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Early Peek at November 2008 Market Results
I took an early snapshot of Portland’s November real estate market activity and it was pretty meager.
Only 1,015 homes sold in the month. That is the fewest sold in any given month going back to February 1993. This isn’t just a seasonal pattern. By comparison, for the Novembers in 2005-2007, home sales averaged 2,173.
The median price will come in around $266,000, the lowest median price going back to March 2006. The average should end up around $309,000. These numbers are 12-13% off the peak pricing of July – August 2007.
I will explain next week why (and for whom) this is good news.
RMLS will publish final numbers late next week or around the 15th, so come back to hear about pending sales, active inventory, and more.
Photo by Liquid Paper, used under Creative Commons license.
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19 Responses to “Early Peek at November 2008 Market Results”
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More basics for you:
Please note that the ratio of the November 2007 sales to October 2007 pending is .826.
Next note that the ratio of the November 2006 sales to October 2006 pending is .804.
If the 1015 number of sales is correct, then the ratio of November 2008 sales to October 2008 pending is .800.
NOTE: I have not proven that there is any correlation between the past month’s pending sales and the current month’s actual number of sales.
With that said, the level of November 2008 sales does not appear to be unusual. In fact, it seems expected. In general I estimate the ratio of current month’s closed sales to last month’s pending sales to be about 85%. The actual average is probably slightly higher. Again, I have not established causation or scientifically proven that the two are connected in any way shape or form. That being said, clearly sales that take longer than 31 days will be recorded as pending in at least one month. Sales that take fewer than 31 days may be recorded as pending, depending on the starting and ending points. I am sure there are some problematic sales that are pending for many weeks, such as a short sale. These might appear as pending for multiple months. Some sales might be pending for 32 days but appear as pending in two monthly reports. I would have to address all these factors, along with some others, if I were going to do a better analysis.
I know that you don’t think it has any significance, but as average sale prices and volume continue to approach zero, total sales volume is rapidly approaching zero. Who is this good for?
Slight Correction:
I know that you don’t think it has any significance, but as average sale prices ($) and NUMBER OF SALES (count) continue to approach zero, total sales volume ($) is rapidly approaching zero. Who is this good for?
Next week, next week. Some aspects of this news are good for some participants in this market.
I’ll patiently wait to hear who sees any of this news in this illiquid market as good. (I am sure there are some doomsayers that will view it as good news, but I hope that is not the direction you are going to go with all of this.)
JP:
Zero sales and approaching zero sales are two very different things. The first is bad for all market participants because there’s no longer a market. The second is good for buyers because houses are getting cheaper, though eventually lower prices will spur demand (I see no reason why the law of supply and demand will be suspended for Oregon’s housing market).
yanagigoshi-
Certainly I understand the difference between approaching zero and zero, and that is why I never suggested that we have “zero sales” in the Portland Market. I do wonder, however, what level of sales is close enough to zero to be effectively zero. Clearly a small positive number of sales, such as 50, is close enough, but what is the maximum small number that is so close that we can effectively call it zero sales?
Lower prices do not “spur demand.” I think you have confused traveling along the demand curve with shifts in the demand curve. You need something more than “lower prices” to shift the demand curve.
Some questions: Why is Months of Inventory so high? (When I say “so high,” I mean high relative to recent history.)
Even if the assertion about “spur demand” were true, why are the number of sales going down? How can I recognize this new “demand?”
Why is the total sales volume going down so much? It would seem that quantity demanded is greater at lower prices, but what we have now is lower prices and fewer sales.
What quantity of sales is the total market value of real estate maximized? A discussion about liquidity and the basis for your observations should be included.
Finally, could you state the law: The Law of Supply and Demand
Could we be in a pseudo monopsony for residential real estate?
Ron-
I hope you will include a discussion about Months of Inventory. With so few sales, it must be heading toward the sky. In other words, while both inventory and number of sales are both going down, the number of sales is going down faster, thus MOI is going up.
In general a large inventory is good for buyers, but with so few sales, thus no liquidity, this might not be the case.
I guess it comes down to this: Cash is king.
More good news!
While it is impossible to prove this scientifically, mathematically or statistically other than looking over our shoulder and see our own behinds, The Bottom is Behind Us!
The recent engagement of the Fed in purchasing Mortgage Backed Security debt is one sign that they now understand the importance of rate targeting in the mortgage market.
