Home Values in Northern Contra Costa County
‘How is the market?’ – this is far and away the most commonly asked question of REALTORS®. While you can get a dated and blurry sense of how the real estate market and home prices are doing by looking at macro level reports like Case Schiller, or use an automated online tool to get a fuzzy picture, only a local practitioner can really tell you what is happening with home prices.
Before we take a look at what the data says about median home prices, it is important to make sure we all have the same understanding of exactly what ‘median’ means. We all get average – for any given X set of things, add up their individual values and divide by the number of items (X). A lot of people mistakenly believe that median is just another way of saying average – this is not at all correct.
What is Median and why does it matter?
Median is very important in understanding real estate values and beyond. Why? Well, first understand that virtually nothing has an intrinsic value. Value is perception. When someone sets out to sell a home, they have to determine what to set as the asking price. Obviously, the goal is to set as high an asking price as possible that someone will actually be willing to pay in a reasonable time frame. This is the art of pricing, and it is something that REALTORS® are typically very good at. They know the area, they know the community, they know the homes. And perhaps more importantly, they know what the hopmes in that area have recently sold for. If there is any objective guide to pricing, that is it; the prices of the most recently sold comparable properties, or comps. And since comps come in all shapes and sizes, we often need to filter them down to the ‘middle ground’ or median. So median actually plays a crucial role in helping set the prices that we pay for houses!
As a consumer, median is equally crucial in helping us try to accurately gauge what is happening with property values. Homes are large commodities, and they don’t sell often – so it can be difficult to read into the data. The best possible gauge of prices is to look at ‘same parcel sales,’ meaning that you are comparing what a house sold for once, then what it sold for more recently. But these transactions are too few and far between. So we try to cheat and extrapolate based on the best data that we can find. One way to do that is to lump together a bunch of seemingly similar transactions, let’s say within a particular zip code, and look at whether prices are rising or declining over time. Sounds reasonable. But what is one of those transactions really isn’t like the others? Let’s take a practical example to understand what median is and why it matters.
Below we have 5 houses that recently sold. Let’s assume they are all from one area and we are looking at them as our guide as to what is happening to prices there. Note that most of the homes are priced between 200 and 500k. One of them, however, is priced well over 1 million dollars. If you rely on average to give you one number to represent this group, you end up with a value of $531,000. But that is greater than 4 of the 5 items in the set! In fact, for that amount, you could buy both of the two least expensive homes. Average is very easy to sway in one direction or another by a very high or very low ‘outlier’ value.
A more accurate picture is often painted by looking at the median value, which quite simply is the middlemost value in any set ordered from lowest to highest. So in this group of 5 properties, the median value is the exact value of the middle item, or $320,000. Clearly, if you believe that you are likely to have to pay 320k for one of these homes, you are better armed with data than if you are under the impression that you will need to pay over 500k for one of them!
Now that we know what median is, we can look at some charts. The following depict Median Sales Price over time (in green bars) laid atop the Average of Days on the Multiple Listing Service for all properties in the area (blue area charts). These should give you a sense of the rise and fall of median prices by month. For most areas, there are two separate charts, one showing activity for Attached Homes (Condos/Townhomes) and one showing activity for Detached Homes (Houses).
Finally, the timeframe plotted is between the beginning of 2005 to the end of June 2014. 2005 is comfortably before the recent economic turmoil, and in most markets represents a peak or ceiling for prices. Broad price depreciation began on average at the end of 2006 and accelerated into the following years. The current recovery has some markets within striking distance of those 2005 peaks.
Median home values in Clayton
Clayton Condo/Townhouse prices peaked at the end of 2005 at just under 600k. Median prices finally rose above 450k again just recently in mid 2013 and again in early 2014. Bear in mind that Clayton is a relatively small community, with more detached homes activity than Condo/Townhouse. As such, there can be large swings month to month, especially when a particular month only saw a few transactions.
All things being equal, we would expect to see mnuch longer Days on MLS values (in blue) while prices are declining. This largely holds true in Clayton, with Days on MLS peaking at around 150 days at the height of the housing crisis in early 2009. It is important to note that while 2013 was marked by rising prices and intense demand, the market in 2014 has started to see greater inventory levels, less upward pressure on prices, and correspondingly an increase in Days on Market in many segments.
While there is much less volatility in the median price values for detached homes in Clayton, on the whole the same patters that we see in the attachd Condo/Townhouse market apply here. The peak median value for homes was late in 2006, and the floor was well established in 2011. Current detached median home prices for Clayton are hovering around in the mid 600k range.
