Inventory Drops Below 1,000

The inventory of single family homes for sale listed in the Sullivan MLS just dipped below 1,000, to 998 homes on the market, just about equal to the 993 homes on the market at the beginning of January this year. While the "raw" inventory may not be climbing, with sales dropping, it does translate into about a 2 to 2 1/2 year inventory at an annual sales rate of 400 to 500 houses. The sales rate a year ago was running about 600 to 700 houses a year.

A lot of the buyers I'm working with recently have the perception that the market downturn has resulted in a surge of new inventory coming on the market — and that every few weeks there will be a whole new selection of houses to look at. But that's just not the case. In fact, "discretionary sale" inventory (houses, particularly second homes, that the owners don't have to sell) seems to be constricting. Some listings haven't been renewed when they expired, others have been withdrawn. There are also 96 houses in "Temporarily Off Market" status, which means that the listing is still technically in effect, but the house isn't being actively shown or marketed. Some of these have been shifted for the time being to rentals. The owners have others have decided not to bear the expense over the winter of keeping them plowed out and accessible.

Between January and December, the median asking price has dropped 6.5% to $215,000, while the average asking price has fallen less than 2%, to $286,189.

Comments

[SquareTime]

The drop in inventory is paralleled by the severe drop in demand. The parallel will cease as demand continues to drop and economic factors cause a gradual increase in supply. Homeostatic factors will help balance out supply and demand, ie. lower prices.

Demand Destruction is the major factor in deflation spirals, not an increase in supply. Inventory will eventually rise steadily over the coming years if you have a sustained economic depression. People are not layed-off all at once. Unemployment is gradual.

Housing inventory peak is delayed by unemployment peak and unemployment is delayed by recession. ie. unemployment peaks after a recession has ended and housing inventory peaks after unemployment has peaked. Therefore, we are years away from peak inventory in housing. Furthermore, huge demographic movements in the coming 20 years will cause much volatility in housing as boomers downsize, shift to the south, etc...

[John Allen]

Who really cares about the asking price Dave?

What matters is what homes sold for.

You can slice and dice up offering / asking figures anyway you want but at the end of the day it is what a property sold for that matters - to the buyer, the bank, the appriaser, hopefully - maybe a few realtors - and possibly - those sellers that really want to sell and not go fishing and waste people's time.

FYI.

There were 70 homes that sold in Sullivan County from November 1 through December 28 2008 up to 400k. That's about one closed transaction per day in a county the size of the state of Rhode Island.

There were a couple / few - 2 or 3 - in that time period that sold over 400k but the focus is on those below 400k because right now that is where the market is and will continue to be for 2009.

In fact if you look at the breakdown, you'll see that the median (2 / 70 Homes = 35) closed price is LESS than $150,000.

Additionally, 30 homes (out of a sampling of 70 below) in this time period sold for less than ***$124,000***.

And the breakdown from 1/1/08 through 12/28/08:

0 - 99k...25
100 - 124k...5
125 - 149k...12
150 - 174...9
175 - 199...6
200 - 224...3
225 - 249...2
250 - 274...2
275 - 299...2
300 - 324...2
325 - 349...1
350 - 374...0
375 - 399...1

Those are the facts and that is your median for NOV / DEC. 2008.

Ask your realtor to look the closed sales up for that time period for verification.

Wishing all a happy and healthy new year,
John Allen

-------------
http://en.wikipedia.org/wiki/Real_estate_pricing#Median_home_price

Median home price

The median home price is the threshold which divides the real estate market into two equal halves, in reference to pricing. One half of all homes in the market were sold at a price above the median home price, while the other half were sold below that price.

The median home price is one of the most common measurements used to compare real estate prices in different markets, areas, and periods. It is said to be less biased than the average since it is not as heavily influenced by the top 2% of homes sold. For example, the average home sale price in the US was $264,000 in October 2005, compared with a median home price of $213,900 for the same time period.

[David Knudsen]

Of course, what matters most is what houses sell for. but I for one also care about asking price as well. The wider the gap between asking price and selling price, the harder it is to bring buyers and sellers together. That's a point i've made consistently. Asking prices, and movement in asking prices, the number and size of reductions, etc., are an important window into seller psychology.

And when December is finished, I'll be posting the sales numbers. I'm not avoiding posting facts here.

