After several years of consistent burgeoning home prices, talk on the ground for the last few months has quietly been of a general slowing of Oakland’s Real Estate market. Is this slowdown really going on? And if so, is it across the board, or only within specific areas or price ranges?
In this article, we will provide an analysis that suggests that some homes are staying on the market longer than last year, specifically within the $400-600k price ranges.
ZILLOW PREDICTS LOWER HOME PRICE GROWTH MOVING FORWARD
The real estate website Zillow has been systematically downgrading their forecasts for home price growth in Oakland over the past few months. Although real estate agents have a healthy built-in skepticism for market forecasting, Zillow publishes a widely viewed (and often disputed) metric on their website called the “1-year forecast”. Basically, this metric tries to pin down the messy art of real estate fortune telling. Essentially, it’s a forecast of what the median value of a home will be in a specific market defined region in exactly one year. Since this forecast is built around expectations for the median sales home price – what about the variance around the median? That is, are all price ranges hit equally by this slowdown?
What goes into making this forecast? It’s a bit of a statistical modeling black box. Zillow maintains that they utilize a variety of housing, as well as general economic indicators. I’ve listed a reference at the bottom of this page to a research brief which goes into excruciating detail on the precise methodology .
BRIEF REVIEW OF BASIC REAL ESTATE STATISTICS
Some fundamentals to lay the framework for our analysis. Variance is a measurement of the spread between numbers in a data set. The standard deviation is the square root of the variance. Therefore, it also will tell you how tightly all the various examples are clustered around the mean in a set of data. So for example, if we are examining the number of days a property sits on the MLS, a higher standard deviation will indicate there is more diversity in the properties we are examining.
ANALYSIS: IS OAKLAND COOLING DOWN?
We’re looking at all sold residential listings, only single family homes (not condos or multifamilies). We break them out into different price ranges. We are comparing the three month span of time from 5/1 to 8/1 from 2016 to 2017. We are assuming that days on market is a good proxy for indication of a market cooldown. There may be reasons to revisit this assumption later, but for now let’s adopt it and see what it tells us:
|Price Range||Units on the Market||Average Days on Market||Standard Deviation of DOM|
|Total (or AVG)||762||692||21.18||22.10||20.41||26.03|
The big takeaway: there does seem to be a trend in certain properties staying on the market longer, but it’s only really confined to two price brackets: $400k-$599k and to a lesser extent $600k-$799k. Notice that the average days on market for listings between $400k-$599k jumped from 23.42 to 27.63 between 2016 and 2017. Listings within this price bracket seem to be spending more time on the market before they are sold. Even more, the standard deviation for days on market for properties within this class jumped quite a bit from 25.38 in 2016 to 44.50 in 2017. That means that there is quite a bit more variability in the number of days on market within this price range than last year i.e., some properties are staying on quite a bit longer. Importantly, there doesn’t seem to be any appreciable change in days on market for the other price brackets.
The market slowdown pointed out by Zillow probably is going on to a certain extent IF you believe that days on the market is a good proxy. However, it only seems to be affecting properties within the $400-$599k range, and to a lesser extent properties in the $600-799k range. Properties in brackets outside of these two groups don’t seem to be staying on the market longer than they were last year.