Median home values in Concord
Concord regularly has a large volume of both detached and Condo/Townhouse sales, making it a great indicator to look at. We can clearly see the bubble inflating from late 2005 into 2006 in both charts below, then slowly deflating a bit into 2007 before prices begin to drop dramatically in late 2007-2008. There is of course a corresponding spike in Days on MLS as inventory flooded the market and sellers were forced to drop their prices repeatedly.
It is interesting to note that the time it takes to sell in Concord has only inched upwards in the last 18 months, despite strong price appreciation. This is a good sign that there is still limited inventory. Not surprisingly, Concord saw a large percentage of all cash investor transactions that have only recently started to taper off. These properties were either rehabbed and sold quickly or have become long term rental investments, helping to keep the inventory levels at any given time low enough to continue to support rapid sale times.
Detached home values in Concord peaked in late 2006, and quickly found their floor in 2009. Of all the communities that will examine here, Concord displays the cleanest, most confident ‘floor.’ Other communities may have seen prices hit bottom, then bounce around significantly, then find bottom again before beginning to rise. Concord, on the other hand established that low point, and then displays a great deal of stability until mid 2012 when prices begin a steady increase.
Median home values in Martinez
Perhaps the only surprise in the nunbers for Martinez Condos/Townhomes is the fact that the Days on MLS has not increased in the past two years, despite a significant rise in values. If anything, Days on MLS has been descreasing during the run up in values. This is an indication of low inventory levels, quite likely due to a high degree of homeowners who are still underwater.
The lows for the Martinez detached home market are not as pronounced as we see in other communities, but that has not hampered the same sort of strong appreciation in prices that we see elsewhere. As a result, Martinez detached homes are actually now closing in on the same heights that they reached pre-recession. On their current trajectory, we might expect to see them meet or eclipse those levels by next springs buying season.
Median home values in Pacheco
Pacheco is a relatively small community, with few monthly sales of Condo/Townhomes. In fact, we have no data points for numerous months. Still, there is enough data to see that prices here bottomed out in 2011, somewhat later than in most other communities.
Pacheco home sales are more robust, and so the chart is better popiulated. Despite that fact, we see a great deal of volatility in the chart. This is typically due to a wide variety of home sales in a fairly small market. Peak values appear to have been reached in late 2005, with a deep trough of lows reached in both 2009 and 2012.
Median home values in Pleasant Hill
Pleasant Hill home prices are a great success story. While there is a lot of volatility in the Condo/Townhouse segment, we can clearly see that prices have nearly returned to their pre-recession levels.
Detached homes in Pleasant Hill show an even stronger cause for optimism. While we can definitely see a drop in prices in 2007, and a corresponding increase in the time that properties spent on the market, it is not nearly as pronounced as elsewhere. The highs are more consisten pre-recesssion, the lows not nearly as pronounced. Finally, the last value we have on the chart for June of 2014 shows prices are essentially back to pre-recession heights. Granted, at the time of this writing June data is still preliminary, but it seems safe to suggest that all things being equal, by next Spring Pleasant Hill homes may be worth fully what they were at the height of their value in 2005.
Median home values in Rossmoor
It is important to remember that Rossmoor is an over-55 only retirement community within the city of Walnut Creek. The community is largely made up of Condos, so much so that we could not even offer a chart for detached home sales in ROssmoor.
Values are impacted both by its relatively small size, and also by the dynamics of an inherently restricted, cautious buying demographic. As such, the time to sell a property during the downturn stands out as some of the most consistently high Days on MLS of all areas. Similarly, the trough of prices is wider than most communities, with sustained price appreciation not materializing until just in the last 12 months, well after we start to see recovery in other areas.
That said, the smaller sample size, among other factors, can yield rapid growth in prices, which we can see clearly at the end of the chart as we enter 2014. If prices inch up any higher this summer, Rossmoor Condos will be back at their pre-recession price point.
Median home values in Walnut Creek
Walnut Creek and Pleasant Hill, as bordering communities, show nearly identical patterns in both the Condo/Townhouse and Detached homes segments. It is interesting to note just how long it took for prices to bottom out in the Condo/Townhouse market in Walnut Creek. In most markets we see a low point in 2009 that is then equalled again in 2011, but not in Walnut Creek. While there is a noticeable dip in mid-2009, it is not until 2011 and then again in 2012 that we found bottom, followed by an iimmediate and sustained increase in prices.
The late arriving floor for prices that we see in the Attached homes segment in Walnut Creek is even more pronounced in the Detached homes data. There is fvery little volatility to be seen here, even as Days on MLS rockets up in 2008. It is very difficult to discern any real ‘floor’ like we can see in other communities, because it is so broad and shallow. The low point for prices occurred in late 2011, and like we see in Pleasant Hill, the recent price increases mean that homes in Walnut Creek are now commanding essentially the same prices that they were in 2005 and 2006.