Spotlight on Nevada County Real Estate-First Quarter 2010

April 16, 2010 – With the first 3 months of 2010 behind us, we look again to the three trends that define the current market cycle. The recovery, or at least the end of the beating, will be marked by sustained upturns in price and volume, and a corresponding downtrend in distressed sales or REO and Short Sale properties.

 

Median Price – After settling around $300K for the first half of 2009, local pricing for single family homes went through a typical seasonal decline in the 4^th quarter. In the first 3 months of 2010, prices have risen consistently from $256K in January to $280K in March, an increase of 9.4%. From February to March 2010, the increase was 4.7%. The year-over-year change from March 2009 was a decline of 3.8%, indicating at the very least, fairly stable pricing over the longer term.

 

There is a short term uptrend in median price. If this proves sustainable over the longer term, the recovery may get some traction.

 

Unit Volume – The recent trend in volume is similar to the price trend, with an increase in units sold in both of the last two months. March volume was 69 units, compared to 62 in February, and increase of 11.3%. Compared to March 2009, when only 38 units sold, we see an annual increase of 81.6%, indicating that the absorption rate has increased dramatically in the last year.

 

There has been a significant increase in unit volume over the last year and the last quarter, more than at any other time since 2004. 

 

Distressed Sales – In a normal or rising market, the percentage of distressed sales (Short Sales and REO) is quite low, usually 5% or less. During 2008, as the number of homeowners facing challenges increased dramatically, this percentage rose into the double digits. While distressed property inventory has been relatively constant at around 20% of total, unit volume has been well above that for the last 15 months, reaching as high as 60% of total units in August 2009. In January and February 2010, it has been around 55%, declining to 42% in March. This is a decrease of 30% from the August high. In March 2009, 31.6% of sales were distressed. 

 

There have been recent reports in the regional media about a significant increase in median prices over the last several months, and it has been attributed to a shift in sales activity from the lower priced valley markets to the more expensive coastal and mountain resort markets. This writer believes that any increase in prices is more likely correlated with a decrease in distressed sales, regardless of specific location. 

 

Locally, we are seeing less dramatic price increases than California as a whole, although the trend is there. The unfolding of the summer market will reveal whether the apparent turn in the market is real or simply a seasonal effect.