Real Estate Survey & Statistics
Survey Points to Further Deterioration in October, Especially in Pricing
49% of Agents Saw Traffic At or Above Expectations Compared to 38% in October;
93% Said Prices Were Flat or Lower
Time to Sell Continues to Lengthen - Pointing to Further Pricing Pressure Ahead
OREGON HOUSING MARKET
Our traffic index was nearly unchanged at 25.0 in November, up from 23.9 in October, reflecting continued disappointing traffic (any reading below 50 indicates traffic below expectations). 55% of agents said traffic fell short of expectations, 40% said it was in-line with expectations, and 5% of agents said traffic exceeded their expectations. Agents said that buyers are confused about the future direction of home prices and are hesitant to buy due to fear of price declines.
Home prices and incentives deteriorate. Prices continued to fall in November, measured by our price index at 22.0 (down from 29.9 in October). 59% of agents said prices declined, 37% said prices were unchanged, and just 2% said prices increased. Agents also noted higher incentives as compared with October, likely in response to slowing sales. Our incentive index measured 10.0, as 80% of agents said incentives increased from October, and 20% said incentives were unchanged.
Nearly all agents noted longer time needed to sell a home. Our time to sell index measured 5.8 in November, as 90% of agents said it is taking longer to sell a home, 8% said it is taking the same length of time, and only 2% said it is taking less time. We view the time needed to sell a home as a good indicator of future pricing trends.
LOCAL HOUSING TREND
Over the past four years in Josephine County we've seen historic increases in property values. The chart below indicates a steady rise from 2002 to 2004, then a rapid increase until mid 2005. This verifies our local real estate market peaked in mid 2005. Sold prices have been in a steady decline since then. Prices on homes for sale are also in a steady decline and that trend will carry into 2007, although we have signs of stabilization in the overall local market. In theory, if you had purchased a 1,600 square foot home in early 2002 you would have doubled your investment, even in today's market.
NATIONAL
Early Signs of Improvement as Index Rises to 30.5 in November from 23.6 in October
Price declines continued in November. Agents noted sequentially lower home prices (index level below 50) in 90% of the markets we surveyed in November. Agents cited sequentially higher prices in only 10% of the markets (just 4 of the 39 markets) in November relative to October. Our price index fell 0.2 points to 25.6 in November from 25.8 in October, and marked another new low for the index.
Traffic improved modestly from weak levels; greatest improvement in markets where affordability was most stretched. Our traffic index showed early signs of improvement, increasing to 30.5 in November from 23.6 in October. Our survey showed the greatest improvement in traffic in markets that experienced the sharpest price declines such as Arizona, California, Florida, and Washington, D.C. These were among the worst markets in terms of stretched affordability and are likely more sensitive to lower mortgage rates and price declines.
Prices Continue to Fall
Traffic improves, but prices fall. Our November survey of 3,800 agents in 39 of the largest housing markets pointed to a modest increase in traffic, but continued broad declines in home prices. Our traffic index measured 30.5, up from 23.6 in October, as lower mortgage rates and lower home prices aided affordability. We view the improved traffic as potentially being an early sign of stabilization and will closely watch future traffic trends. Meanwhile, our home price index was essentially unchanged at 25.6 in November from 25.8 in October (readings below 50 indicate sequentially lower prices).
Rising Inventories Likely to Further Pressure Home Prices
Time needed to sell a home lengthens further, a leading indicator of pricing trends. The time to sell a home lengthened (index level below 50) in all markets we surveyed. Our time to sell index improved only slightly to 15.2 in November from 11.7 in October, but still pointed to a lengthening time to sell (readings below 50). We think this metric may be even more important than the inventory, as a lengthening time to sell has historically indicated weakening conditions, whereas there is some seasonality to inventory trends. The index was especially low (below 10) in 12 of the 39 markets we surveyed.
Pricing and time to sell continue to worsen. Our home price index was 25.6 in November, essentially unchanged from 25.8 in October, but still indicating falling prices as readings below 50 indicate sequentially lower prices. Our time to sell index measured 15.2, up from 11.7 in October, but still pointing to a lengthening in the time needed to sell a home (readings below 50 point to sequential lengthening). Generally we've seen a lengthening time needed to sell a home indicate further price declines.
