NAR Existing Home Sales Data Shows 5.1% Rise

The National Association of Realtors just released the existing home sales (EHS) data for February, which showed a 5.1% rise nationalwide in the Seasonally Adjusted Annual Rate over January, which is good news — sort of. The biggest regional gainer, year over year, was the west, where sales were up 30.4% over February, 2008. But the west — which has been one of the regions hardest hit by foreclosures — also recorded the biggest drop in prices year over year, with February 2009's median down 30.3% from a year earlier.

The northeast showed a nice 15.6% pick up in the annual sales rate over January, but sales were still off 14.9% from a year earlier. Prices, though, have held better than in the high-foreclosure west, with only a 4.8% drop in the median from a year earlier.

Notably, Lawrence Yun, the chief NAR economist, posited in the accompanying press release, that 40 to 45% of sales nationalwide in February were foreclosure or distress sale properties, and that was having downward impact on prices. That number shocked me, and probably means that in some high-foreclosure markets like Phoenix, Las Vegas, Florida and parts of California, the lion's share of the market must be foreclosures and short sales.

The volume pick up, and the regions where it's picking up, seem to indicate that bargain pricing is a key factor in getting buyers back to the table.

Comments

[Tricks n' Turns]

KNUDSEN:
"...that 40 to 45% of sales nationalwide in February were foreclosure or distress sale properties, and that was having downward impact on prices. That number shocked me!"

----------------

Don't be so shocked Dave.

Tally up the sold foreclosures in Sullivan County from December 1 2008 through today and compare that figure with:

1. Sold foreclosures a year ago during the same time (12/2007 through March 2008) period and you'll see that these are way up.

and

2. Percentage of foreclosures versus non-foreclosed properties during that time period.

Nice pop with the equity markets today. Good call cfranch with those call options.

Respectfully,

Lil Tricks n' Turns.

[Rod]

Belated congrats David on the $1,000,000+ sale a few weeks ago. Most impressive.

[wally]

I wish Dave would put the Median Closed Price on the first page of his blog and not just the Average Price.

Most folks know the median is a better barometer than the average so it's a good head's up for the buyers out there.

Coming into the last week of March 2009, we now have the median closed price from 1/1/09 through 3/24/09 at:

$125,000 (75 closed houses in that 83 day time period - less than a house a day.)

Wally

[David Knudsen]

Wally, I assume you mean on the first page of my website, not the blog. The median price is in the text commentary above the table, and is in the table on the Current Market Conditions page if you flip through. So I'm not trying to hide it. My website is more targeted to second home buyers, and I think the average is actually a more realistic indication of what a second home buyer is looking at than the median. A second home buyer is unlikely to find that cute, private country getaway of their dreams at or around the median price, so why set that expectation.

[Bix]

Honestly, guys, I don't see what difference it makes to the average buyer what the median or average price of a house in the county may be. It must may mean that cheaper or more expensive houses are selling. What matters is the median price in a particular, very narrow category (farmhouse 4+ acres, say), and even that is very much dependent on individual factors. The market is just too thin and quirky for such numbers to matter too much.

[David Knudsen]

Bix, I think the median and average are both useful as indicators of market movement, up or down. Comparing the median and average sales prices from a point in time also helps me advise clients on appropriate offers. For example, the median is off about 30% from the peak. Of course, part of that drop can be attributed to the low end bargain hunting of the past few months, pulling the median down, so a 30% price drop factor can't be applied across the board to all types of properties. But it provides a place to start, in terms of thinking about appropriate pricing, adjusting up or down for scarcity, type of property, relative activity in that market segment, etc.

[Dersh Bailey]

Ix Nay Bix.

If you're a buyer looking for a second home in Sully, you certainly want to know what the median closed price is today.

You'd also like to know what it was a year ago and two years ago to find out how much the market has fallen.

It gives you a guide - a roadmap as it where.

What a home is offered for and what it eventually closed for is sometimes 50% apart!

I don't understand why Dave posts the ***offering*** prices on his site. Who cares what something is offered for - most folks would rather know what it sells for!

As for Dave's remark about the "average" close price being more in tune with his second-home urban clients. Fooey.

Please post both the Average AND the Median prices Dave. Give us both sides.

It's really not fair to skew the average with two Chapin sales when those are the exception to the norm.

I know that many foreclosures are weighting the median prices down into the low 100's but that's a fact in 2009.

Oh, here's Pam Liebman CEO of Corcoran Group with the same kind of real estatespeak as Dave's.

She doesn't like the median prices either!

I wonder why?

;-)

Have a listen...

http://www.bloomberg.com/avp/avp.htm?N=av&T=Corcoran's%20Liebman%20Says%

http://www.bloomberg.com/apps/data?pid=avimage&iid=i88wCdN8UovQ

Pamela Liebman CEO of Corcoran Group

* Very low end of the market are showing in the median prices - not the average prices

* 40 to 45 % in distressed sales

* We may be seeing a bottom

* Low mortgage rates

* Affordability

* Median price is determined as to what is selling - and it's not high end.

