Our Meridian Blog

One of the things that is holding up a real recovery in the real estate market is the unwillingness of many would be homesellers to realistically price their properties to where the market is today.  Not many want to accept that their property’s market value is as low as the market says that it is.  I read an interesting article on this very thing a little over a week ago which called it “Homeowner denial“.

A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes.

Likewise, an unscientific study released last week by real-estate Web site Zillow.com found that half of homeowners polled think their home’s price has increased or stayed the same in the past year.

“We expected people to get a little more in touch with reality especially over the summer, because you couldn’t turn on the TV or read the newspapers without seeing that home prices are falling,” said Amy Bohutinsky, a spokeswoman for Zillow.com. “It was very surprising to see this kind of disconnect.”

In fact, the median sales price of an existing home dropped 9 percent to $191,600 in September from a year ago, according to the National Association of Realtors.

Here in Ada County, that median home sales price has gone from $235,000 in September of 2007 to $207,900 in September of this year, a decline of 12%.  We’ve seen home prices decline by roughly 1% per month since the beginning of the year by this measure.  In some neighborhoods it is even higher, depending on how many homes are for sale nearby, or how many short sales there are.

Another thing affecting the whole market, besides overpriced listings, is that so many home sellers are drifting down with the market.  Already reluctant to put what they feel is “too low of a price” in the first place, many sellers take a small price reduction every month, hoping to find where the buyers will start “biting”.  The trouble with this strategy is that most of the other owners are doing it as well.  No one is gaining an advantage and getting their sale, so all the houses trickle lower together.  Everyone follows the market down.

Some owners finally get a sale, but then run into the other problem with this scenario… difficulty getting the appraisal.  After the last few years, who could have imagined a time when a home had trouble appraising at a value sufficient to make the mortgage loan?  But that is indeed where we are right now in the Treasure Valley.  Our area has been classified as “Declining”.  The practical effect of that is many underwriters taking an appraisal and reducing it another 5-8%.  Some homes in our area have had problems making value, throwing the whole process into turmoil.  

Bottom line?  Believe what your Realtor tells you about the market price your home can be expected to bring today.  The old trick of pricing it a little high and letting the market reach up to get you has not worked in years, yet we continue to see it.  If the goal is to sell the property, and if you really must move on, then price it where it will sell.  There is no magic in this market, and there are no agents who can really sell your property for what it might have gotten last year, or what you “need”, or what you “know it’s worth”.

  In September we saw an increase in closed sales over the year before. It was a situation that the local and national papers heralded as very good news for the troubled housing market. I even heard one local radio real estate show suggest we’d see a strong rebound in October, November, and December. I warned that the number could also be due to the big mortgage stumble in August of 2007. So, how did we come out in October? Did we pass the bottom, or was it just a hiccup?

Ada County home sales for October come in at 395 this morning (Nov 4). Last year in October there were 463 sales. That is a 15% drop, and puts us back on the track of declining sales we’ve been on all year long. The economy is on many minds, and mortgage rates are rising a bit. Anecdotally, many agents have reported fewer showings and less urgency in their buyer clients. It is a difficult time if you are a seller who has to move, or you’re trying to sell a home in a hurry. Plan on being super clean and priced very competitively.

One bright spot in the market is the continuing decline in inventory. Currently there are 4193 Single Family homes on the market in Ada County. Last year at this time there were nearly 4500 active listings. Pending sales are almost identical this year to the number we saw last year, with 482 contracts waiting to close right now. So with inventory declining, pendings remaining firm, and the rate of decline easing up from the beginning of the year is it time to join radio-guy and call the bottom? No. But it isn’t the end of the world either. In fact, prices in the Treasure Valley are more affordable than they have been in a couple of years. If you are a buyer, be happy, and go shopping.

Perhaps you read the paper this morning, or have heard the news on the radio, that Ada County home sales ROSE in September by 14%.  “What’s up with that?” you say, and you wonder if it means the worst is over.

Yes, it’s true that we sold more homes this September than we did in 2007, and yes, it’s true that this is the first month over month increase we’ve had in a couple of years.  But what does it mean?  I notice that the paper and the radio didn’t try to give us any more information, so what they did give us isn’t enough to make any decisions on.

