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REAL ESTATE NEWS IS TELLING ONLY HALF THE REAL STORY ABOUT THE MARKET

WHAT IS THE REAL NEWS? IS PRICE THE REAL STORY? OR IS VOLUME THE REAL STORY?

Daily news items and agents' market reports that report monthly sales are telling only half of the story about the real estate market.

SPREAD THE WORD. The real story about the real estate market is not the dollar amount for homes sold. Average sold prices really obscure the real news. The real news is not that prices in Montgomery County for 2007 are 57% higher than in 2002. The real news is that sales volume for November 2007 was only 59% of sales volume for 2002.

Agents can't rely on national news or even local news for the state of our local markets. We need to do our own research and give our buyers and sellers the facts. Ifsales volume is included in a CMA, prospective sellers may make better pricing decisions.

HOME SALES IN FAIRFAX COUNTY FOR NOVEMBER 2002 THROUGH NOVEMBER 2007*

YEAR                            #SOLD             PRICE

Nov. 2002                       596             $491,332
Nov. 2003                       682             $522,490
Nov. 2004                       803             $637,812
Nov. 2005                       663             $748,007
Nov. 2006                       448             $720,790
Nov. 2007                       361             $709,542

HOME SALES IN MONTGOMERY COUNTY FOR NOVEMBER 2002 THROUGH NOVEMBER 2007*

YEAR                            #SOLD           PRICE

Nov. 2002                       533             $442,206
Nov. 2003                       592             $504,521
Nov. 2004                       720             $594,663
Nov. 2005                       575             $680,062
Nov. 2006                       496             $689,066
Nov. 2007                       313             $692,245

SHOW PROSPECTIVE SELLERS ALL THE FACTS.

FACT: Sales volume has declined at a far faster rate than sales prices.
FACT: Market reports that tell the price story are reflecting only what has happened in a time frame.
FACT: Market reports that tell the volume story are reflecting buyer activity.
FACT: Buyers are speaking with their feet, not their checkbook.
FACT: There are 3445 Active Single Family homes listed for sale in Fairfax County as of 12/12/2007.
FACT: There are 2633 Active Single Family homes listed for sale in Mont. County as of 12/12/2007.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

* Detached Single Family Fee Simple.

Posted by Lenn Harley, Broker, Maryland and Virginia on 12/13/2007 02:15 PM

Comments (58)

montgomery county homes, fairfax county homes

58 Comments on REAL ESTATE NEWS IS TELLING ONLY HALF THE REAL STORY ABOUT THE MARKET

DEC

2007

The news is stuck on the REO market and how bad forclosures have been. For that info we only need to go back 2 to 3 years. Values are down in that time period for the majority of markets.

Lenn, sales volume as an indicator is equally as important as sales price. For instance, while researching some data on North Arlington, despite rising prices in most areas, only two of the four zip codes showed sales volume staying steady from year over year (2006 to 2007) while the others experienced dramatic declines. Price is one thing, but sellers need to understand how much or how little buyer demand is out there.

I woke up this morning hoping I was going to get a dose of Lenn Harley today. Thanks for posting--you've blogged on this topic before and as good as you are at teaching, I didn't get it until now. (It's not you, it's me!) I hope you will continue to blog on these topics that no one else will touch on.

Lenn - You mention Montgomery County and toss out stats on Fairfax. How can I reasonably plagerize the info if it requires that I do research? At any rate, thank you for the affirmation.

Joseph. You're right. If we get to a place where the only buyer interest is foreclosures, home owners are just going to sit it out longer and buyers aren't always be interested in buying depressed properties because they expect to get them for a fraction of the list, which doesn't happen.

Brian. I thought of you when I did this post. I watch the Arlington market too. Your latest post hit one of the causes of continued volume in Arlington, condos. I might research that further later.

Amanda. Stay tuned. There's lots of great market info on ActiveRain. Better than you'll get on any news media.

John. I actually did Mont and Fairfax. Microsolf was hungry this morning and ate the Montgomery data. I'll try to get it up now. If I still have it.

John. I still had my hand draft. Enjoy. I really wanted to post Mont because the spread between 2002 and 2005 volume is dramatic.

Lenn, I've been visiting a site called cepr.net- the figures DO NOT stem from the NAR, so thought you might appreciate the site. If prices don't return to a rational level, we appear to be in this thing until they do, as you have made brilliantly clear ALL ALONG.

Lenn - to the masses it's volume, certainly. But to the individual sellers who have indeed sold obviously it's price! I think if I were advertising in your market I would say, "Homes that sold last month sold for $250,000 higher on average than they did 5 years ago." And, if we're looking long term (which anyone who has been in the business for a decade or longs knows is the way to look at it) when things equalize the long term value will still be there - even for people who bought at the peak which, in your market, looks like was 2005 or 2007 depending on the county. Good old media will never trim it down that way - Lenn you are always awesome with your information.

