Author's Note: It will be interesting to see how many more of these educator memos I write to other ERA Shields agents. I have run the numbers now for over three years for ERA Shields and periodically send out "All-Company Memos" to the crew of agents. Some are fans of what I write, some are not, and about half gush about what I write but never actually read it. It's unfortunately obvious.
Today, I wrote such a memo, and as a believer in transparency, I think what is said on the inside, should be said to the outside as well. So another installment in the release of secret insider documents...
Clearly, the tide has turned.
Sales in May 2009 were down from May 2008 by less than 1%, 840 units in May ’08 to 832 units in May ’09.
Average sales price has recovered to just shy of $221,000. I am anticipating that June will be around $230,000.
It still is not clear if we hit peak inventory in March, as the marketplace added units in May, but take a look at the inventory levels at the start of the last four months and compare that to last year and 2007…
2009 2008 2007
February 5060 5571 5202
March 5075 5849 5659
April 5009 6175 6052
May 5043 6396 6567
In 2008, the market swelled 15% from February through May. In 2007, it grew 26%. This year it has remained essentially flat for 120 days (a 1.3% max variance is as flat as any four month period in the last 16 years.) Consider also that this coincides with the maximum ramp up of supply, and you can see how surprising this trend (or non-trend) actually is.
Other big indicators:
The jump in buying activity from March to May this year was 47%. Last year it was 16%.
The market has 6.06 months of inventory right now.
Last year it was 7.6 months.
We are in a new marketplace that can no longer be compared to 2007. In 2007, the median price was $30,000 more and the average selling price was $37,000 higher. The artificiality of that can be attributed to the last months of exotic, soon-to-foreclose financing. I contend that those numbers are padded by buyers who should not have been buying and we should have been in full-tilt correction at this point (like we were last year), but the marketplace was sustained by jumbo loans within a half percent of conforming rates, 80/20’s, interest-only ARMS… and these were the conforming products!
Here is a graphic example of that: in 2007, there were 292 sales over $300,000 in May of that year. In 2009: 159. There were 1032 sales in May, 2007. There were 832 sales in May, 2009. Wanna take a guess where the activity has remained the same? Wanna take a guess where the activity is almost non-existent? In 2007, over $300,000 was beginning to scale back, but it was still 28% of the market. Now it is only 19% of the market.
Lastly: there are 2348 single family and patio home properties for sale under $250,000. From March 1 to May 31, 1548 sold. That means there is 4.55 months of supply for almost half of the market. NAR uses 6 months of inventory as the dividing line between a buyer’s market and a seller’s market. Present Advantage: Sellers? I have a hard time broadcasting that, again, the market has changed and I wonder if 6 months really is an appropriate baseline. But the relationship to sales and supply is increasingly swinging around to a pre-correction level.
Author's note: Again, realize the following information is from an email to fellow real estate agents.
Don’t go and paint your faces and proclaim the correction over. Don’t buy a bunch of bus benches and try and evangelize the non-believers. I still think prices will FALL between September and February (have you seen the foreclosure numbers? These will hit starting mid-July right as sales activity starts to recede and the first-time buyers will be very active September and October trying to beat the November 30th deadline… while one is supply and the other is demand, they will work together to drag prices down probably 3%). Additionally, if the market is picking up… this means your competition is also starting to do well. Your competitors are getting healthy. I have also, somewhat controversially, proclaimed that a big problem in our market was too many REALTORS. As a state, we have lost about 10% of our licensed population since the peak in August, 2007. But the national rate of attrition is 22%. As the market begins to stabilize/turn/return… I don’t think many more will be leaving the profession.
The way you grow your marketshare is through listing control. Without listings, you don’t have any market control. Game on.
Stat Pack should be cooked by Wednesday.
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