RMLS Market Action October 2007
By Charles Turner
A small victory for the market: inventory didn’t increase last month and actually declined .2 months (about six days). There are 15,567 residential properties on the market. That’s the good news. The rest is more of what we expected: decline in pending and closed transactions and a 12 month appreciation of 6.7%.
Affordability
After its lowest reported rate of 88% in July, affordability improved to 94% in September carried by lower interest rates and a lower median sales price. This means that a family living in the Portland Metro area making the median income ($63,800 per HUD) cannot afford to purchase a median priced home in the
area ($283,500 in September). According to the NAR formula, a median income family can only afford
94% of a monthly mortgage payment with 20% down and a 30-year fixed rate (6.38%, according to Freddie Mac).
“last month and actually declined .2 months (about six days).”
What I find more interesting is that for October inventory in months doubled from 2005 to 2006, and then doubled (approximately) again from 2006 to 2007. This means that inventory in months is up about 4 fold from 2005. Is it really significant that it “declined .2 months?” Is .2 months statistically significant? If so, what about the quadrupling from 2005?
CRAZY!
I think it is significant because, considering seasonality, one would expect inventory to always increase in a “normal” market. So a trend of increasing inventory that actually changes in the fall means something has changed. Is it because sales that were put on hold during the credit crunch are finally clearing after rearranging financing? I haven’t dug into the numbers yet, but I suspect a large portion of that decline as caused by expired listings that are turning into rentals instead of renewing.
Sales down 25% YOY – inventory dropping with the seasonality as expected – but still very very high historically speaking.
Not really much change – the inventory drop coming into winter is probably the reason that we see the slight drop in Months of inventory.
It’ll be interesting to see how much inventory hits the market in the spring – and how sales are impacted by the tighter credit environment.
From the numbers it looks like we are significantly down from peak price wise, just the way the published stats are calculated is hiding it somewhat.
http://www.housingtracker.net/askingprices/Oregon/Portland-Vancouver-Beaverton/
Sales : Month 2007 2006
September 1866 2506
October 1864 2503
With sales being remarkably flat month to month (although down 25% YOY) we can assume the days on market improvement was totally due to the number of buyers who took their houses off the market for winter earlier.
Inventory rose slightly at this time last year – this year it fell slightly.
Personally I think it’s a case of people giving up hope until the spring a little earlier this year due to the difficult market conditions – it’s clearly not because the sales have picked up enough to absorb the inventory!
I suspect there will be a flood of these properties back on the market in the spring.
Uncle_Git-
Beyond the small reduction is inventory, I think we agree that the small reduction in inventory in months is not very meaningful.
Is it really that impressive to say that inventory went down slightly but the homes were not sold?
I guess we could also perform sensitivity analysis and error analysis to really get a handle on how meaningless the 0.2 month (approximate 6 day) reduction in inventory in months really is, but I don’t see it as necessary in this case.
Things are getting better!!! People are so frustrated that they cannot sell that they decided not to sell. That reduced inventory, which resulted in a reduction in inventory in months, as sales have remained constant. Oh, yea, it’s only 0.2 months, but it is a glimer of hope.
I wonder how many of those homes that have come off the market are in foreclosure. I also wonder how many more homes will be on the market as the interest rates on specific loans adjust. I know a few people who refinanced for Christmas–I don’t see that happening as much this year, and as the monthly payments go up, it’s going to get interesting, in my opinion. It is my estimate that the interest rate adjustments will continue on for quite some time, as there are so many different loan terms and the dates of the original loans are different.
This means that a family living in the Portland Metro area making the median income ($63,800 per HUD) cannot afford to purchase a median priced home in the area ($283,500 in September
I wish I knew more about how the different sources arrive at their numbers because my sources paint a slightly darker picture…
Housing tracker lists the median price at $329,900
Sperling’s lists the median income for Portland at $46,858
BTW, inventory dipped last winter too…seems like a normal variation rather than a cause for celebration.
Sperling’s lists the median income for Portland at $46,858
That’s probably median individual income. Household is closer to $60K.
