Mid Month Home 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 30 days.
Our forecast range midpoint was $157.31, with a 90% confidence range of $154.16 to $160.46. The actual result was a little weaker than the mid-point but well within the confidence range. Last month's forecast was the most optimistic we have published for many years, so we are pleased that the model turned out to be correct about a huge jump in just a single month.
On December 15 the pending listings for all areas & types shows an average list $/SF of $159.45, down 0.7% from the reading for November 15. Among those pending listings we have 95.1% normal, 1.8% in REOs and 3.1% in short sales and pre-foreclosures. This mix contains more distressed listings than last month. REO activity remains low at the moment compared to historic rates, though short sale activity remains slightly elevated as an after-effect of the housing crash.
Our mid-point forecast for the average monthly sales $/SF on January 15 is $155.13, which is 0.7% below the December 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $152.03 to $158.23.
We are therefore predicting a small correction after the massive increase between November and December. This is in line with the pattern that occurs in most years. We often see a very strong December reading followed by a weaker January. In most years February bounces back again so there is no need to look at our January forecast as a negative signal. While demand indicators are doing nothing special, supply continues to get even tighter so there is no let up in the overall upward trend in pricing on the horizon. For prices to change direction we would need some sign of an increase in supply.