I’d like to give you a bit more information.  In August of 2007 we had the first hard stumble in the mortgage market.  Over night, a couple of large mortgage money sources went under.  A number of sales contracts throughout the United States, and yes, even here in Ada County, fell out and many of them were not put back together.  It even happened to me.  I had helped a wonderful young couple to sell their home and make an offer on a bigger one for their growing family.  Two contracts tied together, due to close in mid-August.  We got both deals signed and waiting for funding.  The buyer’s lender for the first home was unable to fund the sale because the money source had failed.  Mad scramble to get both deals extended, and the buyer scrambled to find a replacement program.  We were blessed and successful.  But many deals fell last year and were not able to be put back together, deals that should have closed in September, making last September an unusally poor sales month.

What do you think?  Are you ready to call the bottom based on the 14% increase the paper is reporting?  I’m not.  I’d like to see a few more months of better sales before I say we’ve turned the corner.  There are a couple of markets in the country right now that are seeing increasing sales, and perhaps the Meridian, Boise, Ada County maarkets are next.  But let’s wait and see a few more data points, shall we?

By the way, I should have a better look at the September sales figures posted here early next week.  See you then. 

This is what I wrote in my last newsletter at the beginning of September

Last year this month we were talking about the problems in the mortgage market and how they had squashed what little momentum the market might have had at the time.  This week we’re talking about how the recent government actions might affect the mortgage market.  Already this week we’ve seen mortgage rates go down between a quarter and a half point.  Funding this year is not a problem if you have good credit and a stable income.  And there are plenty of home sellers waiting for you.

The biggest news this month is a continuation of what I pointed out last month, that the inventory of homes for sale in Ada County continues to go down.  Last year at the end of August there were more than 4850 active Single Family listings.  There are currently 4488. The decrease is coming more from sellers who do not have to sell right now throwing in the towel and waiting for a better market.  There is a lot of competition in the market right now from short sale and bank owned properties.  This is taking the prices below what many folks feel is fair for their homes, so they are sitting out.

In August there were 480 homes sold, which represents a 24% decline from a year ago.  It is barely below the July number though, which is good.  Pending contracts are down to 601, indicating that sales are slowing down now, which is the seasonal trend.  I’ll be curious to see the September numbers.  Last year’s September sales fell below January’s, which is pretty unusual.  I do not expect that this year, but I do not see the market turning around either.  Great time if you’re a buyer, but pretty tough on the sellers.  If you’re in a home you like, don’t worry about the market, just enjoy living in it.

I still do not see the turnaround, especially considering what is going on in Washington D.C. right now, but I do have some interesting, and good, news from here in Ada County.  This morning the September sales number for single family homes is 334 month to date.  Same time last year?  Only 298!  That’s great news, even remembering that the September numbers last year were seriously limited by the first big mortgage market problem (remember that one?).  We haven’t had a month with sales ahead of the previous year since May of 2006, which was roughly the top of our crazy boom market.  It is quite a positive step to see a monthly increase in sales and I see no reason that we shouldn’t end the month with an increase over a year ago!

As long as we’re talking numbers here, there are currently 642 contracts pending, which is up from the beginning of the month, and there are 4466 single family homes actively listed in the county.  That number is slightly lower than the beginning of the month.  Prices are still creeping down, and I  have heard of some contracts in the last couple weeks where the appraisal came in below the contract price.   While that is not terribly unusual in a downtrending market, it is never a happy thing, and indicates we are not out of the woods yet.

I noticed the article in the Statesman this morning wondering about “Have We Hit Bottom?“.  The article was looking at something I mentioned a few days ago, the inventory number going down.  Here is what the Statesman said this morning

For the first time in 28 months, the number of Treasure Valley homes for sale offered a glimmer of hope for a stalled market.

Ada County homeowners were selling 5,055 homes at the end of July, compared with 5,198 a year ago, according to the Intermountain Multiple Listing Service.

The article goes on to say that this is a first since February of 2006. I would caution that it depends which day of the month you pull your MLS stats because the numbers do fluctuate some, especially around the last day of the month into the first few of a new month. That time usually shows a large number of listings that expire all at once, and then get relisted.

More interesting to me than simply a lower year over year number is the fact that for the first time in a couple of years the inventory has declined in August. The last couple years we’ve seen increasing inventory clear into September. Last September, in fact, we had 4850 active Single Family homes, while this morning we showed 4593. Great movement, and something this market needs.  Incidentally, the 5055 number quoted in the article probably includes “Single Family With Acreage”, because I haven’t seen SF only go over 4700 on any day I’ve looked at it this summer.

