As I state every month, the numbers for December are preliminary, and I expect them to change over the coming weeks. I would love to be able to delay a couple of days and have solid numbers, but the pattern I have seen in previous months tells me that the December numbers may change right up until the end of January. The November numbers actually changed between the 1st and 6th of January.
To be flat out honest, I am not thrilled with the December numbers… even as preliminary numbers. It isn’t as bad as it could be, but it is far from good.
Let’s start with the absorbtion rates. The twelve month number is down a little from last month, with it pointing to a 10.4 month inventory. The six month rate is actually up slightly, to 12.1 months of inventory. Finally, the three month rate is up to 15.7 months.
If you aren’t familiar with absorbtion rates, it is simply this: how long it would take to sell all of the current listings if no new listings were added. The common rule of thumb is that a neutral market has about a six month supply. A supply of less than six months points to a seller’s market, and a supply over six months points to a buyer’s market.
Let’s get down to some nuts and bolts…
Listings are down from October to November and from November to December (2164 > 1780 > 1451). However, the year over year numbers are up for both November and December, 6% and 9% respectively. As I have been stating for the last few months, I really want to see the number of new listings drop in relation to the previous year. The bright spot is that both the increases are below the annual average for 2007 (11%). Perhaps the deceleration will continue.
Pendings point to next month’s solds. They are a bit of a forward indicator. Pendings also can be a bellwether of financing problems and other issues with closing property sales. If the pendings are high, but the sales don’t pick up, that indicates that sales are falling through after contract. The most common reason would be financing issues preventing the sale from closing. In that case, either the properties aren’t appraising, or the loans aren’t getting funded. Currently, there is a “liquidity crunch”, meaning the experts are saying there just isn’t enough money to lend. Unless the December solds come up a lot, we may be seeing some of the effects of that liquidity crunch. Pendings are down from September through December (705 > 769 > 637 > 510).
Solds are where the action needs to be. Let me continue with the comparison to the Pendings above for a moment. The solds have been decelerating the last couple of months, but that is normal this time of year. The numbers for October through December (700 > 592 > 353). Looking at the September pendings (705), and the October solds (700), the pendings were actually a little lower than I expected. But, the following numbers October pendings (769) and November solds (592), I was expecting a little more sold activity. I expect to see a correction of the December solds activity as well. November and December were both off of the previous years by about the same amount (32% for Nov. and 33% for Dec.). But, I think that December will change a bit by the time the next report is published.
Since the last report, the November average sale price had a radical change. I previously showed it as about $238k, but it dropped to $225,100. Instead of a 2.3% increase, it changed to a 3.5% decrease. Currently, December is showing an average price of $253,449, up 7.1% from last year. Don’t expect that to hold up. I’ve been looking for a drop to spur sales. I think that we are starting to see that drop.
The final number that I’m going to kick out is the solds/new listings percentage. In the best markets, this is around 60%. Right now, we are looking at about 33% for November, and 24% for December. Basically, this is the percentage of sold listings vs. new listings. This highlights the importance of pricing a home properly. In November, for every three homes that came on the market, only one sold.
I have been calling for a spring recovery. I will have to stick with it for a couple more months. It will probably be the late spring, though… I expect May to be the month, but I won’t have final numbers until July. As always, when the market turns, the first movers get the best deal.
Look for my next report around this time in February.
Seth’s point, and one that I totally agree with, is that if we look for dumb consumers we will find dumb consumers. After all, what should one expect if they put out a message trolling for an eighth grade education?