The Skinny

Department of Duh: Consumer Confidence Not So Strong

Remember our discussion a few weeks back about how the future of the real estate market is a total crapshoot?

Add another reason to the list.

From the Conference Board:

"The Conference Board Consumer Confidence Index™, which had improved moderately in September, fell to an all-time low in October. The Index now stands at 38.0 (1985=100), down from 61.4 in September."

In other words, since they began tracking this metric in 1985 American consumers have never felt less confident about the economy. This isn't necessarily a surprise, given the dramatic financial losses most consumers experienced when they watched their retirement nest eggs partially vaporized by a panicked stock market. But surprise or no, it's unwelcome news to the economy and, by extension, the housing market.

If you're a potential first-time home buyer feeling unconfident about the economy and world in general—historically unconfident—you may be gun-shy about making big ticket purchases, and a home is usually the biggest ticket purchase one ever makes. As long as the economic uncertainty persists, this may have a downward effect on home sales—despite the recent uptick.

Time will tell, and you know we'll be watching and reporting.

Weekly Market Activity Report 10.27.08

Home sales in the Twin Cities housing market continue to post healthy increases over last year, though the upward movement isn't as powerful as it was during September. For the week ending October 18, there were 618 signed purchase agreements (pending sales)—an increase of 9.6 percent over the same week last year and the 16th consecutive week of year-over-year upward movement. Foreclosures and short sales continue to comprise a sizable chunk of the market, as 46.2 percent of pending sales from the most recent reporting week were lender-mediated.
 
New listings for the same time period comparison were 18.1 percent lower, which represents the 30th week of the last 33 to have downward movement in new listing supply. The total inventory of homes for sale sits at 30,343, which is about 3,000 less than at this same time in 2007. Inventory should continue to fall through the remainder of the year but won't fall as far as previous years given the higher number of foreclosures and short sales, which tend to stay on the market irregardless of snow depth and subzero temperatures.

Click here for the full Weekly Market Activity Report.

October Monthly Skinny Video

Booyah, grandma. The October Monthly Skinny Video is now up live on the internets!

This month's edition is narrated once again by our 2008 President, Kevin Knudsen, and is another quick-fire look at the Twin Cities housing market. Please feel free to share this with whomever you'd like, whenver you'd like.

Click here or in the embedded clip below to view.

Weekly Market Activity Report 10.20.08

Home sales continued their recent upward streak for the week ending October 11, with pending sales posting a 21.1 percent increase over the same week in 2007. While this doesn't keep pace with the extreme increases seen throughout September, it remains a positive indicator of recent buyer demand. Almost half of the properties bought during the week in question were lender-mediated foreclosures or short sales—47.3 percent, to be exact.

On the supply side, things look decidedly different. New listings declined by 10.0 percent for the same time period comparison and are down 11.5 percent over the last three months. The total supply of active homes for sale sits at 30,495, which is 9.4 percent below this time last year. Inventory should decline through the remainder of the year as traditional home sellers take their homes off the market with greater frequency during the fall and winter months, waiting for the inherent optimism and renewed spirit of spring's thaw.

Click here for the full Weekly Market Activity Report.

Just Released: Q3 2008 Foreclosures and Short Sales in the Twin Cities Housing Market

Foreclosures and short sales (i.e., lender-mediated properties) continued to increase their market share in the third quarter of 2008.

Over 34 percent of new listings and closed sales during Q3 2008 were lender-mediated, up significantly from the same quarter in 2007 and 2006. The increase is due in part to continued growth of lender-mediated properties, as well as the typical seasonal slowdown in traditional real estate activity (excluding lender-mediated properties). The report reveals the following and more:

• Over the past year, the inventory of traditional properties has declined by 22.9 percent, while lender-mediated homes have grown by 64.6 percent.

• Of all current active properties for sale, 28.1 percent are foreclosures or short sales.

• Home prices are declining across the board, but the declines are quieter for traditional properties. Lender-mediated properties are seeing faster declines as financial institutions price them to move and condition issues decrease their value.

The report underscores the fact that this phenomenon will be with our market into the foreseeable future. The prevalence of lender-mediated homes varies greatly from area to area. A full index of MLS areas and cities is included in the report, which also includes more analysis and an explanation of the research methodology.

Click here to view the Q3 Update.

