Now That's Appreciation...

 Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved, and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next month.

For the monthly period ending March 15, we are currently recording a sales $/SF of $227.56 averaged for all areas and types across the ARMLS database. This is up 3.1% from the $220.75 we now measure for February 15. Our forecast range midpoint was $227.17, with a 90% confidence range of $222.63 to $231.71. Prices were very close to the midpoint of our forecast, just 39 cents higher.

On March 15 the pending listings for all areas & types show an average list $/SF of $230.59, up 2.6% from the reading for February 15. Among those pending listings we have 98.8% normal, 0.5% in REOs and 0.7% in short sales and pre-foreclosures. There has been little change in these percentages compared with last month, and the number of distressed sales remains extremely low by historical standards.

Our mid-point forecast for the average monthly sales $/SF on April 15 is $233.87, which is 2.8% above the March 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $229.19 to $238.55.

Average sale $/SF has risen 26% in the last 8 months, equivalent to an annual appreciation rate of almost 35%. In fact prices are rising at a steady pace of roughly 3% per month at the moment.

We now anticipate that the annual appreciation rate will approach or even exceed 40% by the time we get to the middle of 2021.

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MikeB Commentary~

The highlighted text above, anticipating appreciation of 40% by mid-year (3 months away) is stunning. It rivals the run-up of some 44% in 2005.

Of course, you can't help but see what happened after that! But that was then... 

Today buyers will rightly question if we're not setting up another fall. We've addressed this a number of times, but a worthy reminder, especially for the uninitiated, is that the dynamics were quite different. 

Yes, you had demand far outpacing supply creating the inevitable rapid rise in prices. However, the driver was 'liar loans' - the mind goes to the 2015 movie 'The Big Short'! And there were other factors we've documented as well.

Today the thing you say to buyers is that today it's an equity market - evidence all the inmigration and cash offers you're having to compete with, together with historical low interest rates - almost like free money. Those dynamics don't show any sign of changing any time soon. 

It appears we're in for the appreciation ride of our lives, underscored by this 'bank grade' 5-year Forecast - which btw, holds anywhere in the state.