brief, shallow dive.
This distinction is significant, since it implies a slowdown instead of a recession. Historically, recessions in California have had major job loss in at least two sectors, such as construction and manufacturing. Without recession-sized job losses, a significant decline in statewide home prices is unlikely. However, a few regions where new construction is a significant share of overall sales may see some price declines, since builders historically have been more willing to lower prices than owners," the report says.

Anderson Forecast report author, economist Ryan Ratcliff, says to expect declines in building permits to bottom out in 2008, after which activity will begin to return to 2000 levels trimming residential construction jobs, real estate and financial services.

Leamer says, California home prices five years from now will be about the same as they are today, though lower in real terms by as much as 20 percent. "We do not predict a recession, nor do we predict a substantial decline in average nominal home prices. This forecast is based on two arguments. There is not enough vulnerability in the usual sources of employment loss to create a recession, and the historical record suggests that average home prices do not usually fall without this kind of job loss," Ratcliff said.

"Cost per square foot"

We had rain last night in the foothills. It was the first of the season and a sure sign that fall is on the way. While showing homes yesterday in Pollock Pines and Pleasant Valley I noticed a few leaves are turning from green to orange. Another sign that it’s time to move the firewood under cover, take the screens off the windows and move my aloha shirt to the back of the closet.

When evaluating what a home should be worth, it is helpful to review the median sales prices in the area. Although homes are as different as the folks who live within them, the comparison is a quick reference.

The median price paid for a home in the county of Sacramento so far this year was $247 a square foot. DataQuick’s research compares selling prices to the size of a home and comes up with the median price for a square foot. It’s is a quick reference to comparing home prices in the capital region.

In Placer County the median price was $259 a square foot, El Dorado County the median was $266 and Amador County at $246. Nevada County received the highest square footage price at $308 and Sutter was the least expensive at $194. Here are some community comparisons: Auburn at… $266, Granite Bay…$299, Carmichael….$265 and Arden Park….$306.

Higher prices slower sales

Although home sales have declined over last year, California home prices continue to climb. What’s up with that?

The median price of an existing single-family home in California increased 1.6 percent in August and sales decreased 30.1 percent compared with the same period a year ago, C.A.R. recently reported. "We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent," said C.A.R. President Vince Malta. "This is another indication that we're in the initial stages of a long-anticipated adjustment in the market."

According to the report, the median price of an existing, single-family detached home in California during August 2006 was $576,360, a 1.6 percent increase over the revised $567,320 median for August 2005. Also in August, closed escrow sales of existing, single-family detached homes in California totaled 442,150 at a seasonally adjusted annualized rate, down 30.1 percent compared with the sales pace recorded one year earlier and down 2.6 percent from home resale activity in July.

"Although the median price in the state and in several regions hit an all-time record in August, we expect softer prices toward the end of the year," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The median price typically peaks somewhere between June and August before declining toward the end of the year. Some areas of the state (Sacramento and Placer County) already have experienced year-to-year declines for more than two months. This is in stark contrast to the past several years when there were constant double-digit increases. The long-term trend remains to be seen."