[andy]

John Allen's numbers are pretty startling. If they are correct, they sort of make a mockery out of the asking prices on most SC realtor web sites. These numbers suggest that most sales are at mobile-home prices!

[Rod]

John Allen's numbers are incorrect - he might have mistyped '1/1/08' instead of '11/1/08'- then they would be closer to accurate, but still not accurate. John, can you post your sources?

As someone posted on the last thread - his stats are suspect without methodology. Only MLS sales? All transactions? Land? Arm's length?

[JA]

A typo. Apologies.

It should have been *11* (November) - NOT 1 - for the heading.

All of the figures are correct.

Just ask Dave or any other realtor that you might know that has access to current data Rod.

Very easy to verify.

And the breakdown from 11/1/08 through 12/28/08:

0 - 99k...25
100 - 124k...5
125 - 149k...12
150 - 174...9
175 - 199...6
200 - 224...3
225 - 249...2
250 - 274...2
275 - 299...2
300 - 324...2
325 - 349...1
350 - 374...0
375 - 399...1

Those are the facts and that is your median for NOV / DEC. 2008.

Ask your realtor to look the closed sales up for that time period for verification.

Wishing all a happy and healthy new year,
John Allen

[Vince Jr.]

Andy writes, "These numbers suggest that most sales are at mobile-home prices!"

Did you think Sullivan county lacked mobile homes? There are 2 mobile homes for every man, woman and child in this county!

[David Knudsen]

This is a good example of why I don't think these "data in a vacuum" postings are particularly helpful. The fact that the median sales price of a house is around $150,000, and the median asking price of the market basket of all houses on the market is about $215K doesn't mean that the typical sale is at 69% of asking price. In fact, the average of sale prices to asking prices is about 91%. The market is actually pretty efficient; overpriced houses generally don't find buyers, and overall, the market has been skewing to lower priced houses in general over the past 6 months.

In terms of "Asking your Realtor", whoever is posting the data is very likely a Realtor, since the data is coming from the MLS and access to that data is limited to Realtors or Realtor-affiliates (i.e. appraisers). These posts are being made anonymously, without identifying themselves or using a valid email addres.

[andy]

Of 70 Nov sales, only 19 were over $175K? There just seems to be just such a disconnect between asking prices as shown on realtor web sites and sales prices. That 91% ask-to-sales=price ration must come after drastic price reductions. There must be lots of people with huge paper losses on houses they bought in the past 5 years (but of course no relief on property taxes).

[Bix]

I'd be curious to see the original purchase price for the houses that were sold. Are these prices reflecting losses? Or simply that only cheaper houses are moving in this market? Would the identical houses have sold for substantially more, say, two years ago?

[David Knudsen]

In my monthly Current Market Conditions, I often calculate sales price to original asking price, as well as to final asking price. (The ratio of sales price to original asking price is in the low to mid 80% range.) I'll make sure to do that for this latest period when I post in a week or day days. Yes, some folks will be taking losses if they sell right now, but few owners, particularly in the second home market, are being "forced" to sell.

One point I've made over and over again is that sellers need to get their asking prices into striking range of what sellers are willing to pay to interest buyers and get offers. Listing agents often say to me "Show the house and get an offer", but the statistics consistently show that sellers need to make the move to an appropriate asking price before buyers are willing to even consider entering into negotiations.

[andy]

So, at 80% final sales-to-asking price, the $200K house goes for $160K. Ouch. Well, at least one knows how to read the asking prices on the web sites. No wonder so many houses sit forever on the listings. I guess it only takes a few suckers who take the asking prices seriously to make a seller's (and his broker's) day. I mean, if a 20% haircut is the norm and a house is sold for only 12% off the ask, that must feel good, especially if you can pull it off a few times a year. However, I imagine there are many cases where the ratio is even lower than 80% because a house with an "original" asking price is taken off the market for a bit, then listed again with a "new original" asking price that is lower than the original original.

[Yoshii]

Good point.

That is why - if you are going to go to the trouble of posting calculations of ask / sold ratios - the original offering price of a house that sold should be calculated as well - not just the most recent offering price.

Why?

Because the day that the listing was signed by a realtor with the original offering price, one would surmise that the listing agent could get close to that price for their client - for why else would they take that listing unless, of course, they wanted to warehouse it for awhile.

Offering to sold ratios run the gamut anywhere from 8% to 40% - with a current average of about 80% of the original offering price - i.e. - if a house is offered for $200,000 - at the end of the day, most times, it sells anywhere from 175k to 185k.