* Action is in the lower end of the market.

============================

[DB]

Video clip:

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/v47L5WhqPa5k.asf&vCat=/av&RND=519992356&A=

[Bix]

David, I hear you, but it really didn't help much when I was house hunting a year ago. Even in the narrow part of the market I was looking in, the prices were all over the lot. Even though I realize that some people sneer at asking prices, they are a good gauge of how realistic and reasonable the seller is or isn't, and were more helpful overall even when patently ridiculous.

When one person was asking 249K for a house on a tiny lot in Jeff with no privacy, and around the corner there was a house with privacy and land for which the asking price was $215--those were the kind of numbers that mattered. As you say, a median could mean more houses selling on the lower or higher end.

[mal]

Bix is exactly right.

Knowing the median or average sales price is not much use to a prospective buyer. Sales price trends might be helpful (if the buyer has been on another planet and hasn't noticed that prices are falling), but even the trend is at most only indirectly relevant for a given purchase.

B's attempt to explain why Bix is wrong is actually a fine explanation of why Bix is right. Consider B's summary points:

+++++++++++++++++++++++++++++++++++++++++++++
* Median price is determined as to what is selling - and it's not high end.

* Action is in the lower end of the market.
+++++++++++++++++++++++++++++++++++++++++++++

So, if you are a prospective buyer looking for anything other than a low-end house or mobile home, rest assured that B got one thing right:  the median isn't relevant for you. Instead, you should ask a buyer agent for comparable sales information for the particular category of home you are interested in. There will be probably be very few recent relevant sales for your category and desired location, so you should definitely factor that into any purchase offer.

[mal]

p.s. Of course, medians are very useful when derived from reliable sampling of the desired underlying category (or population). A median price compiled from sales of houses in the buyer's specific category of interest would be invaluable, but in Sullivan county there are insufficient sales to make that feasible.

[Dersh]

Mal,

Those "summary points" {in asterisks} were from Ms. Liebman of Corcoran - not from me.

Watch her video at bloomberg.

Dersh.
==============================

Our Quote of the Day:

"Knowing the median or average sales price is not much use to a prospective buyer."

~Mal.
===============================

[Bix]

Dersh, I don't much care what some lady at Corcoran says. Sullivan County is out in the sticks. It has about as much relevancy to Corcoran-land as the other side of the moon.

[David Knudsen]

dersh, I do post both median and average sales prices, and have every month for 8 years. I also note in my Current Market Conditions report, if you happen to bother to read it, when there are some particularly high priced sales that are skewing the average up. And I post offering or asking prices, like on the houses above, rather than their closed sales prices, because THEY HAVEN'T SOLD yet.

I don't "dislike" median sales prices. In fact, I've said over and over again that they are a better indicator of market trends from month to month because they aren't as affected by a handful of large sales. But just like average prices, they have to be taken in a context. For someone looking for a farmhouse on a quiet back country road or a lakefront home, the median in and of itself probably isn't much of a guidepost. But the average isn't probably much of a guideline for an investor looking to pick up some in-town rental houses in Monticello, either.

[mal]

Notice that Dave essentially made the same point that Bix made first, and I supported: that the median (or average) is not useful without other context. Dave wrote "the median in and of itself probably isn't much of a guidepost. But the average isn't probably much of a guideline...". I wrote "Knowing the median or average sales price is not much use to a prospective buyer". Both of us added an explanation that rests in somehow knowing what subset of the market is contributing to the median/average. On this blog we have argued at length about the underlying factors shaping the median, and David always adds commentary about such factors every time he presents a market report. That's invaluable for any newbie, and if they read what David writes, they will not be misled.

But a median price paraded repeatedly as evidence in itself? A median price without the necessary contextual explanation? Exactly what information is a prospective buyer supposed to get from knowing a number like the "$125000" that B floated today? What use is that data point to a buyer who is looking at an asking price? Let's say the asking price is $100,000. Does she say "wow, I'm getting a great deal!" Or if it's $250,000 should she say "No, way, I should get two houses for that price!" How many bedrooms and bathrooms should she expect for that median price? How much land? How much privacy? Who among you chooses a short list of homes to look at by comparing them to the median? Why do appraisers use COMPARABLE sales and not the MEDIAN sales price to determine a home's appraisal value?

If you are choosing one of several condos in, say, a California development of identical homes, the median sales price for condos in that development would be incredibly valuable. But the median price for sales of all property in California would be pretty useless. Here in SC the diversity of property styles and settings, and the substantial evidence that today's median represents a very different sampling from that diverse range of properties than it did in previous years, makes the value of an overall median even more dubious.

