August Produced nearly 900 Local Home Closings

August was a solid month for residential real estate in Clark County. There were nearly 900 closings on single family and condo units. This does not include private sales or bare land. 890 units is a fair bit of volume that hearkens back to the pre-recession boom.

The market has been labeled by most analysts as warm yet the volume seems hot. That is only part of the story. When the market was really hot a couple of years ago the 'heat' was driven more by a lack of inventory than a straight rush of buyers. We were closing only 600-700 deals a month in an environment that was producing double digit year over year price growth. Right now inventory has risen faster than the pool of buyers but remains slightly in favor of sellers until you get well into luxury territory. The higher levels of inventory means more buyers can get a house and that has proven out in the sale numbers published by the MLS.

These market conditions are ideal actually for a sustainable level of growth. Year over year market price appreciation is settling in at near 50 year norms and middle single digits for the most part. This is a perfect scenario of price and value. Buyers can take a little extra time to get what the want and sellers can still count on a decent return on their investment. It is almost real estate nirvana.

Clark County did see a drop in the median price earlier in the summer for the first time in years, but that was as much about the rush of buyers at the entry price ranges as any real price softening. A house that sold last year for $400k is likely worth a little bit more this year. Overall the median price has been a bit flat but again that is driven by activity at the bottom of the range far exceeding activity at the top.

A bit part of the bottom price activity can be attributed to the recent dip in interest rates allowing buyers that were priced out of the local market last year to get a second chance this year. Judging by the numbers, they took advantage.

This is a fabulous real estate market that is very near neutral conditions with sellers holding a slight advantage at the median price point. Sub median prices are still a strong sellers market. At 150% of median it transitions to a buyers market.

Washington State Biggest YOY Increase in Nation

The Evergreen State indeed led all comers in real estate appreciation last year according to NAR reports circulating around. This is no surprise to locals but some relief for buyers in in sight as projections for 2018 by the typically optimistic NAR is more like 6% for this year. Sellers will still enjoy appreciation in the market but buyers can feel a little less exasperated as things are settling in.

Washington State had a 12.6% year over year increase only edging out Nevada by a fraction which was also 12.6%. Sellers looking to squeeze the most out of their resale may find a hilltop coming as rates continue to march upward and downward pressure on pricing is inevitable. Double digit market appreciation is never sustainable over the long term and we have had just about enough of it to stay healthy. I welcome a softer climb with modest average price growth in the 4-6% range as healthy and sustainable.

As reported right here recently, the market in the higher price ranges is already switching over to a buyer's advantage while the entry level sub-median range remains a sizzling hot plate of multiple offers and up-bidding. In the final analysis pricing homes properly yields the best results and sellers are well advised to not play games with over pricing or under pricing. Get it where it ought to be and the market will deliver a top dollar buyer in 30 days.

Analyst Projections are Softening for 2018

The overall Portland Metro area has already seen a slowdown in the rate of price appreciation in the first 1/3 of 2018. There is near unanimous analyst agreements that market conditions will soften as the year progresses. For buyers that may not seem like the case especially resale buyers in places like Portland, where inventory remains critically tight.

A low inventory definitely tips the scales towards sellers int he supply and demand view of economics, but demand in real estate is a little different than demand in many other commodities. Demand for real estate is almost always high, but the problem isn't that there aren't ready and willing buyers, there are plenty; the problem is that there are many "able" buyers.

The greater Portland-Vancouver market has seen housing price growth so outstrip income growth that many ready and willing buyers are simply no longer able. Many sellers still believe they can list their home for a sky high price because they have a "rare" commodity. But having something rare still requires having more buyers than sellers. For example, if I have a rare and desirable item that I price so high no one can afford it, I will not sell it, even if it is the only one on Earth.

One real classic trap that I see seller's right now falling into is the chasing down the market. Last year a seller could float a high price above market and get away with it. Buyers outnumbered sellers so much that someone would always step up and make an offer close enough to close. But now I am seeing, and the analysts have confirmed, that strategy is leading to a series of price reductions from sellers.

