Here are some statistics that I think best embody the changed marketplace.
In December, there were 495 single family sales and 71 condo/townhome sales for a totaly of 566 units closed.
Of those properties, agents chose to indicate in the “optional disclosures” field of the MLS listing some form of seller-distress. These are terms like “foreclosure”, “pre-foreclosure”, “Bank-owned”, “VA REPO,” “Short-Sale”, etc.
My important point here is “Voluntarily”. Agents were at one time required to put this information in. The Association’s own legal counsel threatened them with legal action since it wa so contradictory to an exclusive-right-to-sell listing contract. I personally would require a seller to indicate this because it does appeal to the most preferred segment of the marketplace for such a seller… and afterall, that’s the point of marketing such a home. Selling it. But I also check every listing I show or preview in the public records before I visit it to see if it is a foreclosure. For one such buyer in December, more than half the homes that were pending foreclosure action or already bank-owned… didn’t disclose this in the optional disclosures.
But of the ones that did… 41% of the market place in December…what percent of the closings were actually distress sales? Conservatively, I’d say 20% of the agents don’t disclose this in their listing. So probably half of the closed sales in December were distress sales.
Here are some ratios worth paying attention to:
The first: number of distress-sale closings compared to the number of distress-sale listings.
The second: number of single-family closings compared to the number of single-family listings. One is around 1:4, the other is 1:10.
Is it any wonder the average sales price is $227,000 right now? Or the median is $180,000?
Or that there were 41 $1 million dollar or larger sales last year after the record performance in 2007 of 67? That only 3 sold over $2 million the entire year? That there is a 5 year inventory of $1 million and up housing on the market?
I talk to 50 people a week, and the consumer’s question seems to be changing. It was: “is it getting worse?” It is now: “is it______?” Yes, they’re asking, “is it ______?”
That’s one of the two forces of recovery. The other I just mentioned. When everything that is selling is foreclosures, and 229 stinking distress sales closed in amidst all the economic gloom of this December, that indicates that the supply of housing has dramatically changed. When the consumer says “buying a distressed property now makes sense”… that’s a stamp of approval.
The other stamp of approval I call “The Treasure Factor”. This is when the individual consumer comes to their own conclusion that something needs to change. Perhaps they’ve been in denial about it. Perhaps they’ve been too afraid to make a move for so long. Perhaps life has been thrust upon them, either for the good or for the bad. In any event, they’ve concluded something personally and powerfully: “money is a tool. I need to do this.”
In a way, it is in defiance of “economics” but it is more importantly in defiance of conventional wisdom.
It’s a choice. People make their decisions based on pleasure or based on pain. Consumers in divorce? Pain. Consumers getting married? Pleasure. Consumers with two new kids? Maybe both.
When the consumer gets to the point that is “hey, you know what, something has to give, this commute is too long / our house is too small / I hate the snow / Mom and Dad are moving in / I don’t want the teenagers upstairs anymore”… they are making a declaration. The funny thing about declarations… there is no turning back.
The not-so-funny and really good thing about declarations: those who make them, tend to come to the conclusions pretty convincingly and from a position of power. Leveraging a house with a 100% loan to get Mom and/or Dad under the same roof isn’t a great idea. Buying a ridiculously large house “for appreciation purposes” with a 100% loan is an equally bad idea. No, no. The treasure-buyer is not buying something to make treasure from it. They are spending their own hard-earned dollars on it. They put skin in the game. They want to make a good financial decision, but economics is not dictating what they’re doing. Life is dictating what they’re doing.
One would think in the midst of “the greatest financial crisis since the Great Depression” that people wouldn’t allow such trivial things as their own life to get in the way of the darkening clouds of doom and gloom. Guess what? I showed four buyers Friday and Saturday. I had not done that since 2004. Four different buyers in 48 hours. One wrote. Two are ready to. The fourth now has a pretty good idea of what they want.
We are at a place where people are buying with different wants. Part of it is need. Part of it is a long-term goal. A lot of it is personal. It is radically different from 2005 when people bought because it was stupid or unpopular not to. To some, it makes as much sense as the map below. But to those buying, the market recovery can be summarized thusly: “For me…It’s just time. It’s worth my treasure.”