Industry Insights Uncategorized

July CAR Trends: The Sales-to-List Price Ratio of the CA Market

August 3, 2011

The July 2011 CAR Trends Report has been posted to the Research Data section on the Marketing Page of SAVI.
In it, CAR shows that despite a weaker performance in terms of closed sales compared to last June, pending home sales rose for the second consecutive month in June, suggesting an improvement in sales activity in the next couple of months. In fact, sales during the second half of the year should match or exceed last year’s sales on a year-to-year basis.
One indicator to consider in the future direction of home prices is the sales-to-price ratio (SL ratio), measured as the ratio between the final sale price of a property relative to its original list or asking price. Below is a look at the SL ratio history in the past couple of years:

  1. In the mid 2000’s, lean inventories and multiple bids drove the SL ratio near 100% – as buyers had little negotiation power.
  2. When the market slowed near the end of 2005, sellers still expected to sell their home at a premium, while buyers realized they had more bargaining power, resulting in a declining SL ratio that went below 90% at one point.
  3. In 2009, after the median housing price dropped more than a third from the previous year and with buyers motivated by tax incentives, the SL ratio began to climb as sellers became more realistic about market conditions.
  4. The SL ratio again started to decline until February 2011 when it bottomed out at 93.5%. The ratio has since bounced back hitting 94.6% in June.

SL ratios vary between price ranges.  High-end homes (priced at over $1 million) had the lowest ratio in June, while sales in the middle tier ($500k to $999k) had the highest. This indicates sellers at the high end were more flexible with asking prices, and were more willing to concede in order to complete the sale transaction.
To access the full report, click here.

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