‘The Change In Pricing Tends To Come In Last’
A pair of reports from the northwest US; the Bellingham Herald, in Washington. “Even with more houses on the market, home prices continue to rise in Whatcom County. ‘Looking at the sales more closely, I found that the attractive, well-priced properties are getting full-price offers, while other properties are languishing because buyers think the price is too high. Generally speaking, if a property doesn’t sell in its first two weeks, it will be on the market for several months,’ said Lylene Johnson.”
“Buyers can choose from significantly more homes on the market. Bellingham, Lynden, Ferndale, Blaine/Birch Bay and Sudden Valley had 1,357 homes for sale on June 30, compared to 655 a year ago. (Realtor) Mike Kent thinks a couple of factors are affecting the average sales price: The number of sales has fallen 13 percent, while more homes have been selling above $1 million this year.”
“‘When you have a few more $1.9 million homes being sold, it will really pull the average up,’ Kent said.”
“Peter Roberts, president of the Whatcom County Association of Realtors, said he’s also noticed an increase in the sales of higher-end homes. ‘There are more people moving to this area, starting at a higher price point than what we’re used to seeing,’ Roberts said. ‘However, these buyers understand the market, so a house that is slightly overvalued will just sit.’”
From the Oregonian. “June appeared to repeat a trend of prices rising, even as sales volumes decline and the supply of homes on the market grows. Economists and local real estate agents say housing in the Portland area seems to be in a transitional period.”
“‘You’re starting to see everything that you’re expected to see except for the change in pricing, that tends to come in last,’ said Jerry Johnson, an economist in Portland.”
“Real estate observers have been betting for years that the Portland-area’s robust housing market was headed for a slowdown. Most differed only in how soon they thought it would slow, and whether it would result in prices actually dropping or simply more modest appreciation.”
“While June’s figures didn’t resolve that debate, they did begin to substantiate observations by real estate agents that their buyers are finding more houses for sale now than they did a year ago.”
“Housing supply rose sharply. The number of active listings, comprising newly listed as well as homes on the market in previous months, rose to 8,575 by early this month compared with 5,423 a year ago, an increase of 58 percent.”
“The disconnect between rising inventory and higher prices suggests the market is in transition, when sellers are trying to stick to a high price they feel they should get, said Bill Conerly, an economist in Lake Oswego.”
“‘They haven’t yet accepted the idea that the market has softened,’ Conerly said. ‘And certainly, if I had a house on the market and saw the median up 17 percent and my house wasn’t selling, I think I’d leave it on the market a little longer.’”
“Already, veteran real estate agents say they’ve adjusted their expectations down from last year. Dave Hrabal, a top producing agent with The Hasson Co., said last year he would set an asking price above recent comparable sales prices and receive full-price offers. This year, he and others have said they’re sticking closer to the prices achieved by recent comparable sales.”
“Eventually, homeowners who need to sell a house quickly will lead the market downward, Conerly predicted. Those sellers, who perhaps need to relocate to start a new job out-of-state, can’t afford to wait for a buyer to come in at their price. They could set a precedent for lower prices, he said.”
“‘We’d have to see falling prices before people start accepting low offers,’ Conerly said. ‘They’re not at that stage now.’”
‘if I had a house on the market and saw the median up 17 percent and my house wasn’t selling, I think I’d leave it on the market a little longer.’
And who wouldn’t? As this is psychology at work, of course sellers aren’t going to start cutting prices at the first sign of a slowdown. But if anything is overvalued, basic economics says there will be an oversupply.
Every market that has turned south; Florida, Massachusetts, Arizona among others, saw the median climb right into the face of mounting inventory. Then one day, the headline was that oversupply was driving prices down.
IMO, I think when we look back on the summer of 2006 it will be remembered as the time for the last desperate hope sellers had of getting anything close to their brain-seared outdated price. There will be a lot of woulda shoulda lamentations in 2007 and beyond.
