Thursday, May 15, 2008

Why Price Range Matters

I've been seeing a lot written and spoken about the market conditions lately – days on market is coming down, sales numbers are going up, etc. And while I believe there are a lot of silver linings on our current market's cloud, I think it's important to remember how different "the market" might be from any one individual house, or even when comparing two house's relative markets.

I pulled the combined numbers today for Surprise, Peoria, and Glendale (single family detached homes only.) I wanted to show how different the numbers were for different parts of the price range. Take a look at these tables:

 Active TodaySold in April, 2008Months' Inventory
$150k - $250k2,5323627.0
$500k - $750k373662.2

Wow – what a huge difference! If you're selling a home in the northwest valley in the $150k - $250k range, things don't look so bleak. But if your home is priced in the $500k - $750k range, you don't have much of a chance of selling right now; there's simply too much competition!

Now let's look at the same information, but we'll look at the pace of sales from 2005 (the busiest year ever.)

 Active TodaySold in 2005Months' Inventory at 2005's volume
$150k - $250k2,53260855.0
$500k - $750k3735248.5

We all remember 2005 as being completely out of control, with most homes selling the first day on the market. Well, using 2005's crazy sales volume, today's numbers aren't too much different on the lower end of the price range: 5.0 months compared with 7.0 months. However, back in 2005 we sold 524 homes in the $500k - $750k range. At that pace of sales we would clear today's inventory in 8.5 months – a HUGE difference compared with 62.2 months.

I've said before that statistics can be easily manipulated, but this example shows that we can't take a given number at face value. Our recovery will vary greatly based on city, zip code, subdivision, price range, lot size, and all the other variables that make each home unique. We'll continue to see trends moving in the right direction, but they will always mean different things to different homeowners.

Your analytical Realtor,

Chris Butterworth

[tags] Surprise, Glendale, Peoria, inventory [/tags]