Low Supply Jolts San Clemente Home Prices

But it’s not exactly late-breaking news, is it?

(Posted on www.SanClementeRealEstateBlog.com on February 22, 2012 by mikecotter)

There’s an old joke that the stock market has predicted seven of the last two recessions.

Something similar could be said about the uptick in local real estate activity that tends to occur in January of each year. Lots of new post-holiday listings and “busy, busy, busy” anecdotes give the impression that market prices are on the rise. Usually, however, they’re not.

But this January, local home prices experienced a substantial jolt to the upside, even though nothing else very dramatic happened with other statistics.

According to the CRMLS — the multiple listing service used by realtors — San Clemente’s home median price came in at $625,000, up 4 percent from last January’s $600,000. Since the housing bubble burst in 2007, this is a rare year-over-year January price uptick.

So, why did January 2012 turn in such a great market performance?

It wasn’t because of high volume. Local sales actually dropped to 42 homes, 26 percent fewer than last January.

It wasn’t because of a drop in short sales — homes sold at prices less than owed.  As a percentage of total volume, January short sales actually increased this year.

I think January prices went up because buyers finally responded to a “for sale” inventory that has been steadily shrinking for 18 months. Right now there are only 265 San Clemente homes for sale. Compare that to 393 for sale last year at this time, and 630 homes for sale four-and-a-half years ago. It seemed late in coming, but the law of supply and demand finally arrived in January.

Another measure of supply is how long it would take to sell the current inventory at the current sales rate.  There are different ways of doing the math, but I calculate four months.  No matter how it’s calculated, however, San Clemente hasn’t seen this kind of limited supply in six years.

So, what does the January market price jolt mean?  Are rising prices finally back?

Remember that the typical January closed sale represents an escrow opened 90 days earlier.  So here in nearly March, looking at January activity, we’re actually looking at buy decisions made nearly half a year ago, back in October.

If rising prices are back, that’s great news.  But it’s not exactly late-breaking news, is it?  We always learn about the major moves well after they’ve started.

For more on the San Clemente housing market, check out MCotter.com, especially latest market statistics and neighborhood stats.