By the time you see YOY at zero or actually declining, like we’ve just seen in SD, it’s too late…..you’re hosed! Timing the peak in any market is a treacherous game. By the time these guys have recognized the actual peak they will already be in line to take that “ass-pounding” that has been so freaquently discussed here as of late.
That’s one of the important lessons the readers of this blog need to grasp. The mainstream media doesn’t begin talking about a problem until year over year declines are repeatable stories. Reporters don’t go out on a limb. Meanwhile, the smart money had several months to exit. You’ve got to learn to follow the data yourself!
You look at the price your neighbors house sold for or is listed at, median prices mean nothing when you are comping your house for a sale. This median price reporting is worthless.. Move up buyers with lots of equity are using it to purchase higher priced homes, and are having to cut deals to sell their previous home unless they want to carry 2 mortgages. In my market there are twice as many listings as there were 2 years ago, and the same number of sales as 2 years ago, but the median price is up 25%.
What good is that figure when you are trying to sell your house to 1st time homebuyers andn 6 other houses in your tract are for sale
You better price it below the others, or it is just going to sit, no matter what the median price is.
And thanks to the readers who sent in these links.
OC in the bag?!?!?!:
Home prices swung upward to a median price of $642,000 for the 22 business days ending June 27, says DataQuick, after easing a bit for a similar period ending June 22. If the latest trend holds, June should notch a new record, beating May’s $635,000 median. It’s worth noting, however, that the latest median price was just 5.8 percent above a year ago and that sales of 3,301 homes for the period represents a 32.4 percent drop from a year ago.
Posted by Jon Lansner at 11:00 AM | Comments (0)
You missed Trader Chris’ comment.
They are fudging numbers or getting fudged numbers.
In what other industry is the market clearing price self-reported and propietary?
RE and wholesale electricity are the only 2 I can think of.
Wholesale electricity prices never made and individual go BK, but RE has and will continue it’s BK inducing track record.
Enron’s involvement in wholesale electricity prices made a whole lot of individuals bankrupt.
Links please.
I am in the CA energy markets and price discovery today is still just as difficult as in 2000 and 2001 and prices have been at or near the same levels $100/MWh, all of this without Enron.
I have experience with Enron and I don’t know any of the laid off employees in CA that went BK.
90%? Not only is the housing market over, but there is blood on the street.
1. there is not retirees in the world that will pay these prices, insurance, taxes and added expenses to live in an “urban” area with high crime and no transportation. they cant even sell their houses in the northeast now. they are moving to the carolinas, tenn and georgia and telling their friends. 2. deregualtion has cause the rising cost of health, food and basic needs. more importantly, investments and pensions are not the same now as is once where. dont rely on retirees to save the housing of pbc when retirees are moving to port saint lucie. 3. over priced housing has led to low and middle class exodus. now, that housing is going down, everyone is saying, buy now. but the buyers are not here anymore or already in homes. the population growth in pbc, broward and miami is slowing down from the past 10 years. miramar growth is from miami and not from out of the area. only martin and saint lucie county is growing and the population is from pbc. scripps are bring in people slowly, but not the numbers for the whole county. pbc and south florida do not invest in quality and is paying the price. there are no buyers left and the reminding low and middle class is just barely surviving. add crazy loans (foreclosure increase) and overall cost of living increase is going to cause major problems for sellers. one last word, PAY ATTENTION TO ISREAL AND LEBANON. IF WAR GOES INTO SYRIA, WE WILL BE PAYING $4.00 BY OCTOBER. GAS PRICES AFFECTS ALL PRICES AND I WILL PREDICT BY THE APRIL 2007, THE HOUSING MARKET WILL PLUNGE 20% ACROSS THE BOARD. THE MEDIAN PRICE WONT GO DOWN AS MUCH, BECAUSE THE LACK OF TRANSACTION, BUT PRICES WILL GO DOWN. PRAY WE DONT HAVE ANY HURRICANES HIT SOUTH FLORIDA! MARK THIS DOWN AND TALK TO ME IN OCTOBER 06 AND APRIL 07.
Who should I pray to?
