The housing market’s “January Effect”

25% declineHome sales plummet by 25%?!

The 376 houses sold during the month of January 2016 in the Reno and Sparks, Nevada market represented a nearly 25 percent decline in the number of home sales from the month prior (December 2015).

25 percent sounds like a very large decrease. But is it really that uncommon? Should we be concerned? The answer to both questions is No. Let’s take a look at some historical numbers.

Number of Houses Sold Number of Houses Sold the Month Prior (December) Percent Decrease in January from December
January 2016 376 499 24.6%
January 2015 363 520 30.2%
January 2014 354 494 28.3%
January 2013 360 492 26.8%
January 2012 449 534 15.9%
January 2011 365 485 24.7%
January 2010 346 426 18.8%
January 2009 233 295 21.0%
January 2008 165 228 27.6%
January 2007 245 291 15.8%

As you can see from the past ten years of data, January has always seen a large decrease in the number of houses sold for the month when compared to the number sold in December. This is due to many home sellers and buyers being incentivized to close on the sale of the home prior December 31.

Why purchase a home by December 31? There are many reasons for this, but probably the biggest are the tax savings (the ability to deduct mortgage interest, property taxes, points on your loan and interest costs) available to many buyers who close before the end of the year.

The motivation to close by year’s end results in the parties involved moving forward the closing dates for transactions that would have normally closed in January. In this way December cannibalizes some of the January’s sales. Think of it as sort of a reverse “January Effect”.

Further supporting this notion is the fact that the number sales in December is seen as a spike upward when compared those of the prior month (November).

Number of Houses Sold Number of Houses Sold the Month Prior (November) Percent Increase in December over November
December 2015 499 423 18.0%
December 2014 520 473 9.9%
December 2013 494 477 3.6%
December 2012 492 525 -6.3%
December 2011 534 497 7.4%
December 2010 485 398 21.9%
December 2009 426 461 -7.6%
December 2008 295 270 9.3%
December 2007 228 204 11.8%
December 2006 291 281 3.6%

Looking at the same ten years of data and comparing December home sales to November’s homes sales, we observe that December’s sales typically are higher than November’s.

Nov vs Dec vs Jan sales

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January median sales price, units sold, DOM and inventory

monthly medians - Jan 2016January’s median sales price pulled back substantially from December’s. January’s median sales price was $277,250 — or a 4.4 percent one-month decrease from December’s median of $290,000. Despite the large drop in January’s median sales price, year-over-year January’s median represents a 8.7 percent increase from January 2014’s median sales price of $255,000.

January’s median sold price per square foot (ppsf) fell to $155.44/sq.ft. — a 1.1 percent decrease from December’s $157.20/sq.ft. Year-over-year the median sold ppsf is up 9.7 percent.

The number of houses sold in January fell to only 376 units. That total is off a whopping 24.6 percent from the 499 houses sold in December; however is up 3.6 percent year-over-year from the 363 houses sold in January 2014. [For further analysis of January’s decline in houses sold see Reno’s housing market’s “January Effect”Ed.]

January’s median days on market (DOM) increased to 87 DOM — adding 11 more days to December’s median DOM of 76 days. The large increase in the DOM (listed to close) is likely attributed to the new TRID rules that recently went into effect in October last year.

A new metric: Two months ago I published a blog post introducing a new metric available on our MLS [See MLS adds “Days to Contract” metric for more details] This new Days to Contract metric reflects the number of days that a property was listed on the MLS before going into contract (e.g. pending). January’s median DTC was 8 days. Compare that to December’s median DTC of 12 days.

Available inventory continued to decline in January. Currently 762 houses are listed and available for sale. Compare that to the 819 available at this time last month. Using the 376 houses sold during the month of January as the divisor, the current months-supply-of-inventory (MSI) stands at about two months — a Seller’s market — particularly at the lower price points.

January sales by type break out as follows:

  • REO sales: 6% – up from December’s 2%
  • Short sales: 5% – up from December’s 4%
  • Equity sales: 86% – down from December’s 92%

January sales by price band break out as follows in the table below…

sales price ($000’s) units sold cumulative % of sales
0 – 99 0 0%
100 – 199 50 13.3%
200 – 299 171 58.8%
300 – 399 96 84.3%
400 – 499 29 92.0%
500 – 599 11 94.9%
600 – 699 5 96.3%
700 – 799 3 97.1%
800 – 899 3 97.9%
900 – 999 5 99.2%
1M+ 3 100%
total 376

January’s median sold price for houses and condos combined was $258,000 — a 6.9 percent decrease from December’s median sold price of $277,000 for combined sales of houses and condos.

