Statistics Prove Home Staging Works.

Right now, the data shos that all North County markets strongly favor buyers. The Market Action Indice (MAI) values fall well below 30, the boundary between a hot and cold market, with the areas we’re interested in scoring steadily between 10 and 20.

Rancho Santa Fe has a 90-day MAI at 13. There are several months of inventory at a low sales rate, so buyers have their pick. MAI trends haven’t changed much lately, so watch out for a slowing in the market, as sellers may decide to hold on to their homes and wait for a better time to sell. This can be an issue in the luxury arena when sellers have enough wealth to carry them through. The average Days On Market (DOM) sits at 254 days. This is longer than most other markets in San Diego, but this is normal when dealing with luxury homes. Average list price is currently $3,764,186 with a median of $2,917,500. Huge disparity between the lowest-priced house at $749,000 and the highest priced estate at $29,950,000! Price per Square Foot averages $504, which is higher than Cardiff and Encinitas but lower than Solana Beach. This may be because of increased demand for houses in the much lower Solana Beach average, but both scored an MAI of 13 so this is unlikely. Average Total Square Footage offered in Rancho Santa Fe was three times that offered in Solana Beach, at 6,122 SqFt.

Price trends in Rancho Santa Fe have hit a plateau that doesn’t show a trend in either direction, making it difficult to predict short market futures. However, the Price per Square Foot has been steadily decreasing recently, meaning buyers have been able to get more house for their money. If you’re looking to get into Rancho Santa Fe, now is a good time to start looking, especially with the new school erected just last year.

Stay tuned for more market updates. I’ll be covering other North County communities throughout the week to head off January. Please help us out by sharing your experiences with the market. What do you think?

author Derek Djavaherian

*Market Action Index is a measure of current rate of sale versus inventory over time.

**All data used was compiled by Altos Research.

A recently published paper in the Journal of Real Estate Finance and Economics suggests that individual bargaining power is the reason comparable homes sell for a wide variety of prices in the same area. Specifically, authors Keith Ihlanfeldt and Tom Mayock focus on the disadvantages of buyers coming from distant markets, areas geographically far away from the buyers’ current residences. The authors postulate that these “in-migrant” buyers have higher traveling costs to visit homes, and also that buyers from higher-priced neighborhoods may have an inflated perception of the value of other neighborhoods–a train of thought known as Distant Buyer Hypothesis.

To test their intuition, the authors devised an equation that relates the effect of search costs and anchoring effects to the final sales price (anchoring effects in this case refer to biases in the market). They then plugged in data from 2009 Florida tax rolls to test a wide range of markets, and used old tax records to discriminate distant buyers from other homeowners.

Ihlanfeldt and Mayock conclude from the empirical results that distant buyers do often pay more for houses. This implies that the MLS and other content services are actually not giving buyers the information they need to reach reasonable decisions.

There is a caveat, however. The study does not account for household income, which could play a factor considering the time costs of searching for a home (people who make more money in a given amount of time value their time and would be less willing to spend it searching for a home) and the authors are careful to note that their methods may lack a measure of quality which would mean that the houses bought were actually worth more than they thought.

Regardless, this shows the power of information in bargaining. A buyer without knowledge of the area has a big disadvantage.