This is a deliberate and methodical action on the part of the Fed and is designed to do two things. One is that it is intended to lower the cost of borrowing or hold rates at the current low levels to stimulate the troubled Real Estate market that is clearly a vital part of our economy. The other is a bit or a PR campaign to turn the tables on the Sky is Falling rhetoric that is still flying around the air and E waves. PR from the Government is also known as propaganda but call it what you want the news is good that they are actively engaged in positive messages to the public and positive actions to put buyers back in the saddle. This “yield or rate targeting” is an unprecedented action and is truly brilliant.
Last week we saw a drop in interest rates that was greater than any changes we had seen in a 72 hours period of time in the last 7 years. The coolest part of this is that they are holding steady in this range and buyers are responding.
Consider the following evidence, albeit a little less scientific.
The casual investor has come back to the market. Ask any Realtor or Mortgage professional and you will find this to be true. Look also at the MBA stats for new aps and you will find renewed interest from this buyer type. This is an organic sign of a stabilizing market that is full of opportunity. This buyer type is generally more risk averse, and sees value for what it does for them and their families over a longer period of time. The professional investor is always in the market, they just change their behavior based on the $’s. Some years they win some they loose. The casual investor responds to different and sometimes more telling motivators.
Values are up. Yes it is only a little and one month does not make a trend but a bounce is a bounce. Don’t ignore it.
The Calvary is coming. We might not all agree that we want them or need them to or like that they have Red or Blue coats on but they are coming and the very suggestion of this is changing our market psyche. Making decisions before they are hear in force is a good idea. The best time to buy is near the bottom not on it. Just like a wave, we may need to paddle a little harder but you get a better read on it and position ourselves better when we aren’t forced to react. There will be more competing offers on properties that are correctly priced come late Spring and or Summer, Sellers will be more confident and will feel that time is back on their side as the Spring and Summer selling season is just starting and the market is improving.
This isn’t 1929. Period! The rhetoric that is anything like it is the Weapons of Mass Destruction of our day. In 1929 there really wasn’t a “Fed”, no FDIC existed and 4000 banks failed. Today 18 banks failed, we have partners Globally in all of this and unlike 1929 when it took 3.5 years to have a President that could or would engage in real change (I hate that expression by the way and don’t like using it but it is fitting in this case) we have 3.5 months. More important we are reacting now under the current administration with the help and leadership of the new and clearly will continue to act in measurable ways on the part of the Feds to do what it takes to get things rolling again. In 1929 we weren’t an economy on Crack like we were over the past 20 years. We were over producing in some ways and we were not well cushioned or regulated for a disaster like the Great Depression however we were strong and smart and learned from our mistakes.
We are smarter and stronger today. We will be smarter and stronger tomorrow.
Stuart Brown CMPS
Valley Mortgage
503-538-1459
It’s possible to over-rationalize economic behavior, especially when it comes to homes. We had years of irrational exuberance, and now we are having a period of irrational fear. There is no sure way to tell how long the fear will go on, but the unemployment numbers will be telling. If we keep losing jobs through the spring and summer, sales may get even worse. If job numbers stabilize, people may start to feel a little better about big-ticket items. But even if they do, they’ll be looking for bargains– the easy money to finance the otherwise unaffordable home is gone.
Stuart-
You’re too funny.
“Values are up. Yes it is only a little and one month does not make a trend but a bounce is a bounce. Don’t ignore it.”
Uh, maybe you didn’t bother to read what this blog entry is about, but values are down.
I don’t know if you are calling the bottom in terms of number of sales, average price, median price, or some combination of these, but I’ll mark you down as calling the bottom as of today.
(Even if you are the lucky one who actually did call the bottom at the right point, I would like to say I have heard these bottom calls by a whole host of people, including owners, buyers, sellers, mortgage brokers, REALTORs, and so on, for the last two to three years. Don’t get me wrong, you are two to three years closer in time than those others.)
Hopefully the economy, in general, will improve sooner rather than later.
Again, thanks for the laugh.
The cavalry can come all it wants – you just can’t argue with the math. And the new lending standards coupled with income levels in PDX indicate much more pain coming next year – and a drop of the FHA loan limit for the Portland metro area from $415k to $360k ish
I’d love to know how those inventory numbers are indicating a bottom ?
Maybe a bottom as far as sales numbers go – but we’ve a long road ahead with inventory still elevated and foreclosures on the rise.
FWIW the MBA mortgage application numbers are bogus – people had locked rates and then we got a hard down spike in rates so they simply reapplied to get the new, now lower rates… One buyer – two mortgage apps – I’d have thought you would have seen some of this yourself as a mortgage broker ?
