Michael Orr, from the Cromford Report, published his mid-month update and forecast. I think the most interesting aspect of the report is that foreclosures are not mentioned once, and short sales may have driving the market now.
Mid Month Pricing Update and Forecast
Each month about this time we look back at the previous month and 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 30 days.
On September 15 we gave a 30 day forecast that average sales $/SF would fall and be within the range $86.48 to $90.00 with a 94% confidence. Our midpoint prediction was $88.24.
As of October 15, the average $/SF for monthly sales across all areas and types was $89.13 up 1.3% from $87.94 on September 15. Note that the latter figure has been adjusted slightly from $87.83 since September 15 due to additions and changes to ARMLS recorded sales data since then. The actual figure of $89.13 is somewhat above the midpoint of our forecast, but still well within the 94% confidence range.
Today the pending listings for all areas & types show an average list $/SF of $88.51. This figure has declined in recent days and is now well below the average list $/SF for homes sold in the last month ($92.02). This suggests that average sales pricing is likely to fall in the next 30 to 40 days. The relationship between these measurements can be seen clearly on the list price per square foot chart.
Our mid-point forecast for November 15 is currently $87.96, which is 2.3% below yesterday’s actual reading, and we have a 94% confidence that it will fall within ± 2% of this mid point, i.e. in the range $86.20 to $89.72.
Since our forecasts have tended to be a little lower than the actual result (all 9 of the last 9 forecasts in fact), we have a hunch that pricing may again turn out to be a little more robust that our model predicts, most probably within the range $87.50 to $91.00.
We have a theory that may explain this phenomenon, but it is only a theory. There are quite a number of aggressively priced short-sales which have status pending but are awaiting lender approval. Since the lender is less likely to approve the most aggressive pricing, these contracts do not close as often as those priced closer to the norm. This tends to make pending listing $/SF a more pessimistic predictor of sales $/SF than in a normal market, because these aggressively priced short sales stay pending for an unusually long time. As short sales increase, this effect get more and more pronounced.
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