A series of price reductions puts buyers in a position of strength against sellers. As interest rates rise the pool of eligible buyers shrinks. Sellers are well advised to price their home at market pricing because higher interest rates reduce the buying power of prospects for the home. Remember inventory IS in short supply, but recent conditions have also reduce the supply of "able" buyers. This local market is moving into a neutral status where it is neither a seller's or buyer's market. I still think current conditions tend to favor sellers, but another few upticks in interest rates could level the field.

For younger buyers that have never seen a mortgage rate above 6 percent, I'll tell you this. The 50 year average rate on a home loan is still above 6%. Young people have seen these historic low rates as the "norm" when in fact this has been an abnormal decade for interest rates which are now beginning to normalize. Paying 6% on a mortgage loan is still reasonable when compared to the long term averages.

That however does not mean the buyers shouldn't try to score a house while rates remain lower than 6%. Interest rate is a much bigger impediment to buying a house than price. Interest rates will likely rise faster than prices this year, so buyers should focus on their ability to pay, not trying to grind out the lowest price on a house.

So overall Clark County, Washington saw roughly 10% growth in the median home price from 2017 to 2018, most analysts are projecting 2018-19 growth to be about 1/3 that in the 3% range. So prices are still rising, but not at the rate they were last year. Incomes are the limiting factor. For buyers, the price slowdown may feel like a reprieve, but combined with the up creep in rates the purchasing power will make the market "feel" like it's rising just as fast as last year.

Sellers need to be cautious, analysts are not the end all be all. Market conditions can be fragile, and they are in my opinion fragile right now. If national and local economic indicators remain strong most of the analyst projections will likely pan out, but any negative economic factors could lead us back to a buyers market. Sellers: A bird in the hand is better than two in bush, in 2018.

Slight Softening could be Golden Opportunity

Prices are stable in the local market with modest appreciation in values. I am seeing a little bit of a bump in inventory which is a much needed softening of the heavy seller's market we battled last spring.

Buyers that were frustrated over the summer with multiple offers and aggressive competition for property in what was a very tight inventory situation, may find that things tempered a bit. It seems like the number of buyers has lightened a touch and a modest gain in sellers is leveling the market into a healthy near neutral condition that just slightly favors sellers.

This is more evident in the upper price ranges but even in the sub-median market I see openings for buyers. Interest rates are nudging up and that can lower the buying power of buyers. This current moderation in the market coupled with still very low mortgage rates could be a golden opportunity to strike a deal for a house.

The classic fence sitters are faced with an opportunity that may not be around by summer. With rates on government backed mortgages still in the low 4s, and a slight flattening in appreciation, the time is now for buyers. Buyers should remember that historically speaking, any rate under 6% is a "low" rate. We have been under 6% for a very long time so some people may be under the delusion that 5% is a "high" rate.

I have written on this very blog about the dangers of waiting for a better price in a rising rate market. Rate will almost always hurt the bottom line more than price. Most analysts are predicting a modest gain in values for 2018 and rates are trending up which amounts to the classic "double jeopardy" scenario.

Get off that fence!

Washington Now 3rd Most Expensive in USA

The State of Washington has managed to climb its way to the upper echelon of home prices for America according to a report last year by the Seattle Times. The statewide median price of $307k last summer placed Washington State 3rd on the list of 50 US states behind #2 California and #1 Hawaii.

Here in Clark County we enjoy relatively inexpensive pricing compared to nearby Portland, OR and well under half what homes cost in Seattle. In fact Clark County remains one of the value propositions in the Northwest.

Affordability is not just based on median or average home prices, but also median or average incomes. For example if the median income in city A is $150,000 and the median home price in $1,000,000 then that city has more affordable housing than city B with a median home price of $200,000 and a median income of $30,000. This is why Seattle with its $700,000 plus median still has huge demand for real estate, they have a median income running close to $80,000 which is about $15k higher than the median here in Clark County.

We have an interesting dichotomy in real estate here in Clark County. Portland is just across the river and they have been built out for decades. They have a genuine shortage of housing, but they don't have the ultra high incomes seen up in Seattle. Portland in many ways is more expensive than Seattle. The median income in Portland is right at $60k and that is about $7000 higher than Vancouver or approximately 12% higher but Portland's median home price is a whopping 25% higher than Vancouver. This puts Vancouver in a high demand position as it offer close in proximity at a significant savings.