But as has been posted - better to have recent sold data from arm's length transactions.

Yoshii

[mal]

Brokers often accept listings even when the seller insists on an unrealistically high price. It adds prestige and internet visibility for the office to have a lot of listings, the fee for MLS listing is nominal, and it allows the broker to show a client a range of properties without the hassle of negotiating with another realtor (for keys, access, etc.). So it might help sell something else, even if it doesn't sell itself.

[mal]

Bix & Andy: If the median selling price of around $150,000 represents 80-85% of the original asking price, the typical sale derives from an original listing price of just over $180,000. i.e., recent sales continue to be dominated by more modest homes, primarily for the primary home market. David documented a shift to that kind of sale last winter, and it probably began earlier in 2007. (He also documented a summer rally that suggested a recovery of the low end of the 2nd home market, but that was before the September economic news).

But even in better years the Sullivan MLS inventory far exceeds sales. Apparently many sellers are willing and able to be very patient. According to the 2008 report on the 2nd-home market in Sullivan county, most 2nd-home owners are fiscally secure, and hold considerable equity. The median time of ownership is 16 years, and selling is usually discretionary throughout most of their ownership years. That means that it remains surprisingly difficult to find true bargains in the 2nd-home market. Sales in the primary home market are probably less discretionary, and are usually less expensive homes.

[Officer]

"Brokers often accept listings even when the seller insists on an unrealistically high price. It adds prestige and internet visibility for the office to have a lot of listings, the fee for MLS listing is nominal, and it allows the broker to show a client a range of properties without the hassle of negotiating with another realtor (for keys, access, etc.). So it might help sell something else, even if it doesn't sell itself."

Posted by: mal | December 29, 2008 at 11:30 AM

-----

I think you'll find that the median in Sullivan is now closer to $135,000 to 140,000 Mal if you were to use the November and December 2008 figures.

And - these were recent transactions. Meaning, that these deals had contracts signed from late August through late September 2008. Since there is usually a two to three month lagtime from the signing of a contract to a closing transaction for financing, survey, appraisal, etc.

In late September of this year, as you mention, the stock market collapsed more than 25% in less than three weeks, after being down 20% - the nenchmarks (DJI, SP and NAS) are currently down YTD of 40% - 45%.

Knowing that there is a two to three month lag in the pipeline, my guess is that you will see the median drop further for the January 2009 numbers to about $125,000 to 130,000 which will reflect the negativity that has run rampant since the fourth quarter of 2008.

As far as your comments as to why realtors take on listings with inflated offering prices, it really does no service to those that they are supposed to represent namely - the client / seller.

Hopefully, Dave will begin to use a two month median cycle as opposed to three months since much has changed and will continue to contract as we go into 2009.

Thank you Mal.

Officer

[David Knudsen]

Just to clarify, sales prices tend to be about 91% of the final asking price, not 80% of the final asking price. Also, I do this calculation on a "per sale" basis --- calculating the ratio of the sale price to the asking price for each transaction, and then taking an average of all those ratios.

I think its a good point about looking at shorter term data when a change in the trend is occurring, like now. However, I keep hearing my old statistics teacher harping on sample size, and to avoid using too small a sample size because of the inordinate weight of the outlier data points in smaller samples. That's why, in statistics, as the sample size gets smaller, the standard deviation gets larger. (I think that's how it works; it has been 25 years since I last took statistics.) I'm going to stick with the 3 month sample I've been using for years, also because that lets me make more of an apples to apples comparison. However, one thing I have done occasionally is pull out the most recent month as a kind of footnote pointing to where I think the trend is going, and I'll focus a bit more on that. For example, if December is lower than November, and November is lower than October, January will push out October, and the January number is likely to be lower than the December 3 month. The trend on both prices and sales is definitely pointing downward. The December 3 month looks like it will come in at $150K, while December as a single month on its own may come in at $140K. That $140K to $150K range is a level we last saw in mid 2004. Could it go lower? Sure. When I started in this business, in late 2001, the median was under $100,000, and didn't pass $100,000 until August 2002.

[henry]

Mal,

Love your posts...

But I disagree with the intimation that the "patience" of SC vacation home sellers will make it difficult to find bargains:

* First, it is difficult to tell a bargain from a falling knife... given the rate of decline in home prices and the rapid deterioration of the economy.

