A Look at Bay Area Supply and Demand
Let’s take a look at the big picture of supply (residential listings on the market at month-end) and demand (closed home sales). Having an idea of what is going on with supply and demand can be an excellent way to measure the general “strength” or “hotness” of a real estate market, and often will provide a hint of the future direction of home price changes.
Here’s a brief market summary for single-family sales, based on the lates data I have available:
November 2008
Active Listings: up 0.9% YOY
Closed Sales: up 18.7% YOY
Our first chart displays the raw supply and demand data back through early 2007:
2008 marked a new high point for Bay Area homes on the market, but listings plateaued early this year and have come down from their highs to match up pretty closely with 2007 in November. Meanwhile, the number of homes selling in the Bay Area has been slowly but surely rising throughout 2008.
Here’s a look at the year-over-year (YOY) change in the previous chart. YOY is the best way to interpret the direction of the market, due to the highly cyclical nature of real estate.
Inventory has basically flattened out on a year-over-year basis, while closed sales have been on the rise YOY since July.
The inventory pattern here in the Bay Area indicates a softening market, but not a dramatically crashing one. Likewise for the number of closed sales. Of course, we know that prices are falling, so it seems likely that the explanation for the relatively strong pattern of supply and demand would indicate that the falling prices are luring in buyers.
MikeW said:
“The inventory pattern here in the Bay Area indicates a softening market, but not a dramatically crashing one. Likewise for the number of closed sales. Of course, we know that prices are falling, so it seems likely that the explanation for the relatively strong pattern of supply and demand would indicate that the falling prices are luring in buyers.”
How can you make that assertion without examining what percentage of closed sales are distress sales? The only reason closed sales have increased is because of forcelosures. Remove the distressed sales and home sales would be anemic. Falling prices are luring in buyers only when they are at bargain basement foreclosure prices.
January 6, 2009 11:13 AM
asad said:
This doesn’t make a lot of sense to me at least why would you only look at one year of data ? you wouldn’t look at the stock market over a one week period would you ?
“but not a dramatically crashing one” well if you take any one week period during the .com bust then it doesn’t look like a dramatic crash either, it would be better to look at the last 3-4 years instead of just one year.
January 6, 2009 11:24 AM
Sujit said:
So you had 24 months of data. You plotted it in Excel. You plotted the y-o-y change in Excel. Damn smart … want to challenge my 3 year old daughter? Who exactly benefits from posts like these? Community college freshmen maybe? … for the easy copy/paste into the Econ 1A assignment?
Redfin, why are you shooting yourself in the foot?
January 8, 2009 11:26 AM
Louis Cabeza said:
Go Sujit! It’s lazy reporting and analysis that got us into this mess. We’re adults, please.
January 8, 2009 9:01 PM
Tim Ellis said:
I apologize if this data is not comprehensive enough to suit your tastes. Unfortunately it was all we were able to put together.
Gathering historical data from the dozen or so MLSes that service the Bay Area is a near-impossible task, and we were fortunate to even be able to obtain two years’ worth of data.
January 10, 2009 8:51 PM
Hibryd said:
Okay, Sujit and Louis, why don’t you guys provide us with some more in-depth analysis?
Jeeze, are you guys real estate agents or something? Why so bitter about a corporate blog’s entry?
January 13, 2009 10:33 AM
Sujit said:
I’m a Redfin customer from about 2 year ago. I bought my first house through Redfin and the experience was great (really, excellent). I’ve been a regular reader of this blog for 2-3 years now.
Sometime last year, October 2008 happened, people lost their money and Redfin fired a lot of it’s staff. The regular blog posts stopped which was sad, but then they were replaced with this. The posts are now morbidly dry and dull, written like a Radiohead dirge. Who cares about macroeconomic trends? I get that stuff from the WSJ. Real estate is about 17 things, location, location, location, location…… So please give me some local news, local picks, local trends, etc.
January 13, 2009 11:52 AM
Stop illegal immigration & Stop NEWSOM said:
The Bay Area is going downhill. It’s way too overpriced. SF and San Jose are losing tons of jobs and there’s way too many illegals in the Bay Area. And don’t even get me started on that whole bs with the “sanctuary city” crap in every single Bay Area city. The arseholes who are in the gov’ts of these cities live SAFELY in their white zones, and never venture out. There needs to be a STOP to illegal immigration, number 1.
Number 2, stop PANDERING to the gayleft.
Number 3. Republican is NOT a dirty word. You want GOOD people out here, make the police forces BETTER. Stop putting the money for fire/police/roads into the ridiculous NON-PROFITS that they do. They are making the Bay Area AWFUL to live in.
January 14, 2009 1:22 AM
Mike said:
I think user “Stop illegal immigration & Stop NEWSOM” needs some more bumper stickers to express his rage at the world.
January 18, 2009 6:01 PM