Clark County, unlike Portland and most of Multnomah County has a fair amount of build able land within the urban growth boundary. This will keep Clark County competitive on home pricing and that is good for us and very good for buyers.

2017 could be a great year of moderation for us in the market. I am deliberately using the word "great" to describe a moderate condition, because a rapid run up in pricing creates a climate for volatility. This market is pretty healthy right now.

Market Report

Spring is coming to a close and the hot summer rapidly approaches. The temperatures are not the only thing heating up. The final numbers for the month of May, showed more than 700 residential units sold. With inventory tight, buyers are engaged in a battle to get to first position.

The Clark County median is sitting right at $300k up about 8% over last May according to data collected by the RMLS. Some are surprised that it is not double digit growth year over year, but that is just a sign that the market's ability to pay is becoming tapped out. With the median household income in Clark County sitting at roughly $60k annually, that means the median purchasing power is limited to about $1800 per month. $1800 a month equates to about a $275,000 purchase price. These are rough numbers and there are many variables, but in general when the median price of a house exceeds the median purchasing power, the prices tend to level out or stabilize a bit.

Demand is still high enough to offer a rapid sales opportunity for sellers, but the market has begun to show real reluctance to look at overpriced listings. Last year and up until about six months ago overpriced listings were still being courted as buyers were willing and able to pay. Now the ceiling for our market has been breached and that will cause a stabilization in the upward pricing particularly under $350k. Sellers will have to bring a reasonable price to market if they want a fast sale and the bidding up is slowing a bit as buyers are leery of low appraisals.

The middle and top of the market may continue to see some growth as the bottom has been feeding a healthy volume of buyers that took profits on a smaller house and are looking to move up. Even though sales are robust and pricing is softening a little bit, the entry level market remains ultra tight at least partly due to the reality that many of the sellers in the middle and upper part of the market are retiring Baby Boomers looking for the classic downsize. These Boomers are competing with the entry level buyers and they are often coming with big down payments of even all cash offers. This makes it challenging for first time buyers.

I hear a great deal of chatter among the community centered around a fear of another bubble. Although the prices have been accelerating rapidly since 2012, the rapid growth is not as robust as it was in the middle 2000's when 15-18% year over year gains were happening. Furthermore, the shady and dangerous lending activities that were going on prior to 2009's crash are no longer happening either. The real estate market does ebb and flow economically like many other commodities, and there is no short term guarantee that prices will continue to appreciate. There is however reason to believe that an event anywhere near the magnitude of the last market correction, is highly unlikely.

I believe that market conditions locally will continue to show modest appreciation gains but likely less than 5% growth in values over the next 12 months. Trends are what they are however, significant positive or negative economic shifts can knock these types of predictions over in a heartbeat. For buyers worried about buying at the top of the market, I say this: rents are high and many people can still buy the same house they are currently renting for less per month. Unless one is a mobile person that moves allot, buying still makes way more sense than renting in this market.

For sellers wondering what their home is really worth right now, contact your trusted real estate pro and have him or her conduct a Comparative Market Analysis. If you don't have a local pro, fee free to reach out to me and I can give you a detailed analysis at no cost to you.

Entry Level is Getting Tight

Our local market has become quite tight for entry level detached housing. The pressure is overwhelming in the sub $230k market. With a median household income of 50k annually, a healthy market supports a median home price of about $200k. Our median is much higher than that. In fact the Clark County median is rapidly approaching $300k. We stand at roughly $275k with a year over year appreciation at 11%. If 2016 matches that growth rate $300k will be the mark by this time next year. I do not think we will, but the point is already made. A median earner cannot buy the median priced home or even anything remotely close.

Rents are also very high right now. A renter will pay $1500 for a 3 bed 2 bath 1500 foot ranch house in this area. That same renter can own a similar house with a mortgage payment very near the rent. Unless that renter is planning on leaving the area, why would he not want to own the home? The payment is fixed, it is harder to get evicted when you own, and the landlord won't throw him out because he IS the landlord!

