Marin Real Estate Prices Have Fallen, But Not As Much As The Newspapers Say
Last week’s Marin Independent Journal had another screaming headline about the collapse of the housing market: “Marin Home Prices Fall Another 26%.” Thank goodness it’s not true.
While there was more information in the body of the article, for those who read that far, it made it clear that the reason average sale price has gone down so dramatically is that more low priced condos are selling relative to single family homes. These tend to be much lower value, driving the average down on a much smaller base.
Average sale price is a terrible barometer of what is going on in the short term, yet because it is the easiest to explain or analyze, it is the statistic that gets used all of the time.
Prices have come down, quite a bit actually. But not “another 26%.” That makes it sound like there has been a big decline, and now there is an additional 26% is on top of that. I don’t believe that is correct for most Marin County single family homes. Some areas, like the Canal in San Rafael, have seen huge declines. Condos are selling there for half of what they sold for three years ago. But in Central and Southern Marin, it is far less dramatic.
I would argue that in total, the number is now about 17% from the peak, based on cost per square foot. I compared the last six months for all of Marin County, actual sold single family homes, and found the average cost per square foot is $527. For the same period one year earlier it was $637, so that is a 17% drop.
However one year earlier, in 2006-2007, that number was $607. So people were actually paying less two years ago than one year ago.
There are issues with cost per square foot also, but the base of units sold is large enough to average out a lot of the anomalies.
I’m much more comfortable saying prices are 17% down from the peak than “another 26%.” Incorrect information is bad for everyone, because it makes Buyers reluctant to step in and buy, as they think the market will only continue to fall. It makes Sellers who want to move put it off, meaning there is less to choose from for Buyers. And it locks up the market for everyone, at a time when interest rates are again at near historic lows. If you don’t buy when the 30 year fixed is at 5%, when do you buy?