* Second, while it may be true so far this cycle, I think that this claim is true until it is not true. Similar claims were made in a long list of other markets (nyc, hamptons, etc.) where it is now easy to find homes with large reductions. The fact is that there will be people that need to sell (and likely an increasing number of them in a downturn). These motivated sellers will set the market... even if many/most property owners in a market segment have no need or desire to sell for a long time.

* Third, there are substitutes. Buyers will buy elsewhere (with price declines almost everywhere you look), travel to exotic places, or rent (noting that there are tons of summer places to rent these days even if, as has oft been argued, there are not that many quality rentals in SC).

* Fourth, buyers generally have more flexibility to wait than sellers given the subsitutes. Why not wait a year if it is clear that prices are trending down in order to give seller expectations a chance to catch up? Or, why not wait to see if the economy is going to stabilize? The sellers are the ones with the downside risk here. They may get an even lower price next year or the year after.

[bix]

Actually what I meant was the relationship between sale prices and what the seller originally paid for the house. But I did want to respond to this: "If the median selling price of around $150,000 represents 80-85% of the original asking price, the typical sale derives from an original listing price of just over $180,000."

Not necessarily, and I know this from my old (increasingly aging) personal experience from this past spring. One house, for instance, went like a snap at the asking price (I know, because I put in a bid on it), because the seller was ultra-motivated and his price was excellent. You actually had bidding wars for the very VERY few reasonably priced houses.

At least, that's how it was last May-June. May be totally different today.

[mal]

Henry, thanks (and ditto). But we don't really disagree. The falling median is an early sign, but it does not yet reflect many bargain sales of higher end homes. In fact buyers looking for bargains in the 2nd home market should probably be on the lookout for a brief *increase* in the sales median. Sellers of higher end homes have thus far refused to meet buyer expectations of massive price drops, so their homes have simply not been selling; the declining median sales price has primarily been a shift to sales of lesser homes (plus of course some reduction in prices for those homes). In the coming months some of those reluctant high-end home owners will be forced to sell, and the median will rise. I know of three homes in that category that just went into contract. But as you say, a buyer will be doing well if the "bargain" at purchase time is sufficient to mitigate depreciation in the coming months.

[Father Time]

[BIX]
"Actually what I meant was the relationship between sale prices and what the seller originally paid for the house..."
------

It's all public record if you want to take the time to go to the clerk's office, spend some time on their computer and look up the deed records and tax recording fees and work back.

The information is there - you just have to put the time in Bix.

----------

[BIX]
"...At least, that's how it was last May-June. May be totally different today.

-----------

It's totally different today.

The median in Sullivan is 140 to 145 and dropping.

Where were you in September with Lehman, Fannie Mae, Freddie Mac, AIG, GM along with the congressional bailouts and the overall market going to hell in a handbag?

As far as contracts signed - only time will tell.

I'll wager that the median goes down - especially in the first quarter of 2009 - from where we are now at 145k.

Father Time.

[Rod]

JA - using only MLS data provides a good, but incomplete picture of real estate activity. Land sales turn into custom builds and there are plenty of sales not recorded in the MLS, and they tend to be at the higher end of the market place. If I am not mistaken, all Rural Connection listings are non-MLS - and there are several other companies selling houses outside the MLS monopoly.

[andy]

Not sure that Rural Connections provides a different picture. Stuff there has been languishing, including Florke's own properties -- he's dropped the asking price of one of his house renovations from over $300K to under $200K and yet still it sits there; the ask on the Jeffersonville restaurant building likewise keeps dropping even with a "motivated seller" plea on that once oh-so-hip listing site (hard to stay cool when you're paying mortgages in the middle of a market meltdown) ; there are other examples on that site. Based on the Rural Connections examples, no reason to think that non-MLS properties are doing better than what we're seeing with MLS-listed properties.

[kate]

FYI.

Just released at Bloomberg.

Maybe these links should be sent to some sellers!

Kate.
---------

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/2,3,4,0,0,0,0,0,0,0,0,0,0,0,0,0.html

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUy9kSeLariw&refer=home

----------

October Home Prices in 20 U.S. Cities Fall 18% From Year Ago

By Bob Willis

Dec. 30 (Bloomberg) -- Home prices in 20 U.S. cities declined at the fastest rate on record, depressed by mounting foreclosures and slumping sales.

