It has admittedly been an interesting year for us as Lafayette Realtors, given the early year volatility in the stock market, and the slow down in market velocity over the busy 2015 market. In most cases, it has been an easier year for buyers and their Lafayette Realtors as the market has normalized, however buyers have paid a price as the stats still reflect rising home costs over last summer’s frenetically crazy market.
As we look at the summer statistics, the inventory levels have been about 30+% greater than 2015’s, and absorption has been about half of last year’s rate, but prices are up. In other words, buyers seem to be paying more for homes than they did last summer, in spite of the market’s overall lower level of velocity and diminished rate of competition for homes.
Looking at the average sales price for the 3 month summer period of June-Aug 2016 over 2015, we see that prices rose about 6%. The largest gain was in August where prices increased 11% over 2015 as buyers became pushed to get their families established in their new homes prior to the beginning of the school year.
Based upon closed sales in Lafayette and the similarly performing Orinda market, the summer of 2015 had about 1 month of inventory available to buyers — a very tight, challenging market. However, 2016 inventory levels rose to roughly 2 months of inventory throughout the summer market of June-August.
Where’s the market’s lower velocity most evident? It is in the heart of the Lafayette real estate market — its most approachable price points — the segment below $1.5M. The last chart graphically shows the profound difference from 2015. In the traditionally busiest month of the summer, July, 2016 sales were down approximately 40% from 2015. Looking at the momentum coming out of the spring season, June sold properties that primarily entered escrow in May were down 20% over 2015. The summer weakness rolled into July with sales down 25% from the previous year.
As Lafayette Realtors, its difficult to predict what the balance of 2016 will bring given the uncertainty typically associated with election years. Over the longterm, its clear that Lafayette will continue to be a highly sought after area with very constrained inventories due to the inability to add substantially to the housing stock through new construction. As long as the Bay Area economy stays strong, particularly the tech sector, Lafayette real estate should continue to perform at a very high level.