Lenn--Great job at breaking it down! I find the same thing to be true in my market. Prices are actually on the rise in some neighborhoods, but inventory is edging up each month.

Markets are local, and our value is in conveying and interpreting the local market - it can be quite different from the national statistics that consume the news.

Lenn,

Great breakdown of the ifo here. I've been researching my own market as well. It is very important that we tell the whole story so people can understand. The media has never given a balanced report on anything, in my opinion.

Lenn,

I've never seen such a short post that explains the most about the present real estate market...your first four paragraphs say it all!!! Enough said! Thanks, Fran

I love the way you look at facts Lenn. I'm going to run these same numbers for my market area. Thanks for the perspective!

Lenn, But what does it all mean? Are buyers still waiting for the bottom? Can sellers afford to sell? Is there financing available? Is the job market off?

Bill Roberts

Lenn - Looking at those numbers it does not look like your market is in bad shape at all. It is suprising that the # of sales has gone down but the avg sale price has not....that seems unusual. That is not the pattern here in my area of Massachusetts, as most towns show less volume and much lower prices.

Lenn, You are right you cannot dispute the facts and they are only reporting what is happening right now, not showing as you did the past to really let the public see and know that the market sales numbers are lower but the price is not. Great information. I hope others see it in their google from your post.

Laurie. PRICE became the culpret when I realized that incomes had failed to keep up with housing prices a couple of years ago. Further, people look at what their money will buy and they say,

"I don't want that crap!"

Ken. Thanks for dropping by. I like to find the stats that show the real story.

Norma. I suspect that folks would find the same in a lot of markets, if they looked.

Sharon. Thanks. When the reporters call me for info, I try to tell them the facts, but they already have their story line and they're just looking for back up.

Lenn, I just got an email today from our Osceola County BOR with are stats. In this county we currently have 4604 SFH on the market and there were only 119 sales from 10-9 to 11-9. The current absorption rate is 39 months!!!! Poinciana is actually worse than that. So what can you do? Our values are down a good 25% to 30%(at least in my area) so that combined with tons of inventory is just devastating for my market. Houses are just not selling. Period!

Andrew. The media have not the foggiest idea of the condition of our markets. Not the foggiest.

Fran. Thanks. I believe in going for the jugular. The facts really are compelling, aren't they?

Kate. Let us know the results. I like to compare markets. I used Montgomery and Fairfax for this research because they are similar in demographics and one in MD and one in VA. It's a good broad segment of our market.

Bill.

Lenn, But what does it all mean? It means that agents need to be very careful when taking those overpriced listings.

Are buyers still waiting for the bottom? Yes, and they are negotiation like they hold all the cards, which they often do until they make loan application.

Can sellers afford to sell? Usually. The ones I talk to will not come off the high comps. They think they are losing money if their net proceeds is $325K rather than $350K.

Is there financing available? Yes, but not as easily as before. We need to get more FHA and VA appraisals in our SOLD database. It's hard to get an FHA appraisal in some counties around here.

Is the job market off? Not here, but wages are stagnant. Affordability here still lags behind price in creases of 2004, 2005. That's when the market ceased to be viable here. Perhaps if Greenspan had stopped at 11 rate increases rather than 17.

Bryant. Your area needs to be declared a disaster area.

BTW, the numbers in my post are only for Detached Single Family Homes. I try to separate SF from all homes for sale because the attached town/condos skew the information. That's why I don't like to get my numbers from the board. I pull it from our activ/sold database. I pulled single family detached fee simple. I excluded co-ops too.

I just added the inventory numbers for Fairfax and Mont.

Susan. I hope some sellers see it.

Bill. It will take something really dramatic to get prices down here. Actually, appraisals are doing it somewhat. Also, foreclosures and short sales will work the numbers down too, but it will take time.

Does that mean I qualify for a government bail out?

Almost anyone who works that market you're in deserves something.

Our market is totally pathetic. I spoke with my Eastern Shore partner about 30 minutes ago. He has an office with about 25 agents. They have had 4 incoming sales calls today.

Shucks, I've had more than that, but none were any good. This is the worst market we've had in my memory. I can just imagine what it's like in Poinciana. Geez. I can't even get any "snow bird" action.

It is bad. But I do have a closing Friday on a couple of duplexes. And got a doable offer on a listing today. I just keep on pluggin' away. I'm like the energizer bunny:)

Lenn- Sales volume is definitely down compared to the glory years.. We need to get used to the fact that the ride is over and sales are going to be a lot slower then when anyone who could pass the mirror test got a loan..It's not the first time and it won't be the last... but give it a few years and the market will be back..