The table below contains the past 13 months of data…

Month Year # Sold Median Sold Price Sold Price per Sq Ft Median DOM # of Actives # of Pendings
Jan 2016 376 $277,250 $155.44 87 762 853
Dec 2015 499 $290,000 $157.20 76 819 749
Nov 2015 423 $292,000 $158.97 72 925 890
Oct 2015 541 $279,900 $158.88 66 1,105 886
Sep 2015 572 $285,000 $159.42 63 1,231 931
Aug 2015 526 $290,000 $160.98 56 1,238 1,021
Jul 2015 650 $290,000 $159.31 57 1,138 991
Jun 2015 657 $280,000 $155.22 54 1,005 1,088
May 2015 578 $283,450 $152.71 52 930 1,129
Apr 2015 567 $272,000 $150.85 57 785 1,101
Mar 2015 552 $272,195 $148.88 59 715 1,027
Feb 2015 397 $265,000 $143.66 75 630 1,044
Jan 2015 363 $255,000 $140.34 84 706 933

Note: The medians table above is updated on a monthly basis. The median home price data reported covers the cities of Reno, Nevada and Sparks, Nevada [NNRMLS Area #100]. Residential data includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – February 8, 2016. Note: This information is deemed reliable, but not guaranteed.

Click here for historical data back to 1998.

Related post: December median sales price, units sold, DOM and inventory

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This week’s real estate headlines

Real estate headlinesHere are a few national real estate-related stories that came across my screen this past week…

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This week’s real estate headlines

Real estate headlinesHere are a few national real estate-related stories that came across my screen this week…

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Washoe County insured recordings statistics – December 2015

Below please find Washoe County, Nevada’s insured recordings (resales, new home sales, and refinances) statistics for the month of December provided by our friends at Ticor Title of Nevada, Inc.

[Click on the chart below to enlarge.]

Ticor Washoe County Market Stats for December 2012-2015 Trend Line

Commentary from the report:

Resale and Refinance transactions increased significantly in December which is normal as many want to close before the end of the year. For December, the Resale transactions that were cash, decreased considerably to 26.27% from the 46% in November.  New Homes had an uptick in closing for December.
 
Median Sales Price was $290,000 in December according to RSAR and this has been consistent month over month, which is a flattening in the market. RSAR said this is a settling of the market due to our 4 year recovery. As mentioned before, buyers are still holding for affordable properties and are not making quick decisions because of the lack of inventory in specific price points.  Sellers are still overpricing their homes and we are continuing to see price reductions.  Buyers and Sellers are at a standoff like two bulls in a ring.  Each waiting for each other’s next move.
 
After attending many forecasts the past few weeks, the overall consensus was to not get too excited about the TESLA affect.  We still have an inventory and affordable price problem.  Most of the companies that are coming in to the market to support Tesla have employees who cannot find or afford homes in our area.  At the BANN Forecast, many mentioned that we need builders to build homes in the $250,000 or less range.  It was also mentioned that there are many companies coming to support TESLA, so we need to focus on them as they come into our market in the next few years. The biggest concerns that are hovering over us….infrastructure and housing.
Predictions are that 2016 will look similar to 2015 in the housing market.  Commercial market is very healthy and very busy.

Below please find Washoe County, Nevada Notices of Default (NODs), Notices of Sale (NOSs), Trustees Deed Filings (TDs) and New SFR REO Listings statistics for December 2015 provided to us by our friends at Ticor Title of Nevada, Inc.

[Click on the chart below to enlarge.]

Ticor Washoe County Foreclosure December 2015 Trend Line bar
Commentary from the report:

Notice of Defaults, Notice of Sales and Trustees Deeds recorded in December increased a bit. Ticor has been doing some research on the Notice of Default filings and have found something very interesting.  After researching the Notices of Defaults documents for the last few months, we found that many of those who are defaulting on their mortgage haven’t made a payment for years.  We found quite a few from 2008, 2009, 2011 etc.  What does this mean?  There are homeowners that could have been in the mediation process or foreclosure alternative process, or the banks have now been able to catch up with their paperwork and are now able to foreclose. This was eye opening. Remember Shadow Inventory?  This is an example of shadow inventory discussed years ago.  The first shadow inventory, was properties that the bank owned and haven’t  put on the market; The second is properties that are in the foreclosure process and will either be short sold or purchased at the court house steps; The third is properties where there are properties where homeowners haven’t made their mortgage payment and the bank cannot foreclose because they can’t find their paper trail or because of legislative changes.

Related post: Washoe County insured recordings statistics – November 2015

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This week’s real estate headlines

Real estate headlinesHere are a few national real estate-related stories that came across my screen this week…

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RRB awarded “Top REALTOR® Blog”

best Realtor blog badge 2016Pleasantly surprised to see that the Reno Realty Blog has been included in this year’s Best REALTOR® Blogs list.

Check out the 2016 “Best of” list here: BEST REALTOR BLOG AWARDS 2016 WINNERS

Thank you to all the readers — both long-time and new — of the Reno Realty Blog for your support!

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This week’s real estate headlines

Real estate headlinesHere are a few national real estate-related stories that came across my screen this week…

Posted in headlines, News | Tagged | Leave a comment