Sunday, March 15, 2009

Slowest sales month yields bottom calls

January is the slowest month for real estate so it isn't too surprising when February's data show an increase in sales from the prior month. Every year local Realtors are quick to call bottom when they see this seasonal increase and every year the Columbian in Vancouver is obligated to print their false optimism.

From the Columbian:

Clark County Realtor Scott Mikel looks at pending home sales, where a buyer has officially made an offer on a house. He compares pending sales to the total number of houses for sale in the market. A year ago, the ratio was heading into deep negative territory; this year the market seems to be clawing its way back.

Mikel said Clark County housing hit bottom in July 2008 when more than 5,400 houses were for sale here. That total has dropped to 4,180.

Prices declines have accelerated since Mikel's bottom and have fallen 15%, it was only 6 months ago!

"Yes, there are a lot of foreclosures and yes, some people have pulled their homes off the market," he said. "But if we get below 4,000 that will take us back to 2007."

Pending sales grew by 11 percent in February and closed sales increased by 10 percent from January, according to the RMLS multiple listing service in Portland.

Here is a more objective look at Vancouver pending sales and closed sales:

Pending sale for February:
2009- 390
2008- 465
2007- 687
2006- 680
2005- 835

Closed sales for February:
2009- 224
2008- 294
2007- 444
2006- 616
2005- 567

"Since a large part of the economy is driven by consumer confidence and attitude, I think we are missing an important component if we just report the transfer of title that is often old news and not people’s ‘intent to purchase,’ which is in many ways a better indicator of current confidence," Mikel said

The article also features comments by local home builder Jon Girod of Quail Homes in Vancouver.

"Prices have come down enough that our research shows about 19 percent of area households can again afford to buy a home," Girod said. "That has been about the average for the past 20 years. With the $8,000 Obama tax credit to first-time buyers, home construction well below averages and (federal) bailout money in the pipeline, it looks like home building and sales might improve."

Prices have dropped 23% and they are much more affordable now.

Girod’s graphs show that housing starts spike after big downturns such as the one we are experiencing. He expects that to happen again.

"At the end of 2008, we saw home sales increase in six states including California," he said. "We tend to follow." He sees inventory and prices stabilizing and buyer interest improving.

Prices will not stabilize while inventory is high (currently at 20 months of supply), prices will continue to drop to clear out the excess inventory. Only then can we look at prices, there is no way that prices will stabilize when the supply/demand is this off-balance.

"Home prices here increased at an average rate of 8 percent a year from 2000 to 2008," he said. "That is twice as fast as the average increase of the 10 years from 1990 to 2000. The market had to have a correction of about 25 percent to get back to the average. That’s about what we've had."

I'd ask Julia Anderson to use some professional skepticism when publishing stories like this but she obviously sold out years ago. She even posts her picture on her articles...just like a Realtor.

I'll post my Vancouver market summary soon (without my picture).