DEC

2007

Kaye. Not so fast. If what we're hearing in the news is any indication, the financial markets have a long way to go before the bank mess is cleaned up.

Even with prices coming down, the financing picture is bleak with further tightening, high fees and in many cases, just no money to lend.

I'm not positive about the next several years.

Lenn - you are absolutely right about what's important. I find, nonetheless, that I need to listen to, read, and understand what is going on in the press because my clients and prospects are hearing it. If I don't explain WHY the local, specific analysis is more important and show that I understand what they are hearing elsewhere, they won't pay attention to what I say is important.

Overall, it's lots of work!!!

Hi Lenn -

Yes - the stats tell much more of the real story of what is happening in local markets. I'm going to plagiarize your format and show it for my area. Thanks for the inspiration!

Vicki

The number of Active listings in those two counties must be extremely discouraging for sellers. I am amazed how prices have held up as well as they have under that level of inventory.

Lenn, good job ignoring the naysayers about national market levels. Real estate is local, not national and your post confirms it. Well done!

Lenn, I also think the most important number is the Absorption Rate. We currently have a 27.5 month supply of homes on the market. We have had some months that our volume of sales as almost as high as it was in 2005. But in 2005 we had only a 2 month supply of homes on the market.

I pull my data like you do.... just on SFH. I had someone say that the THs and condos were really a part of the picture because they show what folks buy when they can't afford SFH's. I didn't really agree and continue to segregate them out. Thanks goodness for spreadsheets...

I think this is an easier way for folks to understand the buyer reaction than absorption rates. And it's causing me to say to people we might not get your house sold no matter what we do, even with price correct. There is only so much funding available and so many buyers to go around. Not enough to sell what's here. ::sigh::

Buyers are hiding in the woods somewhere! And to think this is going to last for several years is truly depressing.

Back to my stats... I'm on distressed properties again...

Josette. Almost everything I do is about single family detached because that is the housing market I have focused my advertising to for 12 years. It's what we want to sell. It's what most of our buyers want.

My theory has always been and still is, if you want to sell single family homes, don't advertise to townhome prices and don't mention the word condo often.

We do sell towns and condos, of course, but my advertising is very focused to SFH.

Dan. Of course that's an important number. I can recall back in 2004 when we had about a 2 week supply of homes. Homes sold before they got the signs up.

Mark. Of course real estate is local. Bryant Tutas just posted similar stats that show a very different picture in Florida.

Randy. So am I. Every day.

Vicki. Be my guest.

Ann. I've got a theory about that. I work with a fairly sophisticated group of buyers. They think they know the market. But, after a brief conversation, they realize they don't know the time of day. The secret is knowing your market. Consumers only know what they hear in the media. I have facts.

Every once in a while I get a buyer who tries to out think the market. I just let them do their thing and they either buyer or they don't.

What goes up, must come down... prices went up way to fast in your area.

Absolutely Missy. We need a 20-25% reduction in price to get folks moving again. No one wants to hear that.

Back to your comment to Ann.... one of the things I'm really fighting is buyers who I've armed with exact data and they still want to offer way lower because they think it's not worth that value. Then it sells exactly as I said it would because I was right. Facts are not fighting the national news. I'd like to believe that after a couple of losses they are more likely to understand but I'm not sure.. Any pointers??

Josette. Do they think the house isn't worth the price or are they trying to get a better buy than the seller will give??/

I've got a buyer who thinks that the market is so bad that new home builders are going to lose money on a sale just to get him to buy.

They are not.

If a buyer continues to consider the negotiation more important than buying a home, I don't consider them serious buyers. They are serious negotiators. If buyer consistantly offers too low, they aren't buyers, they're just negotiators.

I just ran our numbers in Steamboat Springs, CO. There are 69 SFH for sale between $495,000-$15,000,000.

Only 4 of them are below $750,000, and 21 are below $1,000,000. Our absorption rate based on October sales is less than 3 months (in the under-a-million price point). That's partly the reason why our market is still going strong.

Send your investor clients to Steamboat and I'll send you a referral fee!

Is the real story the volume of sales? How about the absorbtion rate instead or the number of pending sales? Technically it wouldn't matter if the volume was down, if for some reason the inventory was down too.

Lenn -- Perfect point on what is real price and what is real information. By the way, talking about pricing, how can stats consider numerous "seller's concessions" or "down payment assistance" or any other "give backs" which got customed to be included in sales price? I believe, in 2002 and even in 2003 we did not experience as many of these give backs as later. However, it is not real problem in the areas like yours where prices increased dramatically. It is more significant for more moderately priced regions like Cleveland.