Which brings me to another point from the Statesman article. Just what is a “single family home”? One of the Realtors quoted in the article made the point that if you could buy it and live in it, it was a single family home. By that definition he maintained that our market is still getting worse, because of the increase in condos and townhomes on the market.

On my blog and in my newsletters I have always counted Single Family homes as just houses… no acreage properties, no mobiles, and no condos or townhomes. My reason? Simply that when a buyer comes into my office and says they would like to find a home to buy, I will ask them “do you want to see condos or townhomes as well as houses?” Most of the time the answer is “No, just houses.” I consider condos and townhomes a segment of the market, and a rather small one at that. Folks who are looking at condos and townhomes are looking at them for specific reasons, but they might be willing to consider a house. I’ve not found it to be the case when folks are looking for “a house” that they’ll also accept a condo or a townhome on their list of properties to go see. So when I look at the market, I look at houses.

Different agents see the market differently. None of us define it the same way. Make sure you know what they’re looking at when you hear someone tell you the market is getting better, or that it is getting worse.

I mentioned that I would post a graph going back a number of years so that you might be able to see what I think is a more normally shaped sales year.  I beleive that is the first sign of a healthier market.

This is a chart of Ada County Monthly Solds going back to January of 2001.  You can see the “usual” shape of our real estate sales in the first couple of years.  You can also see how wildly out of balance our market became between the end of 2004 and the beginning of 2006.  Then, look at how broken the shape was last year, in 2007.  Now,  while much smaller than we’d like,  2008 seems to have a more normal shape to it.  Our largest sales month usually happens in June or sometimes July, then we tail off into the holidays.  Remember that, when the Statesman tells you how dismal the fall sales are.  It all depends on how you look at it.

Meridian’s real estate market in July was quite similar to Ada County’s (see previous post).  We finished the month with 132 single family home sales.  This is down 27% from last year at the same time.  The Treasure Valley as a whole is off by a much larger percentage, dur to a weaker market in Canyon County.  New homes are still selling in Meridian, with 51 proud new owners last month.  That means that 81 existing homes were sold.  I’ve had a couple folks inquire about the mix of new to resale numbers, so for this post I gathered those numbers as well.

Pendings show a similar mix, with 218 total sales waiting to close.  86 of those are new, and 129 are resales.  And the inventory is holding up there at 1337 total active listings in Meridian.  450 of those are new construction, and 887 are resales.

Like the county as a whole, the key is price, price, and price.  Condition helps immensely, but price trumps it all.  As you might imagine, the number of active and motivated buyers out there right now is not what we’re used to seeing, but there seem to be a number of bargain hunters too.  Add to that mix a number of bank owned and short sale properties, and you have a market with very little pricing power.  The bright side of that is that affordability is more back in line with Treasure Valley incomes and lifestyles.  Affordability was the biggest complaint I heard two years ago, as prices rose beyond what average Meridian area residents were able to pay and affordable neighborhoods seemed to disappear.  Now is a good time to be looking around, because there are some nice deals appearing in our market.

The other thing I’ve noticed is that the annual shape of our market is more nearly normal this year.  That is a good sign, and I’ll post a multi-year graph to show you what I mean.  That’s the first sign of a healtier market.

In normal years past we’ve usually seen the highest monthly sales during the month of June or July. It appears that our market has settled down to a normal flow, even if the total sales figure is smaller than we’d like.  Single Family home sales in Ada County for the month of July were 489.  That is from early numbers, and they might find a few more reported in the next week or so.  That is slightly below June, which looks like a normal sales pattern.  I mentioned last month that the percent below a year ago was better at 25%, and that has  held in  July at a  26% decline.

Another encouraging number is a slight decrease in single family homes inventory, to 4634.  This leaves out townhomes, condos, and homes with acreage.  Pessimists may point out that small decrease is not significant, but I see this as the first month all year we haven’t had more homes for sale than we started with.  The pending contracts number is steady at 661, which is 12 fewer than the beginning of July, and about 10% fewer than last year at this time. 
Last year we had more than 7 months worth of inventory this month.  Today we have at least 10 months.  That rise happened early in the year, and the majority of those homes are existing homes for resale, not new construction.

Sellers are finding it hard to adjust to current market prices.  Those prices aren’t set by Realtors, or appraisers, or tax assessors, they are set by people who actually paid money for homes in this market.  There is still a gap between what buyers want to pay and what sellers want to receive.  And as has been the case all year in our market, the best conditioned homes with the best prices have been selling, while the rest just sit.