January 27th, 2010
Geek Talk
I love statistics. Call me a geek, but I really enjoy applying math to a topic I am interested in to try to gain some understanding of it. It is also comforting in a turbulent market to try to bring order through synthesis of data. Okay, the geek has taken over and she has some things to say.
Lower Inventory
Last year at the end of January, there were 190 active residential properties for sale on Bainbridge. In 2008 that number was 206 and in 2007 (before the “stuff” hit the fan) there were 144 and just 80 in 2006. Compared to 2008 and 2009, available inventory is down 22% and 16%, respectively. Why is that news? We have had an oversupply of inventory for some time now. As inventory declines, the market will come back into balance, between the supply provided by sellers and demand desired by buyers.
Months of Inventory
A measure that can be helpful in understanding a local real estate market is the number of months of available inventory. By dividing available inventory (active listings) by the previous month’s number of sales, we arrive at the number of months of available inventory. At the moment, we have seven months of available inventory.
Days on Market
When I compare the number of days on the market for active inventory versus sold listings (in all of 2009) it is striking. The median number of days actively listed single family properties have been on the market is 112, while the median number of days of all single family properties last year was 74, a difference of 38 days. Of the properties that are currently in contract (contingent sale, contingent on inspection or pending sale) the median number of days on the market are 110. What I gather from these statistics is that while inventory is down, it is taking longer to sell properties.
The statistics coincide with my personal observations. Buyers are taking hard looks at their options, kicking the tires hard. This is not necessarily a bad thing for sellers, because once someone makes an offer, rest assured they have thought about it and are not rushing in with a decision they will regret later and pull out of the deal.
So, if you have a house on the market or are thinking about selling, be prepared to wait.
Financially Distressed Properties
No longer a small fraction of our marketplace, financially distressed properties represented a significant proportion of transactions in 2009 and that trend appears to be carrying through to 2010.
While it is difficult to get exact numbers on this because of a change in the way the multiple listing service reported financially distressed properties that did not occur until mid-2009, I do have some estimated results. At my count, there were 37 sales that of distressed single family homes (15 short sales and 22 bank-owned), representing 17% of all single family home sale last year.
As of January 26, 2010 14% of the active inventory is in financial distress (13 short sales and 9 bank owned). Forty-one percent of properties in contract are distress sales, or 13 out of 32.
Of note is that short sales are taking about twice as long to get into contract than bank-owned properties. Could this be contributing to the increase in the number of days on the market for active listings? Most definitely. This is another conversation in itself and perhaps I will post on the topic later.
Forecast for 2010
Ha! I don’t want to be trapped by my own words so this is the beginning of the mystical section of my blog post. First, I’ll use an analogy from my experience with my two babies (now ages 2 and 6). In talking with new parents, I tell them that the only thing that will be predictable for a while with their baby is change. I warn them not to rely on what is happening today to predict tomorrow, and be open for anything. For real estate buyers, sellers, and holders, my advice is to think carefully about your decisions and make sure you get good advice from trusted professionals. Look ahead in your life and think about what a purchase, sale, or staying put will mean for you. Ask not only your real estate agent what she thinks, but an accountant and financial advisor. And, as I always like to point out, real estate decisions are usually made because of some underlying personal reason like a new baby, job change, or other life experience that drives you to act (or not!).
The second approach I will take to making predictions about the 2010 market is to turn to a tried-and-true source the Magic 8 Ball. Manufactured by Mattel and invented in 1946 by the son of a clairvoyant, Albert Carter, I make all my important decision with the advice of this toy, um, I mean, precise prediction tool. My question to the Magic 8 Ball today, is, “Will 2010 be a good year for the Bainbridge Island real estate market?” Wow!!! I got a “Yes, Definitely.” The Magic 8 Ball might be feeling a little more optimistic than me, but who am I to question its advice?
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