Agents Saw Rising Incentives (Index Value Below 50) in Every Market Surveyed
Inventories rose, against seasonal trends - Agents indicated that the inventory of homes for sale rose (index below 50 indicates a sequential increase) in almost all markets, with Austin, San Antonio, and San Francisco being the only exceptions. In contrast with the increase, inventory levels typically decline in November. Our inventory index increased to 31.1 in November from 21.0 in October, as fewer agents saw rising inventories as compared with prior months although the reading below 50 points to a sequential increase. Higher inventories from overbuilding will exacerbate the record inventory of homes for sale.
We think this excess inventory makes it unlikely that the market will rebound in the near term, absent a significant improvement in mortgage rates. In addition, the high level of supply will put further pressure on home prices.
Incentive index points to worsening conditions - Incentives increased sequentially in each and every market we surveyed. Our incentive index measured 14.5, essentially consistent with 14.0 in October, but still points to a sequential increase (index level below 50). Agents noted higher incentives even in the few markets where home prices are increasing, likely a result of homebuilders using incentives to capture sales as traffic slows. In the weak markets, we think the incentives are being used in lieu of price decreases whenever possible. In healthier markets, we think homebuilders are using the incentives as typical marketing efforts, in an effort to capture additional volume and market share. However, we think that many builders are focusing their efforts on increasing their volume in what are currently healthy markets, but we see risk of oversupply given the relatively modest declines in building activity compared to sharply lower demand. This is likely in markets such as San Antonio.
Top 20 New Homebuilding Markets
Atlanta, GA - Austin, TX - Charlotte, NC - Chicago, IL - Dallas, TX - Denver, CO - Fort Myers, FL - Houston, TX - Jacksonville, FL - Las Vegas, NV - Los Angeles, CA - Miami, FL - Minneapolis, MN NY-NJ - Orlando, FL - Phoenix, AZ - Inland Empire, CA - Seattle, WA - Tampa, FL - Washington,DC
Top 20 Housing Markets
Atlanta, GA - Prices Fall, Sellers Become More Anxious; Agents See Modest Pickup
Austin, TX - Investor Activity Fuels In-Line Demand; High Construction Moderates Price Increases
Charlotte, NC - Uneventful Month; Traffic, Pricing, and Inventories Essentially Unchanged
Chicago, IL - Traffic Improves Due to Better Affordability; Prices Continue to Decline from High and Rising Inventories
Dallas, TX - Incremental Supply Exceeds Demand, Pressures Home Prices
Denver, CO - Sluggish Economy and Lack of Urgency Drive Weak Traffic and Price Declines
Ft. Myers, FL - No Sign of Stabilization, Despite Favorable Seasonal Trends
Houston, TX - Market Shrugs Decline in Oil Prices; Continued Healthy Traffic and Modest Price Appreciation
Jacksonville, FL - "Buyers Seem Ready to Buy"; Improved Traffic
Las Vegas, NV - Buyers Wait Patiently for Prices to Decline Further
Los Angeles, CA - Demand Remains Soft
Miami, FL - Buyers Looking for Discounted Homes; Prices Likely Have Further Downside
Minneapolis, MN - Agents Trim Expectations, But Traffic Continues to Disappoint
New York-Northern NJ - More Buyers Looking, But Not Yet Buying
Orlando, FL - Few Snowbirds Returned in November
Phoenix, AZ -Traffic Improved, But Buyer Base Still Small Due to Stretched Affordability
Riverside-San Bernardino, CA (Inland Empire) Struggle Over Prices... Buyers Likely to Win
Seattle, WA - Price Cuts Needed to Bring Back Buyers
Tampa, FL - Few Buyers, Further Price Declines
Washington, D.C. -Traffic Improves Dramatically
Sources: National Association of Realtors, Southern Oregon Multiple Listing Service, Bank of America, Equity Research, Daniel Oppenheim, CFA, Michael R. Wood, CFA
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