The primary difference is that a landlord will rent a $1500 house to a 50k earner. A bank may not. This is what creates market pressure on the entry level. Buyers get locked into a $220-$230k price range and there is less and less available. Slightly higher earners bid the properties up in a desperate attempt to get as much house as they can before the market passes them by.

The middle and top of the market are starting to feel some of the pressure as well. Sellers of these $250ish homes are moving up to bigger and better things. They are starting to bid up homes a bit. The pressure will never be as bad at the top as it is at the bottom because there are ALWAYS buyers at the bottom but the top is a more exclusive market with far fewer qualified buyers. Inventory is the primary driver of the high end market where as demand pushes the bottom. Demand for upper end real estate tends to remain relatively flat but the entry level sees wild fluctuations based on economic conditions. Add a tight inventory in the entry to mid level market and things get dicey for buyers. We are dicey right now to be sure.

Many buyers qualified to buy a home a few years ago, but they allowed market fear to get in the way and they hesitated. Now the market has passed them by. When considering an owner occupied property, the time to buy is nearly always now. Yes exceptions are true, buying in late 2007 was not ideal, but one always needs a place to live and even those who bought at the peak before the great crash, still had a home to live in and those folks are now seeing all their equity return. While the home was financially "underwater" it still served its purpose as a shelter. In the grand scheme of things the only bad thing about the value decline was that it limited the ability to sell.

Too many people put too much into the "investment angle" of the home they buy to live in. Yes, we always want to make a sound investment. But unless you are renting out every extra inch of that house, you are not maximizing your investment. I did not buy the house I live in as an investment, I bought it to provide shelter for my family and to use it for my own needs. Its value is not important until I decide to sell it or leverage it. As a real estate professional I do tend to look at the investment side of buying a house even when I intend to live in it, but I never let the investment potential or lack there of, be the overriding factor in the purchase. The primary concern is its use value. Investment potential is supplemental at best. When I look at property for investment, then investment potential is the overriding factor and it dominates the decision to buy or not to buy. Everyone that sat on the fence while the market was down has now lost all the investment opportunity as prices have risen. They all should have bought at the bottom and failed to act out of fear. Now many of them have to rent instead of own. My clients that bought in 2010-2012 have seen the value of their homes increase 50-75%. Again it really doesn't matter unless they want to sell and move into a bigger house or leave the area. But they are enjoying a mortgage payment that is 30-50% LESS than current rents. That DOES matter. Right now rent vs own is about par on payment for a basic 3 bed 2 bath home. Why again are qualified buyers not buying?    

The Two Hundred Thousand Dollar House is Elusive, But Not Dead Yet

975 SF, 3 bed 1 bath, $199k

Here in Clark County, Washington the housing prices have been robust. Maybe just a little too robust, but none-the-less homeowners that were once underwater to the bank are now finding themselves free to sell and move up or down as the case may be. Interestingly enough, sellers are sitting tight on their homes, and this has created a flush demand for entry to mid-level homes locally.

The $200,000 dollar price point is beginning to vanish in this market. Sure there are fixers and super tiny homes as well as condos and townhouses, but the single family detached dream is getting tight at $200k. I have a young man interested in buying his first home. He is looking to keep it around $200k and wants to use the USDA lending program. This loan program is designed to serve rural areas but there are a few here in Clark County.

1506 SF, 3 bed 1 bath $199k 

The bottom line is that buyers can still find some properties in good shape under this thresh hold. In close to the city, here in Vancouver, these will be fixers or really small houses. In the outlying areas such as Washougal and Battleground there are still opportunities for a decent sized home around 1100-1400 squares either modern and attached or older and detached. Many of these properties will qualify for a variety of financing options. Buyers need to be aware that most of the government sponsored loan products, FHA, VA, USDA, etc. have requirements that may exclude a "fixer" type house. There are other programs designed specifically for fixing up a troubled house, those a bit more complex and buyers should consult with a qualified loan officer about how they work.

This entry level housing market is almost always in demand. During the recent hard recession (2009-2012) I sold a great deal of homes in the entry level price range. The tough market conditions created a whole new class of buyers in a much more modest income bracket. Back then, I wrote articles about two minimum wage earners qualifying to buy a real house! These buyers are now sitting pretty with a nice chunk of equity in the homes they paid $125-150k for now valued at $200-250k.