Let’s have a war
So you can go and die!
Let’s have a war!
We could all use the money!
Let’s have a war!
We need the space!
Let’s have a war!
Clean out this place!
It already started in the city!
Suburbia will be just as easy!
Let’s have a war!
Jack up the Dow Jones!
Let’s have a war!
It can start in New Jersey!
Let’s have a war!
Blame it on the middle-class!
Let’s have a war!
We’re like rats in a cage!
It already started in the city!
Suburbia will be just as easy!
Let’s have a war!
Sell the rights to the networks!
Let’s have a war!
Let our wallets get fat like last time!
Let’s have a war!
Give guns to the queers!
Let’s have a war!
The enemy’s within!
It already started in the city!
Suburbia will be just as easy!
I forget the pop music lyrics I am lifting but here goes:
Despite all the above posted rage I am still just a rat in a cage.
Smashing Pumpkins: “Bullet With Butterfly WIngs”
Google is your friend
that was written by either The Slugz or The Jiucy Bananas, oh yeah, those were the days.
FEAR - nice one, haven’t heard that song in ages.
Why not now? Let’s have $4 gas now. Get the paper cuts over with. ‘Buyers in Tracy complaining about commute costs.’ Sales numbers dropping. Info from Silicon reports.
I’m waiting for a madatory DRAFT to be proposed right after the election…maybe before if this is called World War III…Then the foreclosure rate will really explode.
You heard it here first on Ben’s Blog
“THE APRIL 2007, THE HOUSING MARKET WILL PLUNGE 20% ACROSS THE BOARD. THE MEDIAN PRICE WONT GO DOWN AS MUCH, BECAUSE THE LACK OF TRANSACTION, BUT PRICES WILL GO DOWN.”
I think that if transactions are really lacking, the price may go down a lot more than you think. This happened in the Netherlands around 1980 (our last housing crash): buyers suddenly disappeared, without any clear cause, and al the gains of the previous 5-year runup where wiped out in a 1.5 year, -40% crash.
If there are no takers, the people who really have to sell their home will have to accept offers that are way below their asking price - otherwise they will simply not sell and have no influence on the median price. With low sales numbers, those few 50%-off homes will put serious downward pressure on the comps.
People with money in their pockets are usually keen enough in such a market to only buy the real bargains and the marginal buyers will have no buying power because I can’t imagine they get loans for properties where the value is in temporary freefall.
I’d say this arcticle holds true for Boise area as well. I saw a nice house come on the market (great location) sell for full price in 2 weeks (asking price was at comps) — other places have sat for months in the same neighborhood & same basic price.
If it weren’t for the high house prices, you’d never guess there were so many people making solid 6 figure sallaries in Bellingham.
This comment from the article seems to contradict that:
‘There are more people moving to this area, starting at a higher price point than what we’re used to seeing,’ Roberts said.’
So Bellingham is quickly becoming a haven for the idle wealthy? It’s a nice town.
It’s not clear yet that B’ham is becoming a haven for the wealthy.
Businesses that you’d expect to do well if there was a wealth class do not do well in Bellingham. But it’s got more “fall off the truck discount grocers” than I’ve ever seen in one small town, Four !
Like a lot of places that overbuilt, everyone here is still *counting* on those wealthy boomers and, more recently they’ve narrowed it down to Californians. (The hope of last resort?!) There’s a ton of buzz about about it.
Belingham is rated at 51% price drops (up from 46% last winter) on the national lists, right behind CA towns. While Seattle is “only” at 26% or so. Probably has to with lack of high-paying jobs. Also, the housing stock is not as nice/well-built as Seattle’s. And yet, relatively speaking, they’re charging the same high prices.
I agree with the national lists and think the market here is in for a huge tank.
