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List Price/Sale Price Ratio – Corona, CA

Below is another chart related to the health of the Corona SFR market.  The List Price/Sale Price Ratio (LP/SP) gives an indication as to whether sellers are anticipating the market correctly.  The lack of variance in the ratio for most of 2003-2006 tells me that the market is remarkably efficient at pricing real estate, even in the face of rapidly escalating prices.

Since the end of 2007 the LP/SP ratio has dramatically improved.  Even in the face of rapidly deteriorating prices, Sellers have still continually improved their pricing in order to get units sold.  Note that the ratio has been over 1 for all of 2009.  Lenders are likely pricing aggressively and then hoping that competitive bidding will let the market set the final sale price.

Again, I don’t want to get in the “bottom calling” business.  But based on the charts that I have posted in the last day I am seeing improving market pricing by sellers, shorter required marketing periods, and prices that are showing more stability.  We still have some problems sitting out there with foreclosures and unemployment, but the market is showing signs that it has been stabilizing.

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July 7th, 2009 | Category: Housing Bust, Housing Recovery, Real Estate, Uncategorized | 2 comments

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    Excellent data on the Corona situation. Based on 1st hand experience of this mkt, I would agree that the bottom fell out in 2nd half 2007. One could have used this early indicator & shorted the equities market in all of 2008 & made out like bandits. Couple of datapoints that are not consistent w/ these charts -
    1) loopnet still lists Corona CRE properties @ 7-7.5% cap rates today, not sure where they were in 2nd half 2007, but it sure feels like cap rates haven't climbed too much
    2) the list/sale price ratio has generally hovered around ~1, even when the mkt was free-falling. Does this mean that the market was extremely efficient in setting prices ? And if that is the case, the cap rates of 7-7.5% must reflect reality. Of course, vacancy rates are higher, and rents have fallen. So from purely income capitalization perspective, valuation has tanked (even with relatively stable cap rates). If one has the ability to ride this out (i.e. loan is not coming due soon), it seems like pricing will generally improve as the economy improves (I agree w/ you about calling the bottom, it will only be clear in hindsight).
 
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