The entry level buyers are the most vulnerable during an upswing in values. They can easily be priced out of the market by either rising home prices or rising interest rates. The whole new class of buyers I mentioned above are already priced out of this housing market. The window has closed locally for two minimum wage earners to buy a detached single family. Buyers in the higher prices ranges may not get priced out, but they can get priced down, meaning they may have to downsize the dream if they sit on the fence too long.

Sellers are in a prime zone right. Selling in the middle of an upswing can be good for the move up housing market. Sellers can let that entry level home go, use that equity to buy up to the larger home and still enjoy some market appreciation. Waiting too long, like people did in 2007-08 can result in being "stuck" for a few years when the market dips down. In my book 'Don't Panic', the whole theme is to buy low and sell high. We are running slim on the buy low opportunities so don't sit on that entry level house much longer. Sell it and grab your new house while their is still strong upside potential on the value.

Low Interest is keeping Upward Pressure on Home Values

The market continues to move along at a healthy pace. Here in the Portland-Vancouver Metro Area values seem to be rising at a pace of 5% to 10% year over year. Local fluctuations and market conditions can vary a bit from neighborhood to neighborhood. Low interest rates will always help drive sales in real estate and robust sales will typically lead to increased price pressure on buyers.

Inventory remains tight and many would be sellers seem to be waiting before they list. Holding out for more money? Waiting for equity position to grow so they can make their move up? Still upside down from the crash? All of the above my friends. Buyers are going to continue to feel the pinch of higher prices so they are well advised to consider whether waiting any longer will benefit them. In general this pace of say 7% price appreciation will almost certainly outpace income growth. Some people might be waiting on a career promotion which could launch them into a much higher income, but for those in a job with a steady rate of growth, buying now will make more sense than waiting.

The median price in Clark County, WA is now pushing up above $260,000 and that could easily make its way to $300,000 over the next few years if this trend continues. Sellers should also consider the benefits to selling now rather than waiting. Whatever home will replace the current home will be more expensive later. Those that are downsizing may wait to gain a larger down payment for the next house. Those that are moving up however will only get further behind the longer they wait. The three bedroom starter home is in seriously high demand right now so the move up seller should get listed now before that larger four bedroom house slips out of financial reach. No one knows what tomorrow will bring but we do know what is happening right now; that is low inventory and lot's of hungry buyers.

Metro Area Market Trends

I pulled some data from the National Association of Realtors® for the Portland-Vancouver Metro Area and the results are interesting but not surprising.

Many agents and media outlets have suggested the market is a raging bull and although in context it may be true. But the perception has been that it is a seller's market in the vein of 2005-2006 and that is simply not the case. Back before the crash in 2008-2009 it was a ridiculous seller's market. Homes were fetching whatever the seller wanted and condition was almost a moot point. Double digit appreciation was practically expected rather than being a gross anomaly like it really should be.

This current market is much different and frankly much healthier. yes we are in a seller's market. But sellers still have to present a quality product at a fair price. Over priced listings are NOT selling and that is a very definitive difference between 2005 and 2015.

Buyers are also showing reservations about homes that are in questionable neighborhoods or that need TLC as they say. The market is raging but only if you have a solid move in ready house in a conforming neighborhood. Other homes are are taking longer to sell. 

The media can sometimes make a mountain out of the proverbial mole hill and sometimes they underestimate things. It seems the story is not always what it seems.

We are in a healthy real estate market here in the Portland-Vancouver market. Values are rising in the 3-5% annual range and that is just dandy. If sellers want to have a vigorous multi-offer situation they need to be in a solid hot neighborhood AND they need to have that house looking real sharp. Sellers that are unwilling to comply with the conditions presented by the cold-hearted market will only find disappointment.

Buyers on the other hand, need to realize that the house they want, the clean and sharp beauty in the perfect neighborhood will not be on the market long. It will also sell for more than the asking price. Buyers making low offers on hot houses will also be met with frustration. 