[henry]

While B (and pseudonyms) over-emphasize the value of the median, Bix is also wrong in attempting to trivialize it (even if Bix's home on Lake Wobegon is clearly above average and has clearly INCREASED in value in the last year). There is great value for buyers and sellers in looking at the median and other sales data, and realizing that few second homes are selling. It then leads to the question of why aren't vacation homes selling? Then to the question of why is there a large bid/ask spread? Then to the question of what value are pre-September comps (often the most recent in a given vacation segment given the lack of sales)? Then to the question of the price level of where new deals are likely to be done? Then to the question of ...

[David Knudsen]

great post, mal.

[Bix]

I have to admit that the Lake Wobegone reference was funny.

I view it as a bit like buying a car. What good does it do to know what the "median" or "average" price of a car is? Does that help me judge the value of the 2003 Volvo I'm thinking of buying?

[Dersh]

Ix Nay Bix.

Resale on a 2003 Volvo?

Look at edmunds at:

http://www.edmunds.com/

or Kelley Blue Book at:

http://www.kbb.com/

--------------

Henry:
"There is great value for buyers and sellers in looking at the median and other sales data, and realizing that few second homes are selling. It then leads to the question of why aren't vacation homes selling?"

>> Uh Henry...you've got to be kidding.

:-0

==========

Then to the question of why is there a large bid/ask spread?

>> How about denial on the part of the sellers?

:-0

>> However, some of the blame could also be on the part of the listing agent to take a listing at "any price".

>> What I don't understand is why Dave lists the "Average Home Prices in Sullivan County, NY".

Right now, it's (gasp) $281,284!

>>Wow. Makes the viewer think that things are hopping.

>>The average home price (that is read: FOR SALE) is currently a tad under three hundred thousand dollars in Sullivan County. A bit misleading and, if not, there's your wide bid ask spread as to why things aren't selling Henry.

========

Henry:
Then to the question of what value are pre-September comps (often the most recent in a given vacation segment given the lack of sales)?

>> Who cares? Ask a few local appraisers if they are still using August 2008 comps. You'll get a blank stare. Current comps are from post Lehman which would be closing after October 2008 - five months ago.

===================

Henry:
Then to the question of the price level of where new deals are likely to be done? Then to the question of ..

>>Keep watching the numbers boys for this year.

>>1. How many houses close and 2.what the median prices are.

Dersh

[henry]

Bix - I did write it with a smile... and meant nothing personal. As for your car analogy, you are hurting your case. If the median/average car price fell 40%, then it is a good bet that corolla and volvo (but maybe not ferrari) prices are down. I would then be looking for reasons/context for the decline. Cheaper steal? New technology? Dramatic mix shift? Moreover, I would be particularly careful if the median/average car price fell that much, AND I was being asked to pay last year's price on a 2003 volvo.

B/Dersh - Chill. Context is important and does not kill your argument. Further, I think that everyone here is aware of my view that ask prices for second homes in SC are in fantasy land right now.

[Nick]

The prices posted are macro type numbers, and should be evaluated as such. Extrapolate a little to another context. Does the unemployment figure tell you if you have a job or not? Of course not. Is the unemployment figure valuable? Extremely. Does the S&P 500 tell you what a particular stock is worth? No. Is there a good chance that there's some correlation between trends in the S&P and a particular set of stocks you happen to be looking at? Of course.

That's the nature of aggregate and macro numbers. It's not like anyone's misrepresenting them. And of course they have great value. Don't forget who David's site is for, new prospective buyers. If you live in a place where the median price of an apartment is about a million bucks it might be a total revelation that the median price of a single family home in Sullivan is a fifth of that. And as mentioned above, if you're trying to judge what a house is worth and you have historical sales/value date for it, knowing the overall trend is helpful too. Of course it's better to compare apples to other apples, rather than compare apples to the price of fruit in general. But the latter is pretty helpful too.

[city slicker]

{Data from the *first* page of Dave's website:}

X-----------------------------------------X
Average Home Prices in Sullivan County, NY

Current Listings Dec 08 - Feb 09

All Single Family Homes
$281,284

Closed Sales
$166,119
X---------------------------------------X

Gee guys. I dunno.

Dave's got the average price of all single family homes at $281,284 but the closed sales of single family homes at $166,119!

That's a gap of offering prices on the MLS to closed sales of... 40%!

What gives up there?

What's the point of the offering price information anyway if there is such a wide price discrepancy?

City Slicker

[henry]

Large bid/ask spreads and volume data in SC and elsewhere are well-documented on this site, and are valuable indicators as to the health of markets. If one had to sell today, it would be difficult in most cases and would likely require a large discount to current ask prices (note my recent post about the results of a Hamptons auction where only 2 of 16 properties sold... and those selling went at ~40% discount to ask when they did). On the other hand, it also appears clear that there are few sellers in SC today at this kind of price, so the market is stagnant. Over time this gap must close (one way or the other, ignoring my strong opinion as to the outcome) as there are properties that need to be sold...