I like your idea of comparing sales volume and pricing year-by-year. The problem is - here in Cleveland sales volume vary from month to month and may differ significantly. Because of this it is not accurate to compare November to November data for our area. Maybe in your place sales volume is more steady. What about your numbers for 11 months? Are they similar to monthly data?

Svetlana. The thing I don't want to do when making comparisons is compare apples to oranges. I wanted to make the point that over the years, while prices have held, volume is now significantly lower.

I used November because it's the most recent month.

Geordie. Could be. Why not do such a study for your area??

Eleise. I have seen that with other aeas in Colorado, Idaho, etc. Yours is a luxury market, probably seasonal.

Lenn, I call it "do you want a house or do you want to negotiate yourself out of a house" I even have talked with them about this in just those terms and still it's more important to get a deal than to get a house. It's the same fear for sellers to "lose" money by not making a $300,000 profit. They are all so fearful of leaving money on the table that they end up with nothing.

If it weren't happening to others as well I'd think something was just wrong with me. Aaaaaaghhhhhhh.

I have this on my list to write about...

Always enjoy reading your posts. All the best for this holiday season.

DEC

2007

thank you for sharing important facts. Happy holidays.

Media generalizations need to be broken just as Lenn has done here. Not only just for sales and inventory but foreclosures as well. If you listen to the national and even local (state-wide) media they are reporting national or state-wide averages. But they need to be looking even more locally by county. The media is not going to take that kind of time, so it is in our (and our Client's) best interests to invest the time.

Yes, there are counties in MA that are struggling with very high foreclosure rates and they appear to be centered around more industrial/urban areas. While other, more outlying areas are not impacted as much and the "deals" everyone is looking for just aren't there. If you're looking for a great deal on a triple-decker in Lowell you'll probably find one. But if you want to buy a vacation-spot waterfront at 50% off, good luck with that!

The laws of supply and demand being what they are...it would seem to me that if demand is down, that prices will follow? That is until we get the credit markets fixed, then I think that demand will rise again.

Bob Mitchell

ValueList Real Estate Services, Inc.

Bob.

You would think so, wouldn't you???

Sales volume is very important and I like the way you put it " Buyers are telling us something with their feet not their checkbook" Very Smart! I'm going back to check my reports.

DEC

2007

Lenn,

I came late to this post, I was going to say well done! Then I started reading the comments. How dare you try to confuse the readers with facts in the face of common knowledge!

Cold facts simply don't out way personal annotatal evidence in the 30 second sound byte news madia. So what if that house you bought in 2002 for $491,332 is now only worth $$709,542! You lost money because if you'd sold in 2005 it was worth $748,007! Of course you didn't sell you wanted to live in your own home, everyone has to live somewhere. Most want to maintain the style to wich they have become accustom.

I'm not forgetting those people that bought in 2005, they do have a problem, if they really have to sell. Being up side down in a loan isn't good, but so many volinteer for it when they buy a car, not to mention those cash back programs, real estate unlike a car will recover. But, all the interviews with foreclosure "victims" fail to mention that they stopped making the payments. The interviewers blame all those sub-prime loans, conveniently forgetting that the overwhelming majority have been our countries biggest housing success since the VA loans after WW II! Not to mention that 30% of the foreclosures are on Prime, conforming loans!

Don't you know, home ownership comes with risk and should be discourage in favor of government controlled public housing!

Please, for give me, all I wanted to say was well said!

Bill

Krista. The market will rule. Sellers and listing agents have been ignoring those walking feet for two years.

Bill. You sly old dog. I can picture your tongue planted firmly in your cheek and a sly grin in your face.

You are absolutely right and nothing infuriates me more than politicians or new media people interviewing a home owner who purchased a home in 2003 with 100% financing, refinanced in 2005, spent their equity on a van. Now their loan is resetting and they can't make the payments and are upside down.

That's the buyer who gets interviewed. I have no sympathy.

Lenn,

Please! Don't let the gray hair fool you. I'm not old, just overly dilapidated.

Bill

Thanks for inspiring me to do the stats for my town for the past month, our #sold is the highest this past month since November 2004 (the AVG Sales price is down since then, but not terrible. I'm a stats freak and and always have them available when I do a CMA but I usually do a YTD overview. Thank you,

Judy. Thanks for commenting.

I'm a statistical junkie. Sales stats give us insight. It's the thing that separates us from the fringe. We understand our market.

You've got to be kidding me. 5Yo5Y? That's the "real story?"

And when that metric turns bad, what's next, decade-over-decade?

Robert. 5Yo5Y means something to me because I like to have an historical refereence.

I do month over month regularly.

If you want another metric, do one.

DEC

2007

Lenn, fabulous! All people want is the truth so that they can make informed, educated decisions. Keep doing this and your business will blossom no matter what the local market is doing.

Diane

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