A Vancouver Real Estate Broker's "Street View" of the 2011 Market Activity and Trends - Part I
Highlights: Normalized Housing Inventory Level at 5.17 Months of Supply; while Un-Adjusted value is 6.7 Months of Supply (we'll explain the difference); Overall market appears to be a "Buyers Market" while parts of the market are clearly in a "Sellers Market."
Recent reports on the national real estate scene are showing many parts of the country seeing increases in average sales prices, and suggesting positive signs of recovery. Since we know that our local Vancouver Washington and Clark County real estate market is heavily affected by local conditions as much or more than national ones; this broker's report will focus on the activity we've seen more recently for Vancouver and Clark County.
The "numbers" we'll use come from the RMLS data base, and are homes sold by real estate agents. This data will exclude homes sold at the foreclosure auction, and those sold by owners directly to the buyer. We are also excluding manufactured homes, as this sub-market behaves differently from the traditional "stick-built home" market.
Following the Economic phrase of "Supply and Demand" let's start with the Supply. Using the "Numbers" as we've defined them above, at the end of June the Available Inventory stood at 3,092 units. The traditional calculation for months of supply has us divide that 3,092 units by the total number of closed sales for June (464) which results in an un-adjusted value of 6.7 months of supply. However, we believe some reasonable adjustments should be made in two key areas: 1) listings for un-built New Homes; and 2) Short Sales with Offers on them.
New Homes Adjustment explained: Prior to the market downturn, most New Home listings represented actual homes that were either turn-key ready or would be within a reasonably short time. However, in the current market most lenders are not allowing builders to construct houses on "Spec" (a speculative build). In response, most "New Homes" listed in RMLS are actually only proposed homes, and won't be built until a buyer is in a purchase contract. For June there were 22 New Homes Sold, with 458 homes listed with a "Year Built" of 2011. We know in reality that some of these listed New Homes do exist but, most don't exist; thus, for this report we'll exclude them.
Supply After New Homes Adjustment: Adjusted Inventory (3,092 total listings minus 458 New-home listings = 2,634) divided by Adjusted Sales (464 total sales minus 22 New-home sales = 442) = 5.96 Months of (Resale) Supply. We'll call this the "Resale Supply" as we have confidence these homes actually exist and can be purchased.
Short Sales with Offers Adjustment explained: We are currently in the "last and largest predicted wave of foreclosures" and RMLS shows 966 available Short Sale listings at the end of June, which equates to 36.7% of the Resale Supply. RMLS also shows that 351 of these listings have at least one offer on them. Although we believe less than 100% of these offers will be successful to Close, in our opinion it is reasonable to exclude these 351 units from the more traditional "Active" inventory.
The Resale Supply After Short Sales with Offers Adjustment: Adjusted Resale Inventory (2,634 resale listings minus 351 short sales with offers = 2,283) divided by 442 Resale-sales = 5.17 Adjusted Resale Months of Supply.
Traditional market reporting suggests that a longer term "Normal" level of Supply equates to about 6 months worth of Inventory. Less than that is a "Seller's Market" and more than that is a "Buyer's Market." Although we know the higher end homes are in a Buyer's market, many of the lower-price tiers are likely now in a Seller's market. With 148 (1/3rd) of the Resale Homes Sold showing "Days on Market" at 30 or fewer days - homes priced to-the-market are selling quickly! Only 50 of those 148 speedily-sold-homes were bank owned so, we cannot say this high-velocity segment is only the foreclosure sub-segment.
In about one week the RMLS monthly market update will provide their standard presentation and show Available Inventory, without Adjustments, at about 7 months; which will be an improvement from the beginning of the year. However, given the above exercise, it is our strong opinion that it is necessary to "Normalize" the data to obtain a more historically consistent set of data for comparison purposes.
Even though some parts of Vancouver and Clark County appear to be a "Seller's Market" we still have too many Un-Willing Sellers (aka Distressed Properties, Short Sales and Bank Owned). We also have a longer term "Sales Price Inertia" with the sales-price trend in the downward direction. Thus, the chart below is still showing short term and longer term Average Sales Prices are still on the downward trend:
Clearly, Vancouver and Clark County's home sale prices have not yet turned positive. How long will that last? Stay tuned as we'll take a look at why we believe prices will start going up in Part II of this report when we examine the "Demand" side of the Supply and Demand equation.