The National Association of Realtors® has some projections for pricing over the next twelve months and the outlook is HEALTHY.

2015 Could be the Last Chance for Deals

That headline should have got your attention. We have seen modest to robust appreciation across the USA over the last two years in the real estate market. The mortgage rates have been ranging from really low to ridiculously low and the economy has been slowly moving towards full recovery.

This has kept real estate as a value. Prices have run from the basement in 2010-11 rising to the point now that they are about where they were in 2007-08. Rates are the real story however. They unprecedented long run of sub 6% rates has kept housing active despite and overall economy that has run from dismal to fair.

2015 could represent a turning point however. If this economy gets into full swing, we very well could see the Fed back off the loan guarantees and rates could end up where they really should be in the 6% range. Coupled with the last two years of appreciation that would move the home affordability index much higher and lock out many buyers that can buy today but couldn't with 6% mortgage rate.

As an FYI 6% is still a very good rate and well below the 50 year historical average of 6.8%

Buyers should take care of their finances and get ready to buy in 2015 if they want to secure a housing "deal". The deal may not be so much a price deal but a rate deal. I have said it many times before and I will say it again here, rates kill buyers much more than price.

2014 has shown us that the entry level clean house was king. These little 1400 square foot 3 bedroom 2 bath homes have pushed up towards the $200,000 in the local market while just 10-15% percent more money buys a house nearly twice as large. These low rates have brought out the entry level buyers in force. Any upward movement in rates will "thin the herd" at the bottom and that could mean a serious appreciation slowdown at the entry level. I have seen the starter houses already showing signs that the economic ceiling has been reached. The middle however should continue to move up in appreciation with a modest but healthy rate of growth.

The real estate market doesn't just move in broad based motions. There are subtle differences for neighborhoods, price ranges, style, etc. Prices can be moving up in mid size house while remaining flat at entry level. That is my prediction for 2015 if we see interest rates move up into the 6% range. The market a few years ago allowed two minimum wage earners to buy the median priced home in our local market (Washington minimum wage at $9.32/hour). That is off the table now and that means a lot of buyers can no longer afford a house. This is why the bottom of the market has seen a leveling on appreciation. As the economy ramps up, middle income earners are getting back on the job, better wages, etc. that will help push the gap between entry level and mid-level back into proper proportion.

I believe the value proposition for 2015 will be in the upper middle and lower high end homes. Locally that means $350-500k. That is probably where the "deals" will be found. I am no Nostradamus, but that is where things appear to be headed. 2015, it's time to jump in. 

Some Sellers are Reaching for the Heavens

2013 saw a robust increase in housing prices. In fact the median price rose 12-15% over that year. 2014 has seen a dramatic slow down in the rate of increase however. It is likely that this year will end up somewhere in the 3-5% appreciation range. This is by no means a negative. Appreciation is one of the core values to owning real estate. I believe we still have the same seller's market conditions as we did last year but prices are being held back by an overall sluggish economy. Sustained double digit growth requires a roaring economy. We haven't heard an economic 'roar' in quite a while. We are seeing a bit of a 'purr' however.

Some sellers in the market place are beginning to price their listed property 3-5% above the market. That tactic worked last year but is not a winner in 2014. Buyers are plentiful but they are limited to their financial ability to borrow money. Sellers that overprice their homes in this current situation will likely do nothing more than delay the sale of their house. The trick in this market is to have the home between 98-102% of market value. Above market should be for a truly move-in ready, updated or modern home. Bear in mind that some sellers are overpriced out of necessity. Many homeowners that bought near the top of the market found themselves horribly upside down and are just now closing in on positive loan to value. Sometimes overpriced listings are driven by greed and sometimes by financial necessity.

Buyers need to recognize that these move-in ready modern or updated properties will fetch high prices and if they are under market they will likely get over asking offers. A good buyer's agent is critical in these kinds of modest growth markets. An experienced agent can help buyers determine where to come in on offers to get the best deal possible and still acquire the home.

The most important thing to keep in mind is the mainstream media. These guys love to take subtle changes and turn them into a catastrophe or a rampaging bull depending on the conditions. In most cases things are much more modest than the big circus media makes them out to be.

