December 14th, 2008 . by Mike Kelly
Here is the sales data for November gleaned from our local Multiple Listing Service of which I am a subscriber:
- All Actives: 2087
- In Escrow as a "Continue to Show": 786
- Pending Sales (firm deals): 188
- Solds/Closed escrows: 414
The median price for all Actives is $450,000 but the median price for Sales: $309,900. This is a 32% change from last year which simply shows you where the "Action is" when it comes to activity in the marketplace. Half of the sales are below this market and half above.
This is a "value-driven" market which simply means prices are percieved to be at bargain prices. Hence the lowering of the median as this is the price point where the value exists. The REO (Real Estate Owned-bank foreclosed properties) is where the action is. Here is some data on this segment:
REO's: Actives: 416 Continue to Show: 272 Pending: 103 Sales/Closed Escrows: 239
Here's the story behind the data:
- The "Active" REO's make up 20% of all Actives but 58% of ALL SALES!!
- This is a big number. Where we have a 5 months supply overall, in this hot segment we have only 1.75 months supply of product.
- A raging "Seller's" market being fueled by all those smart investors and first time homebuyers! Median price for the sales is $275,000. The "REO" market continues to fuel this market.
We are "re-cycling" the homes purchased in the fever of the former "Hot" market of 2001-2006. Remember, in 2004 we sold 650,000 units in California and 40% of those were "ZERO" down loans! That's 260,000 units with huge equity losses. Even those who bought with 5,10,20% down are wiped out.
Currently many "investors" clients being serviced by the big lenders, are holding off foreclosure proceedings through December. Perhaps awaiting a "bail-out" program which will give them some relief. Remember, when a lender forecloses the costs to them is a loss of at least 50%!! Not to mention the costs of marketing, fixing up the property, etc.
"Short-Sales" or where the Seller owes more on the house than what it is worth, continue to grow in popularity but NOT in closed escrows. The new, unregulated, "Loan Modification" wave is now sweeping across the nation. I did a recent google search and got over 230,000 entries for "Loan Modification"!! Be careful with these companies! Many want big bucks up front or when they get you a "modification". Spell out just WHAT the modification will be up front! If they don't deliver, don't pay them a cent! This is similiar to a "Short-Sales" in place! You get the lender to modify the loan not for a prospective buyer but for YOU the Seller!
Here's how the "Short-Sales" did in November:
"Short-Sales" 453 of All Actives or 22%. Continue to Show: 379 or 48% Pendings: 29 or 15% Solds:66 or 16%
We have a 6.86 supply of "Short-Sales" with median price of $285,000. Many say you get a great price on "Short-Sales" but the median price edge goes to REO's.
However, the big news and story continues to be the huge number of sales with NO MOVE UP buyers involved. If you add the "new homes sales" market, or builder/developers selling their product, then add in the REO,"Short-Sale" segment sales the total is a whopping 76.5 % of all sales result in NO MOVE UP BUYERS!! This is an amazing number which explains why the median of $450,000 for all "Actives" hovers at this number. No buyers are forcing their prices down!! The REO market has yet to have "price creep" into these segments on the scale of the more "entry level" pricing. But the resources of this mid and upper segments might be beginning to slip as unemployment rears its ugly head and savings/credit lines dry up due to falling home prices.