I guess I’ll mark this down as the start of the real estate biz PR campaign praying to stimulate a “spring bounce” though…
“In 1929 there really wasn’t a “Fed”, no FDIC existed and 4000 banks failed. Today 18 banks failed,”
The Federal Reserve System (the Fed) a central banking system operating as a quasi-public entity was created in 1913 by the enactment of the Federal Reserve Act. The FDIC was created in 1933 in response to thousands of bank failures, which today is still an entity whose existence is debatable.
As for real estate bottoming because of buying by early investors; I would look at Japan for historical reference. One could also look to the past “dot com” buying as the market stabilized then tanked washing out the “catching a falling knife investors.” The bottom is always hindsight. To call a bottom is speculation, which might be true but I am not that much of a speculator or gambler. I will always follow the motto “the trend is your friend,” and I will always invest with the trend in any market.
Best of luck to you, Stuart, I hope you are right.
Hey Stuart, you might have missed this news:
58% of Modified Mortgages Re-default after 8 Months: Why are Loan Modifications not Working?
The Office of the Comptroller of the Currency released data today showing that over half of modified mortgages are back in default after only 6 months. More startling data is that 36 percent of the borrowers re-defaulted after only 3 months. What this is telling us is that modifications are not helping to buffer the housing market in any significant measure.
http://www.mybudget360.com/58-of-modified-mortgages-re-default-after-8-months-why-are-loan-modifications-not-working/
How do you think all these lay-offs are going to effect housing? Or is Portland still residing in that special immunity bubble?!
First off
I will correct my earlier comment to clarify, it should read. ” In 1929 there was no “Fed” as we know it today” and more importantly “our bottoms are always behind us”. As far as calling a bottom, I do believe that the worst is over and the recovery is well underway and hopefully we can call this the beginning of the bottom here in the Northwest. At the least I am going to defer to Cramer (Mad Money) and suggest, since he is always right, that the real bottom is 204 days from now. Of course I have never actually invested in anything based on his advice so it is easier to believe everything he says. That being said, I don’t think any of us have the answers and it is all speculation regardless of history and statistics. I for one will still be hanging on to my bottom while trying not to look back at it much in the New Year. I am convinced that if isn’t in our rear view mirror; the rear is at least near.
There are two things on the modification issue that bug me. One is the low number of people that are actually being helped and the other is that high # of second default you mentioned. I hadn’t heard the exact # but had heard it was high. So many people were given loans they simply couldn’t afford and they are now simply getting another loan they still can’t afford.
This is one of those don’t get me started subjects. How about FHA Secure that was designed for homeowners in trouble. You can’t get the loan unless you are in trouble and most lenders won’t approve the loan if you have a Mortgage slow. Go figure. We are just unloading our Congressional shotguns on some of this stuff and missing our target. I will say that it is a beautiful thing however when you see someone get modified that it does rescue from foreclosure, especially those that didn’t wedge themselves into something they couldn’t afford or speculated or worse yet lied. The 41% left over I guess are pretty precious.
On the Portland Realestate-topia Q. I think Portland has a good chance of remaining somewhat more insulated than other parts of the US. We often do have higher unemployment #’s than the rest of the US even during real estate growth periods. It is a wild card though. I don’t doubt that the jobs numbers are going to be bleak going forward and the historical correlation between jobs and rates (and real estate) are undeniable. We can compare this period to any number of periods statistically however it just aint so. This situation is different and very new. We can get some bearing from history and economic theory but this is one strange time in our world. I am betting that unemployment continues to look Poooopy to Pooopier (howz that for technical?) and we still see the start of a housing recovery or at the least stabilization while it peaks.
I think the same Economy on Crack or more accurately Real Estate Economy on Crack is going to be revived by some of the same drugs that inflamed it. It is sort of looking like economic Methadone for a Heroine Housing addiction. Albeit artificial and possibly temporary, all of the intervention including the modifications, forcing rates lower by purchasing Mortgage debt etc. will or is bringing about the correction; it just may not bring about a real cure.
Most of the banks that failed during great depression I were tiny operations. WAMU alone was almost as large as all of the thrifts that failed in the S&L crisis COMBINED. I would not be surprised to see complete nationalization of out banking system.
“I think Portland has a good chance of remaining somewhat more insulated than other parts of the US.”
Care to explain why?
http://www.luxist.com/2008/12/13/portland-condo-offers-overnight-stays-to-lure-buyers/
Ron-
I am still waiting to hear who is helped by leftward shift of the demand curve. (Normally I don’t use graphs, but it is so pervasive in economics that it seems appropriate here).
The official RMLS numbers will be out soon.
[...] released the November 2008 report and it corroborates what I had reported last week — weak unit sales and falling sale [...]