Despite the current "seller's market" it is still a good time to buy a home. Low interest rates and modest appreciation still favor buyers. This current real estate market is very healthy and favors both buyers and sellers. Get out there and find your dream home.      

Ho Ho Ho, Real Estate is in the Holiday Spirit

The real estate market is healthy right now. We are enjoying modest growth in pricing and strong sales volume. This is the kind of sustainable growth that is better than the rampaging growth of the 2004-2006 period.

The Regional Multiple Listing Service here in Clark County has posted sales summary data through first nine months of this year. 4728 real estate transactions have closed in those first nine months and that compares quite favorably with the 3805 through the first nine months of last year. This reflects a 24% increase in closed transactions. There is no shortage of buyers out there. The median price for 2012 was $194,500 and through the first nine months of 2013 the median is up 14% at $223,600.

Numbers tell many tales and a healthy pinch of the proverbial salt is in order with statistics. Has the actual value of any given home in Clark County appreciated by 14% this year? Not necessarily. Last year the market was still being driven by sustained growth with first time home buyers and the entry level market as well as a lot of REO (bank owned) and Short Sale transactions with typically lower closed prices. This year has seen a nice progression into the mid level price range as homeowners can finally sell that formerly upside down home. So as more transactions occur in the mid level, the median price rises. Even if the actual appreciation was very modest the median can rise much steeper if there is a market transition to more expensive homes.

All of that said, there has clearly been appreciation in the marketplace this year. Those three bedroom two bath 1200 square foot 1950s move in ready homes that were readily available for sale in the $130-140k range a couple of years ago are now easily $160-170k this year. But homes in the middle to higher price range have had much more modest appreciation.

I decided to dive in a little deeper. I took two county wide but very narrow market segments and will show actual growth in volume and appreciation between 2012 and through yesterday's closings this year. The first is a batch of typical entry level family homes and the second a typical first move up house. These are fairly small segments but this helps to keep them all truly comparable with as little variance as possible but still providing a large enough pool of data to be statistically sound. These all have very similar lots, in town and very similar sized homes, etc.


Last year there were 47 detached single family, three bedroom homes with 1200-1400 square feet of living space, sold in Clark County that were on a small to medium city lot and were not bank owned or short sale transactions. The median price was $163,900 and 98.19% of original list price with an average time on market of 27 days. So far this year the numbers for the exact same search yielded 83 sales with a median price of $185,000 and 97.55% of original list price with an average of 22 days on the market. Well that is 13% appreciation in that segment and a unit sales volume growth of 77%. What about the move up market?

This time I ran sales of homes again, traditional sales, not short or REO. 2000-2500 square feet of living space, four bedrooms on a small to medium size city lot. 2012 had 71 sales with a median price of $232,000 and 95.79% of original list price and average time on market at 42 days. The numbers so far this year look like this; 170 sales at a median price of $251,125 and 97.01% of original list price with an average 39 days on market. This represents appreciation of 8% and a huge sales growth of 139%.

The overall synopsis follows the traditional model for market recovery. The bottom grows first and feeds growth to the middle of the market. With a 139% sales growth this year in the move up market, I foresee an opportunity for double digit appreciation in that segment for 2014. This of course depends on all the crazy variables in the real estate market and the economy at large. Marketing time continues to shrink and well priced homes get multiple above asking price offers. There is a segment of sellers that will "test the waters" with a high price and then end up reducing the price to sell. But 97% of original asking price is quite good.

Short sales in both of these segments were flat year over year. 23 sales in both 2012 and 2013 in the 3 bed segment. The 4 bed segment 31 in 2012 against 27 in 2013. I left out REO because the condition of the home varies so widely, banks often use auction methods and such, it is difficult to gauge those against traditional sales. If you look at the combined segments here, 2012 had a roughly 2:1 traditional vs short sale ratio and this year short sales remained flat while traditional sales skyrocketed so the ratio is now slightly more than 5:1. If this ratio carries through to the overall market it bodes well for our local market.

2014 is shaping up nicely for real estate. As the middle of the market begins to feel a surge so then the upper levels will enjoy favorable price movement as well.