The S&P/Case-Shiller index declined 18 percent in the 12 months to October, more than forecast, after dropping 17.4 percent in September. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

The financial market meltdown that’s reverberated around the globe has prompted banks to curb lending, signaling the housing slump will persist for a fourth year in 2009. Falling property values have eroded household wealth, causing consumers to pare spending and deepening what is projected to be the longest recession in the postwar period.

“As 2008 comes to an end, the housing market is left in a weaker state than at the beginning of the year,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “Uncertainty remains high given the unprecedented nature of the recession.”

Economists forecast the 20-city index would fall 17.9 percent from a year earlier, according to the median of 21 estimates in a Bloomberg News survey. Projections ranged from declines of 17 percent to 18.4 percent.

Compared with a year earlier, all areas in the 20-city survey showed a decrease in prices in October, led by a 33 percent drop in Phoenix and a 32 percent decline in Las Vegas.

“The bear market continues,” David Blitzer, chairman of the index committee at S&P, said in a statement. The declines in Atlanta, Seattle and Portland surpassed 10 percent for the first time, he said.

Shiller, Case

Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.

The 20-city index is down 23 percent from its 2006 peak. Fourteen of the 20 metropolitan areas showed record declines in the year ended in October...[snipped]

[Rod]

andy - not saying non-mls listings are doing better - just that the non-MLS sales changes the conclusions/data to an unknown degree. You are right that the RC isn't selling much, but whatever they do sell (of their own) does not show up in these MLS snapshots.

[rumson]

Bix (and others) who wanted to know original purchase prices versus a current sale price from the peak.

All information is accessible in the public record.

Here's a recent sale:

Sale Date: 7/2006 (around Sullivan peak): Purchase Price: $240,000

Sale Date: 12/2008: Purchase Price: $195,000

Cochecton, NY

That would be a decrease of:

19% over the past two years.

Throw in a 10k in commission and the seller's net drops to 185k - or a loss of 23% from their original purchase price of $240,000.

If the future sellers begin to drop their offering prices to realistic 2009 levels you'll see more losses from the seller's cost basis - if these homes were purchased - after 2003 to 2006 - in the year ahead.

And, if the homes were purchased prior to 2005 for a modest amount and the owner did a refi with a new mortgage with an 2003 - 2006 appraisal at 2x to 3x the orginal purchase price - they too might be under water for 2009.

Happy New Year to all,
rumson

[David Knudsen]

Rod, the MLS data may be incomplete, but its the best single-source we have. Frankly, its amazing that this county doesn't have timely on-line property sales information available to the public. Yes, the information is publicly available, but I don't think that going to the courthouse, looking up deed transfers and working back from tax stamps is exactly "readily available" and certainly not convenient.

I don't think including Rural Connection sales in the data would significantly change the picture, particularly trends. Their business, from what I can tell in terms of looking at what's moved off their website, is pretty off, too. I would venture that almost all of their sales are above the median price, but their sales volume is very low, so while there would be some uptick in the median and average if they were included, it would likely be quite modest. If there were a way to sweep everything in, we'd probably also find quite a few lower end 'bungalow' sales that often transfer privately rather than through brokers --- so it might even out.

[hamlet]

I say SELL NOW or FOREVER HOLD YOUR PROPERTY.

[crumley]

{Knudsen}

"Rod, the MLS data may be incomplete, but its the best single-source we have. >>>Frankly, its amazing that this county doesn't have timely on-line property sales information available to the public.<<< Yes, the information is publicly available, but I don't think that going to the courthouse, looking up deed transfers and working back from tax stamps is exactly "readily available" and certainly not convenient."

--------

Well, that would be too easy - since it is all in the public record.

Dave, correct me if I'm wrong but there used to be some outfit that published a weekly hard copy of the credit bulletin on a *paid subscription* basis to their subscribers - mostly attorneys, title companies and real estate firms - prior to the advent of the MLS and the internet.

For all I know, maybe they still publish this weekly list.

This outfit recieved all deed transfers, mortgages, tax recording fees, judgements, etc. from the county - or vice versa - they did the gruntwork - and then printed up the form and mailed it out to their subscribers.

It would be nice if the county made these weekly figures available to the public.

In fact, the county - as a revenue stream - since they always need money, could charge a monthly fee for users to access their database via username / password thus making some money for the taxpayers and dismissing the outfit that used to (or still does) print up the bulletin for that person's gain since it is public record and the data orginates from the county.

Crumley