According to yesterday’s Arizona Republic the spread between listing and asking prices has been narrowing:
Real estate analysts say it’s an early sign the ailing housing market could be on the road to recovery.
This proves fairly conclusively that these analysts can’t read signs. Consider the following logic:
The standoff between home buyers and sellers in metropolitan Phoenix could be nearing an end.
The wide gap between what a home is listed for and what it sells for is shrinking, which means Valley home sales could start to pick up if more buyers and sellers agree on prices.
"Both buyers and sellers are readjusting their expectations," said University of Arizona economist Marshall Vest. "Buyers are coming back into the market with reasonable offers. More homeowners are pricing their homes to sell."
Vest analyzed data from the Arizona Regional Multiple Listing Service and found that the spread between what Valley home prices sold for in March and what they were listed for is the narrowest it has been since mid-2004. The gap hit a high in mid-2005.
So let me see if I understand this. Apparently the spread was at its greatest when the market was at its peak, and seems to be at it’s narrowest point since the market has cooled. So that shows that a narrow spread is a sign of "recovery"?
I use a more traditional indicator of market health- sales vs listings. M has sent us our early May numbers, and the ailing housing market just continues to be in decline. [Thank you M!!!] Not only are we seeing a year-over-year decline, but the third month-to-month decline as well:
ACTIVE 52,970
UC 7,780SOLD MAY 06 1-14 2,582
SOLD MARCH 1-14 2,478
SOLD APRIL 1-14 1,970
SOLD MAY 07 1-14 1,764 [down 32% YOY!]
A large percentage of home closings generally occur at the end of the month, so 1,764 probably represents less than half of the eventual May sales figure. However, it is worth noting that at the time of year when it would be expected that sales would be increasing month-to-month, they are showing a steady decline.
The Republic has more "signs of a rebound" for us in an additional article. Note the source was "Economists, real estate analysts and agents," who wisely remained anonymous:
• The gap between sales prices and listing prices will shrink.
If you don’t have much property trading hands, it is difficult to see how this makes much of a difference.
• Home listings will steadily start to fall each month until they are down by at least 20 percent.
Actually, a 20% drop in inventory would only put us back to the still high levels of May 2006, but it would look more like a turnaround than our current monthly increases.
• The time it takes homes to sell will drop from the current three-month average to a more normal two-month time frame.
Days-on-market (DOM) is bogus. Homes on average are not selling in three months, homes on average are not selling at all. In April only 10% of homes listed actually sold. DOM is the average time it takes to sell a properties that actually sold. No consideration is given for cancelled, expired, or languishing properties. A better gauge is the month’s supply number–a more normal market has about a four to six month supply, rather than the current ten.
• The number of monthly home sales climbs back to levels from 2003 before the market frenzy.
Is this in English? If it is, see previous point. Sales vs. listings is the important figure–you can’t tell much without looking at both numbers and the ratio between them.
• Home prices go back to increasing 5 to 7 percent a year as they did before 2004.
This one would make sense, but don’t hold your breath. If you want to read the signs of recovery–get a good pair of binoculars.
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One might infer that the houses that are selling have relatively low asking prices to the ones that are NOT selling. Thus they should sell at or near their asking price.
A recent economic study in Central Florida used a sample of about 1,000 listing, half of which had sold and ran AVMs (automated valuation models) on them. It found that on average the homes that sold were at about 96% of their asking prices. The ones that did not were estimated to be 15 to 20% higher than what the AVM said they should be. Hmmm.
it continues to astound me that following the most ridiculous real estate frenzy/hysteria and run-up in history, people (and by people- ostensibly intelligent, bright people who should have half a clue ie, economists) believe we have had our 3% price correction and now everything is going to normalize.
it is so silly a notion as to leave me speachless. breathless, actually.
“Home listings will steadily start to fall each month until they are down by at least 20 percent.”
I agree, if we saw a 20% decrease in inventory (not during the holidays, when that is normal), that would be a great sign of a recovery. Wake me up when that actually happens, though. Inventory is skyrocketing. Ocrenter’s blog is showing 100+ homes added per day. Hardly fits their model, does it?
Even as a doomer I think we are probably at the peak of inventory or within 10% of the peak. It is an all time high and I think most never expected it would cross 35k.
With that being said, you are right, a small amount of home sales is too small of a sample to draw a conclusion.
Burn baby burn!