Hillsborough Real Estate - May 2014

Still a Sellers Market

No sign of a slowdown in the Hillsborough real estate market as buyers continue to pay record amounts. Highlights as of May 2014:

• The average price per square was $904. This is the third highest monthly figure ever. It has only been above $900 four times (two of which are May 2014 and April 2014).
• The average selling price in the past three months has been nearly $4.1 million, which is the highest ever over a 3 month period in Hillsborough.
• Inventory remains at historically low levels. There were 43 unsold homes at the end of the month. This is the lowest May inventory in at least 10 years.
• The run-up in prices has so far not appeared to entice seller's into the market. At the current rate, 2014 is on pace to have the fewest homes listed in at least 10 years.

Prices continue to rise in Hillsborough. In the past 12 months, prices have increased by more than 10%. Since reaching bottom a few years ago, prices have increased by 30%. Prices are more than 5% above where they were at the previous peak in late 2007/early 2008.

The chart below shows the 12 month moving average for median prices, average prices and average price per square foot. Taking a 12 month average helps to smooth out random fluctuations. However, even when doing this, there can still be anomalies. At first glance, it appears prices tumbled in February 2014. What actually happened was that in February 2013, there were a number of high-end homes that sold (high-end even by Hillsborough standards). The average sales price in February 2013 was over $6 million. In February 2014, that month was removed from the 12 month moving average, and replaced by the more modest $2.5 million average sales price in February 2014. The result was a notable decline in the 12 month moving average. This discrepancy has corrected itself graphically going forward as prices continued their ascent on a year-over-year basis.

The ratio of average sales price to list price was 98.4% in April 2014. That is, the average sales price was about 1.5% lower than the list price of the homes sold. For the year, amongst homes that have sold, sellers are receiving on average about their list price. The ratio of sales price to list price is 99.8% Hillsborough is a bit idiosyncratic and in a neutral market where prices are neither rising nor falling, the ratio is usually in the range of 96% to 97% (in most cities in the mid-Peninsula, neutral is around 100%). In fact, if the current ratio holds, it will be the highest in Hillsborough in at least 10 years. The previous high was in 2005 at 98.9%. When this ratio is above the normal baseline for an area it is strongly suggestive of a market that favors sellers and may foreshadow continued price increases.

 

Lots of Sales in May

There were 20 homes sold in May 2014 in Hillsborough. That's a big number for the area. While sales levels fluctuate from month-to-month, there have been only a handful of months with 20 or more sales in the past 10 year. For the year, sales are ahead of last year's pace. Through May 2014, there have been 64 homes sold. Last year at this time, there had been 56 homes sold. If the current rate holds we may see more than 150 sales in the year, for the first time since 2005.

 

Impressively, sales have increased at the same time as the number of newly listed homes has declined. There have 95 new listings so far in 2014 through May, as compared to 109 new listings through May 2013. Not surprisingly, with listings (supply) down and sales (demand) up, this has put pressure on inventory levels. The number of unsold homes has been about 40 homes for most of the year. As of May 2014, there were 43 unsold homes. This compared to 66 unsold homes as of May 2013. We may see inventory rise slightly during the summer months as more homes come onto he market. However, even if that does occur, inventory levels should remain relatively low. This will mean that buyers will continue to compete against each other, benefitting sellers.

 

By The Numbers - Hillsborough Real Estate