Tag Archives: Market Report

How the Market REALLY Works…The Stat Pack

The New, More Colorful, and still Data-Rich Stat Pack

For those not yet indoctrinated in all-things Stat Pack…

This month I enjoyed another laugh at the “wisdom of crowds / conventional wisdom folks” by saying that:

The informed consumer should read Bloomberg,, MSNBC, Fox News, The Wall Street Journal, Case- Shiller, The Gazette, The Denver Post and whatever else big media wants to throw out there about how horrible the economy is doing, how poor the job creation is, how volatile import/export balance sheets are, and what the Fed Policy decisions will do to the dollar against foreign currencies.
They should do that: as long as they temper that with simple observations, like a glance at what is going on in local pricing. Pricing has been marching unmistakably all year to a place of balance.

What color is the sky?

What is happening to price?

Both of these questions have obvious answers. The sky is still blue, and price is climbing.

In the world of data-crunching, it’s important to stick to data and not to headlines. In the world of data-crunching, there is excess hyperbole. In the world of data-crunching, nothing sells quite like fear.

Buyers and sellers like to say right now that prices are coming down.

They’re right.

Sellers see their neighbors coming down in price.

They’re right.

So why are sold prices going… UP?

Here is a quote about the Pikes Peak Market from the October 2010 Stat Pack (You can link to the November Stat Pack – posted today – RIGHT HERE).

Sellers are so frustrated that they are quitting the market, so prices logically are going… up? How is that possible? The reason is that the buyers who see this as an opportunity are often ones who focus on their interest savings, interest that won’t change for 15 to 30 years.  At 4.375% – the going-rate on a 30-year mortgage – every $1000 increase in price represents a mere $5 a month in payment to a buyer. So a buyer who increases their search by $20,000 only ends up paying $100 a month more (or $1200 a year) for a home that is probably significantly “more” in every way.  With the low taxes of the Pikes Peak Region, a $200,000 30-year fixed mortgage usually has less than a $1200 monthly payment, even with taxes and insurance escrows.

The hidden story here is that buyers end up reaching, and what they end up buying are homes that previously were considerably more expensive. Take a home in N/E, where the average time to sell was around 100 days last month at and average price of $234,000. The buyer of that home might have capped initially at $220,000, not found what they were looking for, and stretched in price to $240,000. There, they found a home that initially started at $259,000, reduced to $250,000, then $245,000, before finally getting to the right price at $239,900. With a 97.3% price differential (the sold price divided by the final asking price), they were able to settle at a very-near-all-market-average price of $234,000. The data on the story is really this: the buyer came up $14,000 and the seller came down $26,000; the headline is that prices are going up. Here, reality and headlines are not really the same thing.

Don’t buy the headlines. Don’t buy the hysteria. Unpack the data. Look for simple answers. Watch for trends. That’s the Stat Pack.

Ask a Real Estate Guru Wednesday

I was just asked a superb question via Facebook by my neighbor, Lt. Col. Scott Touney:

Ben, I have a question. If foreclosures are being de facto “frozen” due to legal proceedings, are those homes essentially taken out of the available supply? If they are out of the supply of existing homes, does that afford an opportunity for housing prices to increase during the period that those homes are frozen in legal proceedings?
Here is my Podcast Answer:

http://www.wellcomemat.com/wm_video_1/8C46275492

Market Report July 2010 (Mid-Year Stat Pack

Click For July 2010 Stat Pack

The First-Time Buyer Tax Credit perhaps worked too well: it fueled a sequel that provided both excess optimism and (later) damaging conditions that reversed much of the good accomplished. The intent and purpose of the tax credit was to activate the most easily activated segment of consumers (people who didn’t own homes, but aspired to own one) and convert them to homeowners. In the process, they would draw down the record inventory of homes, buy up and fix up bank-owned and distress-sale residences and help the market find equilibrium. A stable housing market would trickle to other segments of the economy and eventually stem the tide of the Great Recession. After November 30th, when the first version was to have expired, there were only 4301 listings for sale.  Despite the dreadful beginning to 2009’s sale year, the calendar year ended up 400+ units in sales,  and with 794 sales in November, the market had actually moved past equilibrium to a seller’s market: an equally-beneficial market is considered to be sitting at six months of supply, and November ended with a mere 5.4 months.
Today, during what is supposed to be the peak demand season of mid-summer, inventory is at 6.4 months. Last year at this time it was at 5.9 months. This is not a huge change, but it presents a serious problem looming ahead. This is shown in the first graph on Page 2, Single Family Home Comparison: in May and June of this year, the bottom fell out of the pending sales (ready to close escrow contracts) indexes once the second wave of tax-credit fever expired. In March and April, 1477 sales went to a pending status. In May and June, when the market demand should still be accelerating, only 1067 went to pending. In May and June last year there were 1360 pending sales. Instead of peak demand numbers in July, when they normally occur, it is fair to assume this year that July will be 10 to 25% off the pace it was at last year.
The real problem with a 10 to 25% downturn in volume is that it convinced a fair number of sellers (and agents) that homes were easy to sell again. What followed was the largest six month run-up in inventory in the PPAR MLS history: a 51% increase in only six months, and today 2000 more properties populate the MLS than started the year. With a 15% increase looming and a 10 to 25% decrease running the other direction, the market enters the second half of the year once again out of balance.