BTW, inventory dipped last winter too…seems like a normal variation rather than a cause for celebration.
In raw numbers, yes, however “months of inventory” (number of homes on market/sales rate) generally goes up. Closed sales were almost identical in September (1866) and October (1864), while new listings dropped a good bit in October (to 4597 from 4966 in September). I’m wondering if potential sellers are just figuring on waiting till Spring to put the house on the market because sales are fairly slow now (these would not be desperate sellers) or perhaps some are opting to put their home on the rental market instead. What we don’t know from these numbers is how many people have pulled their homes off the RMLS so that they can instead rent out the house over the winter.
Oh, and October had 23 business days vs. September’s 19 business days. I’m guessing that the six day reduction in inventory is “in the noise” as it were. Certainly there haven’t been improvements in the credit markets in the last month (in fact it’s gotten worse again) and lending seems to be continuing the tightening trend.
The credit crunch is still the key limiter – if you can’t get a loan, you can’t buy the house unless you’ve got cash… and not a lot of people have the cash.
Pendings are up a bit, but again, one wonders how many of those will fall through given the tight credit conditions – it would be interesting to track that data (percentage of pendings that close) – my suspicion is that ratio of closed sales to pending sales is falling, especially as compared to earlier this year.
JP, you say things are getting better…how so?
bearlee
I have a question about MLS. Is http://www.rmls.com the same thing? If so, I rarely see brand new homes in developments listed on rmls.com. If they did there would be a ton for the SoWa but the only ones I see listed are flips. Same w/ the two BV Marcus Hills homes up for auction. I never saw them on Hasson.com or rmls.com. So how are these new homes accounted for in the numbers, charts, etc when talking appreciation or in this case depreciation and inventory?
bearlee
I have a question about MLS. Is http://www.rmls.com the same thing?
I am not sure that I understand the question as to RMLS being the same as what. RMLS is this area’s multiple listing service (MLS). There is no requirement that a house be listed in RMLS to be for sale.
Builders might list none, one, some or all their inventory in RMLS. When RMLS reports numbers, they are reporting numbers that go through their system. Most company websites gather their information through RMLS so if the listing is listed in RMLS, it probably won’t show on our site or another agent’s. I am not sure what the exact working relationship is between companies, RMLS and IDX. IDX is what allows listings to be shared.
If developers do not list their homes via MLS then the inventory numbers may be much higher than reported. For example, the BV homes (240 that are up for auction) are not part of the inventory if they are not on MLS. Looking at Arbor Homes and Centex websites, there are potential hundreds of more homes not on MLS.
The majority of FSBOs are not in RMLS either.
Are any FSBOs on RMLS? (except for maybe the ones being sold by Realtors)
My local FSBO report: There were 3 FSBOs within 1 block of my house. Now there are 2. The flipper FSBO actually managed to sell to a friend who apparently paid cash because buyer had sold home back in the Spring (retiring to a smaller house). Flipper got very lucky and avoided bankruptcy. The other two have been on the market for months. And now one of the empty homes on the block just got a new roof and a big dumpster out front which makes me think that they’re getting it ready to go on the market.
I think a FSBO can pay about $750 to get their home on rmls if I am not mistaken. Not sure how many people do this.
Apparently a FSBO can pay about $750 to get their home listed on the rmls if bearlee is not mistaken.
Seems like a lot of $$$ for not a whole lot of work on someone’s part.
I don’t know what it would be as we don’t do it but I am sure there is liability as an RMLS member entering FSBO data into RMLS even if all the data is supplied by the FSBO.
In North America, the MLS systems are governed by private entities, and the rules are set by those entities with no state or federal oversight, beyond any individual state rules regarding real estate. MLS systems set their own rules for membership, access, and sharing of information, but are subject to nationwide rules laid down by NAR or CREA. An MLS may be owned and operated by a real estate company, a county or regional real estate Board of Realtors or Association of Realtors, or by a trade association.
The MLS is advertising masquerading as audited statistics.
Caveat emptor.