BTW where all you PPT theory people this week?
http://finance.myway.com/servlet/GifServlet?b5d&11671|11m
Nice orderly decline. We still have yet to see a day where the DJIA loses 500 in a day. I will refrain from bad-mouthing the scam market from now on though.
at this rate 900K + (plus) this time next week.
mid may was 799,000
6/10/06 was 836,471
6/14/06 was 840,935
6/17/06 was 846,120
6/20/06 was 850,317
6/22/06 was 855,892
6/24/06 was 860,647
6/29/06 was 866,037
7/01/06 was 858,675
7/09/06 was 870,854
7/11/06 was 882,239
7/13/06 was 886,055
7/14/06 today 890,896
http://www.ziprealty.com/maps/index.jsp?usage=search&cKey=74rbwvlk
Stanley,
When we break a mil does that mean we’re gonna have a party!?
The NAR had better get busy and recruit more realtors, because at this rate there won’t be enough realtors to sit all those open houses that no one is walking through.
I know! Start MLS kiosks in Mexico to attract more *BUYERS*! Since that’s where all the population growth is originating from, it might be nice to let them “virtual tour” some homes before making that trip across the Rio Grande.
Problem: They come without money.
Solution: More creative financing with loan apps in Spanish!
A simple average of the rate of growth / days suggests that on the same trend, Ziprealty’s listings should break a million mid-september.
1M by mid-september!
I get Mid september using my assumptions, but that’s a nitpick.
What is the inventory level that the market cannot support?
I doubt 1M will create a sudden collapse… but will other economic indicators make it seem like it? (e.g., $4 gasoline?)
I’m thinking my “ides of October” prediction for when Joe Six pack knows homes are losing value might be right on target…
And then the real pain hits 2Q2007 (mortgages resetting in bulk, people no longer able to hold out, etc.)
I wish there was a less painfull way to get back to affordable housing… Something other than a price crash… Cest la vie.
Neil
I swear I looked this afternoon and it was 889K and a little change - big listing day - this is going to go ^ like crazy with all the bad news finally sifting down to Joe 6 …
Funny. Living in Seattle, as recently as 6 months ago I was in fear whether the NW would be immune. Despite no apparent price decreases, I’m now able to see the bigger picture: inventory mounding, prices topping off, sales slowing; of course, also in Seattle. How could I ever come so close to believing that “Seattle is different?” Dang.
You should visit the Seattle Bubble blog, if you aren’t already. There’s still several doubters over there.
I’ve always contended that Seattle/Portland are two of the most vulnerable markets in the country. Both are losing (not gaining) core employers making us that much more dependent on “the boomer factor”. Truth be told we are “sub-markets” to San Francisco and LA. Poor policy decision making lead to Boeing’s exodus and Meier and Frank pulled up their tent stakes and moved 1,200 good paying jobs to LA. I talk to folks in the business community everyday and the common refrain is “when my lease is up I’m out of here”! But good news! Portland IS attracting “high end” bicycle mfrs! We’re gonna get hit and hit hard.
When does the summer selling season start in Phoenix ? It’s 112F today. heheheheheheh
From Bill Bonner, Daily Reckoning:
US companies are making record profits, say the papers.
At first glance, that looks like a fact that does not fit our theory. Our theory, remember, is that the US economic recovery since the recession of ‘01-’02 is a charade. It is based neither on savings nor earnings, but debt. Since all debt must be repaid – by someone, sometime, somehow – whatever boom it caused must be followed by a bust of exactly the same scale. A slump is equal and opposite the fraud that preceded it, we like to say.
Of course, that doesn’t mean that every time you borrow money you ought to face a terrible bust. If you borrowed money to increase your own earnings by learning a new skill - if you are an individual - or to add to capacity – if you are a new business - then you can pay the money back out of your new, plumped-up earnings. But a consumer boom, funded with credit, is something else because the money is not invested, it’s consumed. And when it needs to be paid back, there is nothing to pay it back with except the old pre-boom income. Real earnings of most households in America have not increased during this last 5-year period. This, too, helps explain why corporate profits are so high – businesses have not had to pay more to their employees.
When consumers spend from their borrowings, rather than from their earnings, businesses get to sell more without having to pay anyone more. Income gets logged onto the revenues side of the ledger, but no extra wages are recorded on the expense side. Result: profit.
