Appreciation...As Predicted

 Cromford Daily Observation ~ 

For many years the record monthly average sales price per sq. ft. across the entire ARMLS database was $190.61, set on May 5, 2006, almost 15 years ago.

We exceeded that level for the first time on August 1, 2020.

It only took until October 2, 2020, to exceed $200, and then $210 was passed on November 23, 2020.

February 9 saw us break over $220, so in the space of just over 6 months, we have seen $30 added to the average price per sq. ft. This is a rise of almost 16% in half a year.

Maybe you think this is unusual and will not last long. I would disagree with that opinion. With the Cromford® Market Index about to exceed 500 for the first time in the next few days, the speed of appreciation is about to step higher, not lower.

It will not take much for appreciation rates to exceed 30% and possibly 40% over the next few months. If appreciation is to slow down we need to see a clear sign of something that could cause that to occur. At the moment there is no such sign. We will let you know when we see such a sign, but right now, the market is primed for an explosive rise in house prices.

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MikeB Commentary ~

This is what the composite CMI referenced above looks like :

The 'bank grade' Collateral Analytics 5-year Forecast agrees for the next couple of years:

Note: The CA Forecast chart above you can re-publish without a copyright restriction.

And here's what the current relative breakdown across 17 cities in the Metro looks like:

Note: The Cromford Market Index has proven to be an accurate short term predictor of the market.

A CMI of 100 represents a balance between supply and demand.

A CMI over 100 represents the degree to which it's a sellers market - demand exceeding supply.

The green arrow (up) shows a month-over-month increase in the supply/demand imbalance favoring sellers.

The red arrow (down) shows a softening in the supply imbalance that may be a catch-22.

Catch-22 translated: A problematic situation (lack of inventory) for which the only solution is denied by a circumstance inherent in the problem (would-be sellers won't list for lack of a place to go).

So we're experiencing two seemingly contradictory dynamics simultaneously - some sectors experiencing a slow down in demand while anticipating a general 'explosion' in appreciation anticipated to be 30 to 40% for that very lack of supply that ironically attenuates more supply!

The picture improves somewhat i.e. at least a 1 month supply, as you go up in price to $600K, which favors RLSIR (with the 'Lyon's share' of the volume in the luxury sector). But since we, of course, serve everyone, we have great empathy for the majority looking in the under $500K market.

I can't remember a time when there was only a 6 month supply over $3M!

The divergence of increased Months Supply under $200K is presumably for utter lack of inventory.

And so it is on President's Day 2021...