Has Fresno Real Estate put in the market bottom?

This question really depends on which way you look at “The Market”. As an investor in the market who reviews listings everyday I thought I would take a shot at providing my answer to this important question. Feel free to comment with your thoughts.

First when I compare the market we have today with the one that existed at the beginning of the year it is clear the banks (sellers) fear has subsided. At the beginning of the year you could tell the banks were scared and ready to deal. I suppose the loans from the government to the large institutions did the job and gave them the cushion to be a little more selective and less trigger happy to dump properties. At the outset of the year they wanted CASH and they wanted to sell.

Another characteristic that is unquestionable is that there are more buyers in the market for low priced rental properties. Given the low rates found in most savings accounts and the unsteady nature of the stock market it makes sense that more people are turning to low end rentals for return on their money. Therefore the supply demand equation has tipped dramatically since the beginning of the year. It should also be mentioned that the low end market has also seen a dramatic up tick of home buyers given the available tax credit for first time buyers.

Now let’s review the statistical metrics called out most commonly by the media.

Has the mean or average price of Fresno homes bottomed? For review the mean is simply the amount of all homes sold divided by the number of homes sold. At the beginning of the year when the large price drop in single family homes was recorded, what was selling? Well from my experience I know for certain that the cheap and very cheap houses were being dumped by banks. I also know that almost no high end homes were sold because financing was shut down. So you had a market with transactions highly skewed to the low end. Given only one side of the market was functioning it should have been obvious to us that the average price would fall dramatically at the beginning of the year.

Another metric sometimes trotted out by the press is a slight variation on the theme above. They say has the “Medium” price changed. The medium is a different statistical metric that is simply the middle price. Think about listing all the sales in Fresno from cheapest to most expensive and then finding the transaction in the middle. For example if there were 100 homes sold you would find the 50th home sale in the list from cheapest to most expensive and that would be the Medium price. Like the mean/average above this statistic is greatly exaggerated by the dominance of the low end transactions at the beginning of the year. In a market where 80% of the transactions were low end you will find a market were the medium is found in the low end transactions.

Fast forward 10 months to November, 2009 and I can tell you first hand that the low end of the market is still the most active but homes are going for 20-30K more than they would have gone in Jan/Feb of 2009. In addition with the loan market on better footing the move up and high end market is functioning better than early this year.

This rebalancing of the market will lead the media to create additional positive press articles stating the bottom is in and all is clear on the real estate front. The more positive press will lead to more buyers and you know what happens when more buyers show up, yep prices go up again.

So yes I think the bottom of the market has been found and we will work our way slowly back to replacement cost. Please understand that I mean slowly back to replacement cost.