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949.769.1599. OC Housing News market reports information on housing market valuation and price trends essential to homebuyers and home sellers.

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Publié le 04 septembre 2014
Nombre de lectures 1
Poids de l'ouvrage 2 Mo



Housing Market
Reports



Understanding and interpreting OCHN
monthly housing market reports

HOUSING MARKET NEWS
HousingMarketReports
OCHousingNewsMonthlyMarketReport.....................................................................................................................3
UsingtheOCHNMonthlyReport........................................3
InterpretinganOCHNMonthlyMarketReport............4
NewsOverview..........................................................................................................................4
MedianHomePriceandRentalParityTrailingTwelveMonths................................4
Resale$/SFandYear-Over-YearPercentageChangeTrailingTwelveMonths............................6
RentalRateandYear-Over-YearPercentageChangeTrailingTwelveMonths.............................7
HistoricMarketDataCharts................................................................................................................................................................8
PercentageChangeCharts.10
HistoricValuation..................................................12
OCHNRatingSystemChart...............................................................................................................................................................13
InvestorAnalysis...................14
MarketPerformanceandTrendsTable.......................................15
MarketTimingRatingandValuationsTable.............................................................................................................................17
Theimportanceofrentalparity.....................................18
RentalParityasbasisofvalue.........................18
Premiumsordiscountstorentalparity..........................................................................................................19
Benchmarkvalueofstablemarket....................19
Howrentalparityiscalculated........................................................................................20
Conventionalfinancing...........................................................................20
Year-over-yearpercentagechange................21
Per-Square-FootBasis.............................................................................21
Salespricesonaper-square-footbasis...........................................................................21
Rentsonaper-square-footbasis........................22
OCHNRating..........................................................................................................................................22
SystemCriteria.......................................................22
Valuationrating.........................23
Resalemomentumrating.......................................................................................................................................23
Rentalmomentumrating.......24
Whatwouldatypicalmarketlooklike?..........26
Whatwouldbeaperfectworld?.........................................................................................................................26

info@ochousingnews.com 949.769.1599 HousingMarketReports
OCHousingNewsMonthlyMarketReport
OCHousingNewsmonthlymarketreportandnewsletterprovidesaclearpictureofthehealthofthehousing
market.Bothbuyersandsellersfindtheinformationonlocation,valuation,andpricetrends,timelyandrelevant
totheirdecisiontobuyorsellahome.TheOCHousingNewsreportanswersthemostimportantquestionsto
buyersandsellers:(1)WhereshouldIlookforbargains,(2)Arecurrentpricesoverorundervaluedinmyarea,and
(3)whatdirectionarepricesheaded,upordowninmyarea?Armedwithbetterinformation,peoplemakebetter
decisions.
ThereistoomuchinformationabouthousingfloatingaroundtheInternet,andmostofitisbad.Itiseasytotake
dataandcreateprettychartsandgraphsthatdon'tprovideanyusefulinformationsomeonemightusetomakea
gooddecision.TheOCHousingNewshaseliminatedtheuselessinformationanddistilledthemarketdownto
threekeypiecesofinformation:(1)resalevaluerelativetorent,(2)yearlychangeinresaleprices,and(3)yearly
changesinrents.
Forthosewhoareverytechnicalandanalytical,theinformationonthetheoryandthecalculationsbehindthe
report,thelatersectionsofthisworkstartingwithTheimportanceofrentalparityonpage18,providesmore
detail.Forthosemoreinterestedinusingthisinformationtofindahome,keepreading.
UsingtheOCHNMonthlyReport
Whenmostpeopleareconsideringrentingorbuyingahome,theyalreadyhavenarrowedtheirchoicesfor
location.Mostwanttobenearwork,buttheymayalsowanttobenearfamily,friends,oraparticularschool
district.ThetableofcontentsonthefrontpageoftheOCHNmonthlyreportorganizesthereportsbycountyso
peoplecannarrowtheirsearchtotheareatheyaremostinterestedin.Isuggestsearchersstartwiththeoverview
ofthecountyasthisprovidesimportantdataonthebroaderrealestatemarket.
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InterpretinganOCHNMonthlyMarketReport
Thefirstpageofacountyreportbreaksdownintofourparts:Thenewsoverview,MedianHomePriceandRental
Paritytrailingtwelvemonths,Resale$/SFandyear-over-yearpercentagechangetrailingtwelvemonths,Rental
rateandyear-over-yearpercentagechangetrailingtwelvemonths.
NEWSOVERVIEW

Thenewsoverviewprovidesconcisedescriptionsofthefactsandconditionsinthemarket.Itstateswhetherthe
markettradesatapremiumoradiscounttorentalparityandprovidesameasureofit.Amarkettradingata
premiumtorentalparityismoredesirable,sobuyersarewillingtopaymorethanrentalparitytolivethere.A
markettradingatadiscountislessdesirable,andpeoplemustbemotivatedtolivetherebysavingversusrenting.
Thenewsoverviewmeasuresthecurrentpremiumordiscount,comparesittothehistoricpremiumordiscount,
andstateswhetherthemarketiscurrentlyovervaluedorundervalued.Thisisanimportantmeasureoffuture
financialperformance.
MEDIANHOMEPRICEANDRENTALPARITYTRAILINGTWELVEMONTHS
Forthosewhowantthebottomlinewithoutalltheanalysisanddetail,themarketratingisthefirstrowofthefirst
sectionofdata.Theratingencapsulatesalltheconditionsofthemarketintoonefigure.Formoreinformationon
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howthisiscalculated,seeOCHNRatingonpage22.Sufficetosaythataratingof10isgoodandaratingof1is
bad.Buyerscanrestassuredthatahighlyratedpropertyormarketisagoodfinancialbuy.

