Reverse Hockey Stick in Los Gatos

The first thing to notice is three quarters of steadily building inventory, which finally crested in September (around 225 homes listed on September 1, 158 today), right about when prices bottomed. (checking into that anomalous dip in April)

Next we should look at the quartile pricing.

You can see from this chart why the median (the central price in the market) trended down this year. The median falls between Quartile 2 and Quartile 3, and this gap has been trending lower. Note the low end of this market (under a million bucks! woohoo!) slid a bit early in the year, but has been basically flat this quarter. Market Action Index is still strong in Quartile 4.

Sometimes you can see that quantitative changes in the homes listed drive price changes. Most of the time, we see bigger homes and higher prices over time. But in this case, it is the opposite. The homes currently on the market are significantly smaller they were at the beginning of the year. See the highlighted cells below. (They're slightly older too, but probably not enough to attribute the price changes.)

This appears to be simply a function of the inventory levels. That is, the characteristics of the homes for sale more closely resemble the underlying home stock as greater amounts of inventory come available. Price per square foot during the year has stayed within a relatively tight band ($600 plus or minus a few percent - the scale on this chart makes the small changes look a bit over-emphasized).

In summary, it appears that we've probably settled into this price range for a while as inventory typically remains low for the winter and Market Action Index (relative demand) is fairly high in all but the top Quartile. Look for counter-seasonal inventory increases (or big increases in purchase costs, like higer interest rates) as a leading indicator for a resumption of price declines.

Likewise if spring comes around with inventory levels similar to last year's, without big increases in interest rates and/or a strong stock market, there is nothing in this data to indicate prices wouldn't follow Market Action higher.

[update] replaced the Price and Price per square foot charts in this post after a bug fix. The analysis of the charts doesn't change.