SmartMoney recently performed an analysis of home sale data in markets across the nation in an attempt to determine those markets where listed home prices were most (and least) “realistic”. See SmartMoney‘s Cities With Least Realistic Home Prices.
In the study SmartMoney compared a market’s median list price with its median sales price to determine the difference. The greater the difference, the more unrealistic the list price. For example, the three cities with the “least realistic” list prices are…
|Metro||Median list price||Median sales price||Houses selling for…|
On the other end of the spectrum, the three cities with the “most realistic” list prices are…
|metro||Median list price||Median sales price||Houses selling for…|
|Las Vegas, Nev||$120,000||$121,800||+1.5%|
So, how does the Reno-Sparks, Nev. market compare with its list prices? I took a look at the list prices for all current active and pending houses listed on our MLS. The median list price is $179,900. I then looked at sold prices for houses sold over the past 30 days. The median sales price is $150,000. This equates to a -16.6 percent difference. So, relative to SmartMoney’s ranking, Reno-Sparks’ listed prices would rank at the “unrealistic” end.
Next I decided to look a little deeper at the numbers. If I separate the active listings from the pending listings, the median prices become $299,950 for the active listings, and $152,500 for the pending listings. This equates to differences of -99.9 percent and -1.6 percent, respectively. It’s also worth mentioning that the number of pendings outnumber actives by more than 2-to-1.
What can we make of these numbers? Well, it appears that the pending listings (forthcoming sales) are inline with the current median sales price. If all of the pending listings were to sell in the next month, then we would see the market’s median sales price rise to $152,500. Given the current market conditions, i.e. multiple offers; sales for more than list price (see Inventory now measured in days, not months), a gradual rising of the market’s median is not unexpected.
However, the more concerning number is the current median price of the market’s active inventory – namely that it is double the current median sales price. The median buyer in the Reno-Sparks market is not suddenly going to go from purchasing a $150,000 house to a $300,000 house.
So, how many affordable houses are currently available? At the moment there are a total of 826 Active (non-pending) houses listed for sale on our local MLS – by itself, a very low number given that the market has been average 482 sales a month during the 1st quarter of 2012. But the number becomes frighteningly low when we see how few houses are priced at or below the current median sales price. How many? Presently, only 133 listed non-pending houses are priced at or below $150,000.
Unless the market receives an influx of new affordable inventory, monthly units sold are going to fall off a cliff. There simply is not enough current inventory to support the number of sales that the market has been averaging. Using the 482 monthly sales average above, and looking at the median list price of the 482 lowest-priced active listings, we observe a median of $214,000. So as one can see, without new inventory entering the market either unit sales will fall to about a quarter of where they stand now, or the median sales price will soar to $214,000 – a 42 percent increase. Which scenario is more likely? In actuality, the outcome will likely be some combination between those two extremes. Predictions?
When will see these changes in the market numbers? I predict June’s or July’s numbers will begin to show some noteworthy changes – either to units sold or to median sales price – or to both. Given the large number of pending listings, currently over 1,800, there are enough transactions already in the pipeline to maintain some consistency through April’s and May’s market numbers. After that things will get interesting. …as if they aren’t already.