Thechartdisplaysthreelinesthatrevealmuchaboutthemarket.Thefirsttwolinestonotearetheparallelgreen
andorangelines,rentalparity(green)andhistoricvalue(orange).Asmentionedpreviously,somemarketstradeat
adiscountandsomeatapremiumtorentalparity.Iftheorangeline(historicvalue)isabovethegreenline(rental
parity),themarketisapremiummarket.Iftheorangeline(historicvalue)isbelowthegreenline(rentalparity),
themarketisadiscountmarket.Thelargerthegap,thegreaterthepremiumordiscountis.
Thethirdlineplottedagainstthesetwoparallellinesisthemedianresalepriceforthearea.Thislinereveals
whetherthemarketiscurrentlytradingatapremiumordiscounttorentalparityandhistoricvalue.Themore
importantoftheserelationshipsisbetweenmedianresalepriceandhistoricvalue.Overtime,themarkethas
shownatendencytowardtradingathistoricvalue.Ifittradesaboveforawhile,overtimeitwillrevertbacktothis
value.Thatmayhappeneitherbyanextendedperiodoflittleornoappreciationoranoutrightdeclineinprices.If
themarkettradesbelowitshistoricvalue,it’slikelytoseeareboundbacktothisvalueinthefuture.Thebest
marketsarethosetradingatasteepdiscounttoitshistoricvalue.
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RESALE$/SFANDYEAR-OVER-YEARPERCENTAGECHANGETRAILINGTWELVEMONTHS
Sincethehistoricvalueissoimportant,thefirstcolumninnextsectiondisplaysthepremiumordiscountfrom
historicvalueoverthelastyear.Thesecondcolumnandthechartshowsthedollars-per-square-footresalepricein
themarket.Thelineonthechartvisuallyshowsthegeneraldirectionofprices,andthethirdcolumnshowsthe
actualpercentagechange.

It’simportanttonotethatthepercentagechangeinresalepricescanbemisleading.Mostbuyersfoolishly
extrapolateshort-termmovementsinmarketpriceswillcontinueforever,motivatingthemtobuyatwhatisoften
theworstpossibletime.Inreality,buyinginadecliningmarketwhenvaluationsarelowisgenerallythebesttime
tobuybecausesellersaremotivatedandsupplyisabundant.Buyinginanappreciatingmarketmaynotbewise,
particularlyifvaluationsignalsabubble.Inshort,valuationismuchmoreimportantthatpricemovement.

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RENTALRATEANDYEAR-OVER-YEARPERCENTAGECHANGETRAILINGTWELVEMONTHS
Thefinaltableandchartonthepageissimilartothefirstgrouping;itdisplaysthreelines,twoofwhichareparallel
andshowcurrentrentandthehistoriccostofownershiprelativetorent,andthethirdlineisthecurrentcostof
ownership.Therelationshipsaresimilar,thechartswilllooksimilar,andtheinterpretationsarethesame.

Thismethodoflookingatthedataismorerevealingtothosewholiketofocusonmonthlycostsratherthan
purchaseprice.Itrevealshowaffordablepropertiesarerelativetomonthlyrent,whichiswhatrentalparity
analysisisallabout.Thefirstcolumnofdatashowstherateofrentgrowthoverthelastyear,andthenexttwo
columnsshowthecostofrentingandthecostofowningduringthesameperiod.

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HISTORICMARKETDATACHARTS
Thenextpageofthereportshowstwocharts:CountymedianhomepricesinceJanuary1988,andCountymedian
rentandmonthlycostofownershipsinceJanuary1988.Thesechartsaredesignedtoputcurrentcircumstancesin
historiccontext.Theyanswerquestionslike,“Howvolatileareprices?”and“Howdoestoday’spricingcompareto
thefluctuationsofthepast?”and“Howmuchdangeristhereinbuyingtoday?”

ThechartabovedisplaysLACountythroughearly2014,butthepatternissimilaracrossCalifornia.Withthegreen
lineforrentalparityandtheorangelineforhistoricvalue,it’seasytotellwhenthemarketisfairlyvalued,over
valued,orundervalued.
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Thechartaboveshowsrentandmonthlycostofownership.Itlookssimilartotherentalparityandresalehome
pricechart,asitmerelyconvertsthatinformationtoamonthlyformat.Forthosewhohavedifficultyrelatingto
thelargenumbersofpurchaseprice,viewingthedataintermsofmonthlyexpensesiseasiertoputintocontext.


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