Current Market Conditions Posted with January Data

Ok, folks, its up. Gotta say the picture isn't very bright. Sales dropped about 15% over December. The median sales price is holding, but the average is dropping, confirming what I've been sensing for the past few months that demand is soft in the higher ranges of the second home market.

Plase go check out the latest Market Conditions Report and come on back and add your comments about where you think the market is going.

Comments

[henry]

Regarding the "curious" inventory level, I think that you should be looking at the absorption rate (ie the number of months of inventory on the market). There is more than 30 months of supply in SC (given that homes sold at a rate of about 30 per month in january and that there are about 1000 homes on the market). Thus, one would expect only 3 in 100 homes on the market to sell in next month at the current sales rate... Yikes!!! Going to take a long time for the "typical" seller to get to a close at this rate... and this is all before new listings.

Another way to look at it... the National Association of Realtors says that six months of inventory is normal. Anything less is a "hot" market, and anything more is slower. At 30+ months, the current market is 5x+ slower than normal. Pretty bleak!!! For more info on absorption, see http://www.realtor.org/RMODaily.nsf/pages/News2007111404?OpenDocument

Please note that the picture is not much better if you use the three month average rate for home sales. This number may be statistically better, but the tradeoff is that the trend is down, and Jan was supposed to be a strong month.

One last thought... What if inventory picks up in the spring as you suggest? Then the market would be getting hit from both ends... slowing sales AND rising inventory. That would not be pretty...

Here's to hoping sales pick up. Great blog. Thanks.

[David Knudsen]

Henry, the inventory here has traditionally been much higher relative to sales than in other areas. Over the past year, its been in the range of 12 to 15 months. During the peak of the boom, it was more in the range of 9 to 12 months. Yes, it is higher than it has been over the past few years, but I don't think you should compare it to the national 'hot' market statistic. One reason that the inventory is so high relative to sales here is that we have a lot of crappy houses that sit on the market seemingly forever. The inventory of attractive houses that I consider salable is much smaller than the 1,000 count.

The 30 in January is low. One reason I use a 3 month measure is that a 30, 40 or 50 unit sample size is just too small to draw trend conclusions from and the number of closed sales in a given month can be affected by the calendar. For example, this January, we had 4 Fridays --- Friday is the most popular day for closings. A month with 5 Fridays can show a spike over another month with 4. Tax considerations can also affect monthly closing numbers. For example, an investor taking a loss on a property would want to close before Dec. 31, and one facing capital gains on a gain would want to close after Jan. 1. I'm not in any way here trying to argue that the trend isn't down, just defending my use of 3 month statistics.

And finally, about your comment that salowing sales with rising inventory would not be pretty. That depends on your persepctive. If you're a seller, it is a pretty lousy combination. But I represent buyers, and in general, rising inventory is a good thing for buyers. More selection, and more competition among sellers for the available buyers.

[henry]

3mo or jan data. Still not pretty for the seller. But takes time for sellers to realize the change... so not really good for anyone.

Most importantly, thanks for your local insights.

[citizen s c]

I think there's no hard and fast rule of thumb. We can't keep rehashing what NAR and the other naysayers keep saying. Don't join the flock. If you believe in doom and gloom, then there will be doom and gloom. Chill out and relax ! Enjoy what we had. Settle in, be a little patient ! Statistics are only that. Remember, Each buyer is unique.

[CP]

DK - 'spring awakening / rude awakening' really cracked me up.

I think your analysis couldn't have been more thoughtful, well-rounded and fair. Most existing houses in inventory under $400,000 are overpriced and will fall in value - the fact that the buyer's know this, or suspect it, presents some real issues. I think most houses listed in the high $300's belong in the high $200's, or the very low $300's - mostly because they aren't very exciting - and just 4 years ago they were selling for $175k, max.

And thank you for including the thread about asking the seller to give too much. If a seller makes a big, kicking and screaming price concession, very few can then give another $10k in inspection giveaways. It's about the money, but it's also about feeling mistreated and taken advantage of.

Last Friday, we sold our spec house at Chapin Estate for $760k - it was listed for $960k - 21% off asking before inspection work. No matter how you did the #'s (sq ft/land/quality), it was worth far more (there's that funny word - 'worth'). Not only did we lower the price to make the deal happen, the realtor reduced her commission when both sides were at their final number (that famous 5% spread you keep talking about), and we included about $15k of post-inspection work. Bottomline, we got the deal done, I cashed at a t-bill return, the realtor got paid, and the buyers got a great deal. The fact that they are researchers and engaged in a lengthy house search process means Catskill Farms outcompeted a lot of nice homes - in price, in service and flexibility. We were motivated, but by no means motivated enough to strike a bad deal.

Similarly, we are buying an old farm and 50 acres for $385k, again 21% off asking. We bought the Eldred bus garage for $200k, 30% off asking.

In a parallel with the financial markets, the valuation/pricing of product is very difficult at the moment - and only blue chip, priced right products are being purchased. The rest of the offerings are dropping in price until the scavengers see opportunities over risk at the extremely reduced prices.

But mostly, prices in Sullivan County tripled over the last 3 years. By any analytical method, it's hard to rationalize that type of uptick for modestly interesting architecture and a 50 year old home.