But if workers are not earning more, how are they going to keep up with the extra debt? They can only borrow more, or cut spending to below the level it was when the boom began. So far, they’ve been borrowing more. They’ve borrowed against the increased prices of their own homes. It’s too bad, but even if their houses were worth five times what they were five years ago, it wouldn’t help them pay off their debt – unless they were to die or leave the country. If they’re still alive they will have to live somewhere. So, they can’t very well sell their houses.
Oh, of course a few people could. They could sell their expensive houses in Miami or San Diego and go live in a trailer in the Ozarks. They’d be fixed for life. But if many people chose to do that, prices for houses in Miami and San Diego would collapse.
Already, we’re getting anecdotal evidence that US housing prices are weaker than the figures tell us. A friend from Florida passed through Paris last week:
“You remember that house next to mine? It’s right across the road from the beach. Nice 1920’s-style cottage. I wanted to buy it for a long time. Well, I finally did.
The guy wanted $2.5 million for it. He was sure he would get it if he waited long enough. But the longer he waited the more it looked like prices were headed the other way. I had offered him $1.9 and he refused it. But prices are really getting mushy. I just bought it last week for $1.35.”
“More housing weakness,” adds a headline from CBS Marketwatch.
As housing weakens so does the US economy. It is not apparent in the corporate profit figures – yet. The CEOs there are still enjoying additional sales revenues without additional wage expense. But those profit figures are history, not future. Wait until the consumer finally figures out that he can’t continue borrowing to pay his way in life, wait until he finally figures out that he must cut back on his spending, wait until he figures out that he’s been had.The CEOs might become history too…Wait until our theory is proven correct!
A few weeks back, I visited some realtor offices in Bellingham for a chat.
My first question was “How many homes were on the market this time last year?” (That info for Whatcom Cty. is not available in the NWMLS lists).
Even though one of the realtors was very free with some damning info, he “searched and searched” but couldn’t find the inventory #’s for last year.
So thanks Ben for putting this report on the blog.
Just checked on my co-worker’s dads condo in Birch Bay. (in The Sandpiper Condominiums). 307 days on the market. Price reduced $260K to $225K. 4 identical units priced from $219K to $230K, min. 60 days on the market. Because this condo is a nightly/weekly rental, the average rent is usually less than $600/month.
Makes you wonder when an 850 sq ft condo built in the 1970’s costs more in Blaine than it does in the communities bordering on the city of Seattle.
The “high end” has been doing very well in Seattle (and evidently places like Bellingham) the past couple of months. The CA equity locust is feeding in great black clouds on WA. This has driven the prices up quite a bit in some areas.
For example go to Zillow and check out properties in 98112 (Madison Park). You will find the price increases are quite large. This is because there are many multi-million dollar homes (locust bait) in this zip and they are driving up the median in the whole zip and in general, the whole city. But mid and low ends are not enjoying the same sort of popularity. In fact inventory is building and homes are sitting in the “non-bait” areas.
The same thing is happening in Bellingham and probably in “target areas” across the country.
This is the “last hurrah” for RE in the “target areas” that are at the end of the domino chain. This summer, “The Summer of Locust”, is market peak here in the PNW. The fall brings…the fall.
“The same thing is happening in Bellingham and probably in “target areas” across the country.”
The same thing has kept European RE markets expanding for at about 5 years now. It depends on how far the equity locusts are able to spread. Probably the spread of the CA locust variety will be limited by the fact that most of them focus on their own country and are not likely to go feeding in Canada, Mexico, Middle-Americas etc. But if they do, the bubble could remain alive and kicking for at least another few years.
Just check up on a few of the homes selling in my area (Sacramento). There are a trio of 2400 sqft homes that are on the same street that have been on the market for a couple months now. One is listed at $470K, another at $510K, and another at 500K after being reduced from 550K. If they want to sell now, theyll probably need to be around 450K, to compete with the other 12 or so houses withing walking distance.