MAAR Needs Your Help: Research Survey

The message has been made clear to us that our most popular offering over the past few years has been our market reporting tools. Now that you've helped us prove the "if we build it, you will come" theory, we want to learn more about what we're doing right and wrong.

We thank you for participating. This survey should take no more than 5–10 minutes to complete.

CLICK HERE TO BEGIN.

Mortgage What?

While speaking with the local media last week about our most recent press release, Kevin Knudsen, our 2008 President, informally asked the reporters he spoke with if they believed that current mortgage qualifying standards make it difficult for prospective buyers to purchase a home. Overwhelmingly, they responded "yes," with some believing a downpayment of at least 20 percent was an absolute necessity.

If the press believes mortgages are that difficult to obtain, the general public may likely (erroneously) believe this as well. REALTORS® must continue to promote the wide variety of mortgage options available to home buyers in this market to combat this misperception. Click here for an excellent post on the subject from local mortgage blogger, Alex Stenback.

Weekly Market Activity Report 10.14.08

After spending weeks hypothesizing what role the sunsetting FHA seller-funded downpayment assistance was having in stimulating the recent jump in home sales, we may have our first indication this week. For the week ending October 4—the first week we've measured in which the program was unavailable to prospective Twin Cities home buyers—pending sales were ahead of the same week last year by only 3.5 percent. While this is still an upward annual trend, it is about a 15 percent decline in buyer activity as compared to the activity of each of the previous four weeks.

Now that the FHA program is gone, time will tell if home sales will continue to surpass 2006 levels, as seen over the past several weeks. While one week of a relative downturn is too small a sample size to be predictive of the future, our changing financial climate bears close scrutiny in the weeks ahead.

Listing supply continues to draw down, as new listings declined by 12.0 percent for the same time period comparison and the total number of homes for sale is 9.1 percent lower than it was one year ago.

Pending Sales: Skyrockets in Flight

We put out a news release today, and these are the points at the heart of what we had to say:

• Buyers took advantage of attractive home prices and a sunsetting federal loan programs in September.
• 4,036 pending sales in September, which is 42.2 percent higher than the 2,839 posted in September 2007. Closed sales were up 34.9 percent for the same time period comparison.

The last time there was a year-over-year pending sales increase even close to this large was in March of 1998 when the increase over March of 1997 was 38.6 percent. BUT...

• September 2007 was extremely slow, which makes these figures pop.
• There may have been extra "last call" buyers before the October 1 dissolution of the FHA-sponsored seller-funded downpayment assistance program.
• 41.6 percent of September's pending sales were lender-mediated foreclosures and short sales, up from 17.5 percent in September 2007.
• The overall September median sales price of $189,900 fell from last year by 15.6 percent.
• Lender-mediated homes posted a median sales price of $146,000, a decrease of 11.5 percent from last year.
• Traditional properties had a September median sales price of $212,500, a decrease of 8.6 percent.

Finishing on a positive...

• The October 2008 Housing Affordability Index is up to 159, which is 21.4 percent higher than this time last year.
• This means a more accessible market for potential home buyers.

read the full press release

Wall Street Journal: One in Six Homeowners "Under Water"

Here's some more great news for your Friday, as if this wasn't enough: one in six homeowners in the U.S. now owes more on their home than it's actually worth.

From a fascinating WSJ article:

About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody's Economy.com.

The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm's chief economist, Mark Zandi, who adds that "it is very possible that there will ultimately be more homeowners under water in this period than any time in our history."

This unfortunate trend is the likely culprit for the recent downturn in "traditional" listings (i.e. those offered by home sellers that aren't foreclosures or short sales). When your're fairly certain that selling your house will not only be difficult, but financially disastrous, you're more likely to hold off on trying to sell, no matter how much you might want to move.

It's hard to tell how dramatic the picture is locally, as the data for the Twin Cities "underwater" figure in the WSJ article simply says "NA." We can, however, take a look at the interactive map included to get a feel for the geographic picture. The entirety of Southern California and Southeastern Florida falls within in the  SCARY RED THINGS ARE TERRIBLE swatch, while Minneapolis is more like a slight orange hue things are pretty bad but could be worse vibe.

Graphic by WSJ.

October Housing Supply Outlook

The months supply of total inventory in the Twin Cities housing market fell slightly to 9.5 months for October, which is 3.9 percent below last October. While the downward year-over-year movement is encouraging, we are still far from a balanced market.