In the meantime, bix will enjoy his/her piece of dirt and the lovely fresh air and sunshine... while us "bitter renters" will enjoy amazing vacations elsewhere at a fraction of the cost... as well as the satisfaction of not having burned a pile of money. Each to his own.

[Bix]

Bid ask spreads? Volume data?

This isn't the stock market, with equities trading on an arms length basis. This is people selling their most valuable asset for any number of reasons. There are no data on "bid ask" spreads in SC real estate. There are average asking prices and average sale prices, which are absolutely not a "bid ask spread." Comparing the two numbers does not imply that houses throughout the country, with an average asking price of X and an average sale price of Y, are selling at an average markdown expressed as the percentage difference between X and Y.

There is absolutely no data on "bid ask spreads", nor can there be because the "spread", meaning the reasonableness of the seller, varies from house to house.

[henry]

"Bid ask spreads?" Dave posts it monthly on an average (macro) basis. For "micro" data, real estate agents have a good approximation for their listings... as it is the list price versus the best offer that they have received in the last year or so (and likely lower now given the deterioration in the market).

"Volume data?" Dave posts it monthly... albeit with a "time to close" lag.

The point is that, in general (and apologies to the few SC sellers that have dropped their ask price to account for current market conditions), there is a large bid/ask spread right. You can see this in the complaints of realtors about "low ball" buyers (who have made bids at large discounts to ask) and in the lack of sales volume. You can see this in neighboring geographies where there are more sales, so recent comps form a picture of the current market. You can see this anecdotes like the Hampton story referenced above.

[Bix]

I didn't dispute the volume data but "bid ask spreads"? Where does that come from? Not only does he not use that terminology in his monthly report, but to do so would be ridiculous. I think you're confusing average asking prices with a kind of mega "asking" price, which is absurd. Please correct me if I'm missing something.

Certainly there is no such thing as a "bid" either, as there is in stocks, in any quantifiable way. One does not place a "bid" for House X on the Sullivan Real Estate Exchange. It is as antiquated a dealer market as you can find. So to use "bid ask spreads" in this context is just not accurate.

[Jerome Klein]

Sullivan county had a Miami-style run up but on a much smaller scale.
There is no otherway to put it.

Game Over

[henry]

Bix,

I am using stock terminology to describe the situation. It is not ridiculous.

Seller listing price = ask price on the micro/property level. Then I am looking at the average asking price data in order to try to figure out what is happening on a more macro level (with all of the issues discussed above). It is worth noting that dave has a paragraph about the average asking price in his monthly report. It starts with: "The fact that the overall asking price average hasn't budged since December indicates continuing seller resistance to the downward price pressure in the market."

On the other hand, buyer offer price = bid price on the micro/property level. This data is not available on a macro level; however, offer price is <= the deal price on closed deals... as sellers tend to take the highest offer. The average closed deal price is available (though on a lagged basis).

[cfranch]

While the real estate bid/ask spreads aren't visible to the naked eye as they are in stock trading, they are still relevant here. As a trader when I see the bid/ask spread open up with the bid dropping and the ask remaining fixed, that usually means I go short. If the only offers coming in are low balls and sellers are fixed, it is the seller who are going to have to hit the bid.
As far as what has driven the New York economy, the stock market, it has acted well lately if you are a bull. However we are approaching some key resistance levels. I am taking profits on the way up here as I think we go down and test the lows again. As for the economy all I can offer up is anecdotal evidence of a huge white collar recession engulfing NYC. This is prime rental season in NY and according to broker friends nothing is moving. No new graduates from law or business school moving in, laid off workers going to cheaper cities and a freeze on hiring. Moderate to cheap priced restaurants with good food are all pretty busy, expensive places dead. You get the sense that people are pulling back on the excesses of the past 20 years. Being frugal is in. People seem to be valuing experience over consumption. Maybe this is a good thing. The biggest loser here will be real estate. The 50% peak to trough called made by Goldman Sachs and others looks to be spot on. I know Dave said he was busy but I wonder how serious these potential buyers are. Americans tend to be optimistic so maybe everyone is looking now with plans on buying later when things improve.

[Fez]

cfanch,
Not so sure.

What's your resistance on the SP500?

868 to 874?

We're now at 832 and might only have another 5% upside until we hit the the resistance.

However, NAZ and techs are more impressive with 1591 the next resistance point and the NAS closed at 1589 today. Very close to break out.

Good to see techs and transports along with financials leading the way.

We'll see.

Fez

If it blows through that number - it will be more good news for the bulls.