Mar. 30, 2009 - Home Prices "Bottom" - % variance asking to sold
At the peak of the market, the % variance between asking and sold prices was zero. At points where the price of homes on market is higher than the market will bear, that % variance increases to almost 6%. In the chart below you can see that this variance is often eradic and the percentage from Asking Price to Sold Price usually decreases along with Days on Market and % of sold property that sold in less than 30 days, as we saw in the previous posts.
At the point I noticed a dramatic shift in the market, there was a drop in prices AND an increase in the % variance between those lower asking prices and sold prices. In the chart below, focus on the green line which is the subject of this post. I will break out the overlay blue and red lines below it.
In early 2007 you see the % variance fluctuating between zero in the Spring period and as high as 2.4% coming into "Spring Bounce". Once we passed the peak, the variance shot up to 4% almost instantly, but at the same time you see the blue line of asking prices trying to stay flat in a declining market. As the blue line decreases in November of 2007, the variance decreases as well from 4% to 1.8%. This means that the homes sold at 98.2% of the asking price vs 96% of the asking price.
The lowest of prices is achieved not simply because the asking prices reduce, but when the asking price reduces and the buyers pay substantially less than those asking prices, both at the same time. What we can't readily see are concessions in those asking prices, which can alter the results by as much as 6%, but more commonly up to 3%.
The peak period would also have the fewest number of concessions. So the difference between zero and 4%, especially as we get into the middle and end of 2008, can actually be substantially higher.
The above prices are converted so that I could do the overlay in the first graph. 4.8 equals $480,000. The asking prices for this market segment range from $429,000 at bottom to $585,000 at peak. But it is what happens with the green line in the first graph that actually controls the outcome.
Again, in order to overlay the median price per square foot in the first graph, I converted $240 per square foot to 2.4. The price per square foot in the above grapth ranges from $208 at botton to $299 at peak. In order to stabilize the sample, I took an area that was relatively cohesive and limited the square footage of the homes to not more than 3,000sf. I also excluded lake and mountain view homes to eliminate the appearance of a market increase in months where more or less view property is sold.
As a final step, I Adjusted the Median Price Per Square Foot to the average median home size of 1,944sf to eliminate the variance of months where the median square footage of a home sold was 1,830 vs. 2020.
It might seem odd that studying peaks and bottoms is not about actual prices. Determining the flow of the marketplace is like looking at the Dow vs. the Technology Sector or your holding of Microsoft stock specific. You have to find the general flow of the marketplace in order to know if your area is over or under performing.
I will note here that the market sampling for all of these posts of yesterday and today have very few short sales or bank owned property sales, less than 10%. More on that in the final wrap up post that highlights the shift period exclusively.
(required disclosure) stats hand compiled by ARDELL and not compiled, published or verified by NWMLS.
Mar. 29, 2009 - Home Prices "Bottom" - volume of sales
Before we talk about volume sold...understand that unlike the stock market and its ups and downs and peak and bottom, to a large extent the housing market is more a story of what is NOT sold, vs. the "volume" of those that have sold. That's why "the bottom" is/was like watching a bunch of people jump in front of a train. As you look at the volume chart below, keep in mind that in this specific market segment there are currently 543 properties on market that are not sold.
Calling "the bottom" is like saying "it can't get worse than "this". "This" as to volume and "this" as to price, are not necessarily one in the same, as prices do not often or always coincide with volume statistics. My bottom call was about prices and not volume, but let's add 38 as the "bottom" as to volume and 13% in the previous post as "bottom" with regard to % sold in 30 days or less.
There has been a lot of discussion around the internet about "spring bounce" periods, as if "spring bounce" doesn't count. Spring bounce is and will always be a huge part of the real estate appreciation factor. If the housing market "goes up" 12% in a year, you can count on a majority of that appreciation being attributable to the months from March through September. So comments like "oh, that's ONLY "spring bounce" are...well, silly.
An increasing market will have taller low points, a decreasing market will have shorter high periods and deeper low points. "bottom" will be the lowest of the low periods and 38 moving forward should be "the bottom" as we look back at it in months and years to come.
An analogy for those who follow the Dow might be that 181 in the graph above represents 14,000+ on the Dow and 38 represents, well...jury's still out on that one. I'm not as convinced that we have seen the Dow's low point at just under 6,500, as I am that we are seeing the low point as to volume of home sales in this market segement at 38.
There is much more to this story as "bottom" relates to sold vs. not sold. We will discuss that when we get to the subsequent and likely final post as to prices But first we will look at the % variance between asking prices and sold prices, as "bottom" was a double whammy effect of lower asking prices and widening % variance of asking to sold prices.
As to this post and this graph, the last few days of a month often hold a large % of the number of sales. Since Tuesday is the last day of the month, and reflecting those sales can take a week or so beyond that, let's just say I am positive that closed sales for the month of March will exceed the tail end of this graph, which is already up. There are already 46 closings in March reflected for this market segment, so the final count will clearly by UP from the final position in the graph above.
(required disclosure) stats hand compiled by ARDELL and not compiled, published or verified by NWMLS.
Mar. 29, 2009 - Home Prices "Bottom" - % Sold in 30
Similar, but an inverse relationship to the graph in the previous post. Tracking the percentage of homes sold within 30 days or less from coming on market. In a hot market, more properties sell quickly, as is evidenced by the peak periods where the % of homes sold in 30 days went as high as 71% in April of 2007. The insanely low periods in early 2009 of heretofore unheard of numbers of 13% to 23% conincide with my "bottom" call back on February 7th.
Note that the final downward spike in the previous chart represents "Days on Market' for sales that went Pending since 3/1/09 and are not yet closed. The final spike up does not appear here to the extent that it is reflected in pending transactions, but one would think if the median days on market was only 35, that the % sold in less than 30 days for those transactions, once closed, will be in the 20s. That will bring the tail end spike up higher, and as high as the previous post tail end is low in comparison to the "bottom" points earlier this year.
One thing that I think will be skewing some of the numbers as to tracking transactions, is the fact that "contract to close" periods are being extended. For quite some time we could rely on a home sale to close within 30 days of an accepted offer, for the most part. Due to more stringent lending criteria, including the limitations on which appraisers lenders will use, we are seeing extended periods needed for loan processing time. Most times the appraiser is showing up much later in the game than they did in a hot market when you could turn an appraisal around in 5 business days. Now it is not uncommon for the appraiser to show up on the 12th to 15th day of escrow and the appraisal to be completed in 20 days vs. 7 days.
In a lot of ways this is a good thing, as appraisers are being much more careful as to valuations and lenders are being much more careful regarding the quality of appraisers. But the net effect on "monthly" volume, which we will study in a subsequent post, will skew the data a bit.
This factor DOES NOT affect % sold in 30 or less, as Days on Market and % sold in 30 or less relies on the period from list to pending and not on the length of time the sale and escrow take to finally close.
(required disclosure) stats hand compiled by ARDELL and not compiled, published or verified by NWMLS.
"ARDELL DellaLoggia, who writes on her own weblog and on Rain City Guide (has) an empathy that seems to me to be infinitely maternal. It's when she's talking about true justice for the consumer that she forges client relationships. It's not so much what she says, nor even the way she says it. What matters is that her readers believe that she believes in the high standard of customer service she upholds.
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ARDELL
DellaLoggia
On Seattle Real Estate including Kirkland, Bellevue, Redmond, Green Lake and most areas around Lake Washington North of Downtown Seattle.
Phone: 206-910-1000 - Mailto:Ardell@RainCityGuide.com
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