Home values continue to experience downward pressure as lender-mediated foreclosure and short sale properties maintain their relatively strong market share.

The lower price ranges remain a hotbed for activity. For instance, sales under $120,000 have increased 178.0 percent in the last year, jumping to 5,473 sales during the last twelve months compared to 1,969 during the twelve months prior to that.

Click here to view the full October Housing Supply Outlook.

Weekly Market Activity Report 10.6.08

The September sales party continued for the week ending September 27, as pending sales jumped by a whopping 58.4 percent from 2007. The extravagant nature of these sales increases will not likely continue through the fall, given the current economic uncertainties and an expected downward trend in consumer confidence. New listings also increased for the same time period, bumping up 9.9 percent from the same week last year—the first year-over-year increase in new listings since early July. Total inventory remains significantly down; there are roughly 3,000 fewer homes for sale now than at this time in 2007.

This week's edition of the MAAR Weekly Market Activity Report features updated figures for several important metrics. The Supply-Demand Ratio (SDR)—a measurement of the number of homes for sale for each projected buyer—stood at 9.79 for October, down slightly from last October. The Percent of Original List Price Received at Sale dipped slightly to 92.2 percent in September, while the Average Days on Market Until Sale increased to 145, up 2.7 percent from last September.

Click here to view the full Weekly Market Activity Report.

Economy Got You Down? Have Beers.

Not everything is built to withstand recession. Auto dealerships, restaurants, and airlines are often among the many industries sent into a tailspin when consumers get frugal in tough economic times and cut back on spending.

Historically, however, there is one segment of the economy which not only withstands downward economic pressure, but often thrives on it.

Beer.

Most Americans tend to hold off on snipping that line item from their budget as long as they can, preferring to cut down on life's "non-essentials" first.

From a WaPo article:

More than 16 million barrels of domestic beer were sold in the United States in July, and annual sales through that month are up 1.4 percent, the largest increase since 1990, when the economy was headed toward a recession, according to the Beer Institute. (Yes, such a thing exists. It's a trade group.)

"The beer industry and the alcohol industry seem to be fairly recession-resistant," said Nick Lake, vice president of beverage and alcohol at the Nielsen Co., a market research firm. "Why would you want to cut out beer? You don't want to punish yourself just because the economy's bad."

Despite some legitimate changes to the ways that people buy their beer in a recession (more take-home, less bar visits), and the kinds of beer we drink (maybe make the switch from Newcastle to Budweiser, or Budweiser to Natural Ice), we still find a way to enjoy a cold one.

Or a warm one if your electricity's been cut off due to non-payment.

House Swapping

With home values in decline and traditional sellers facing new competition from bargain-priced foreclosures and short sales, some are turning to a completely different approach to trying to sell their home. Rather than put the house up for sale, they're trying to actually swap their house with someone else's.

From a Star Tribune article:

Homeowners post a description of the property they're trying to sell and of the type of home they're seeking. When there's a successful match, the owners negotiate to buy each other's homes. The sale and purchase of the two properties is typically done at the same time, so no one is left paying two mortgages.

For example, the Bruuns placed an ad on Craigslist offering their $208,000 townhouse in exchange for a four-bedroom home, for which they would pay up to $300,000. They've had four queries and are considering an exchange with a homeowner in Lakeville.

"If it works, it will be a win-win for both of us," said Sher Bruun.

The article doesn't go into specifics about how large of a trend this growing niche represents, but it's likely a very small portion of the overall market. Regardless, it's a new alternative that can't be ignored, especially by REALTORS®, who typically make their living by offering counsel to consumers on the sale of real property.

There are undoubtedly unique risks and uncertainties for consumers who choose to go this route (legal disclosures and mortgage assumption law, anyone?), but can we really be surprised that the swap alternative has gained traction? The cost to post a your property online for other swappers to see is 30 minutes of your time in front of a laptop, while the potential benefit is thousands of dollars in savings at the closing table. With odds good that your home is worth less now than it was two years ago, this can easily start to look like an attractive option to cost-conscious consumers.

Free markets invite competition, and the swap model represents some healthy competition to the traditional REALTOR® business model. There's room for every sales approach under the sun to co-exist—each business model just needs to be prepared to differentiate itself and articulate it's value to consumers.

So, let's hear it, folks: why should consumers list with an agent instead of trying to swap it? Defend yourselves.