Market downturn: How will it develop?

Here in South Florida we have been watching the number of homes for
sale pile up to historical levels while the number of homes sold drops
off to almost nothing. This has been taking place over the last 6
months or so (see Number of Homes for Sale vs. Sold chart at
). I know very little about real estate but
even to me it looks like something big is about to happen. I'm also
aware of loads of new condos and other new construction coming on line
within the next year. Will this be the straw that breaks the camel's
back?

Also, we know that a great many people financed with exotic loans with
introductory periods of no interest, no payment or interest only. This
unfortunately includes some of our friends. When the introductory
periods end (perhaps within these next 2 years), will these folks start
a new flood in this already flooded market?

My question is, what should we expect to see in the local RE market
within the next 2 years? Will all of these sellers simply take their
properties off the market and try to wait it out (and therefore try to
avoid lowering the price on property). For those with the "time bomb"
mortgages, will we see a huge tide of foreclosures or is there some
other way for these people to avoid a potentially disastrous scenario
if they must sell and prices have declined? Will the state or local
governments intervene on behalf of these people to avoid some kind of
economic backlash?

Should we be reading up on how to buy foreclosed properties?

Bill E.
Hollywood, FL

Re: Market downturn: How will it develop?

It appears that there is a rise in number of listings and a decline in
number of sales in both Broward and Dade counties. But, considering the
population of the area and the number of listings in both counties, the
listings do not appear to be too high even though they almost doubled. It
appears that it is back to normal. I think the market is still stable but to
know for sure we need to to know the number of days it takes to sell a home
and whether it has leveled off, increasing rapidly etc.

www.AmericanWest.biz


<> wrote in message
news:
> Here in South Florida we have been watching the number of homes for
> sale pile up to historical levels while the number of homes sold drops
> off to almost nothing. This has been taking place over the last 6
> months or so (see Number of Homes for Sale vs. Sold chart at
> ). I know very little about real estate but
> even to me it looks like something big is about to happen. I'm also
> aware of loads of new condos and other new construction coming on line
> within the next year. Will this be the straw that breaks the camel's
> back?
>
> Also, we know that a great many people financed with exotic loans with
> introductory periods of no interest, no payment or interest only. This
> unfortunately includes some of our friends. When the introductory
> periods end (perhaps within these next 2 years), will these folks start
> a new flood in this already flooded market?
>
> My question is, what should we expect to see in the local RE market
> within the next 2 years? Will all of these sellers simply take their
> properties off the market and try to wait it out (and therefore try to
> avoid lowering the price on property). For those with the "time bomb"
> mortgages, will we see a huge tide of foreclosures or is there some
> other way for these people to avoid a potentially disastrous scenario
> if they must sell and prices have declined? Will the state or local
> governments intervene on behalf of these people to avoid some kind of
> economic backlash?
>
> Should we be reading up on how to buy foreclosed properties?
>
> Bill E.
> Hollywood, FL
>

Re: Market downturn: How will it develop?

Again, I know little about this, but taking December's numbers if 880
units were sold and 6356 were available for sale, doesn't that mean
that there were 6356/880=7.2 months of sales sitting on the market? Is
that normal? I really don't know because I'm not in the business. In
March and April we had only 1.6 and 1.8 months worth of sales on the
market, respectively. This certainly is a big change in only 8 months.

I suppose you're suggesting that having only 1 to 2 months of sales or
"inventory" on the market is the unusual case and 7 or 8 months is more
normal. Is that right? The site doesn't provide us with historical
numbers so I can't say. What is a normal range for the ratio of units
available for sale to units sold?

Bill

Re: Market downturn: How will it develop?

<> wrote in message
news:
> Again, I know little about this, but taking December's numbers if 880
> units were sold and 6356 were available for sale, doesn't that mean
> that there were 6356/880=7.2 months of sales sitting on the market? Is
> that normal? I really don't know because I'm not in the business. In
> March and April we had only 1.6 and 1.8 months worth of sales on the
> market, respectively. This certainly is a big change in only 8 months.
>
> I suppose you're suggesting that having only 1 to 2 months of sales or
> "inventory" on the market is the unusual case and 7 or 8 months is more
> normal. Is that right? The site doesn't provide us with historical

Bill, that is exactly what I am suggesting. As you correctly pointed out,
we do not have the historical numbers to confirm. But, based on my
observations in similar size markets, the Dade and Broward market is now
back to normal. I will change my mind if the historical data shows
otherwise.



> numbers so I can't say. What is a normal range for the ratio of units
> available for sale to units sold?
>
> Bill
>

Re: Market downturn: How will it develop?

Cal,

Check my math on this but if we have between 7 and 8 months worth of
inventory on the market, I would guess that the average time to sell a
home would be about half of that or 3.5 to 4 months=105 to 120 days.
Is this correct reasoning?

Bill

Re: Market downturn: How will it develop?

<> wrote in message
news:
> Cal,
>
> Check my math on this but if we have between 7 and 8 months worth of
> inventory on the market, I would guess that the average time to sell a
> home would be about half of that or 3.5 to 4 months=105 to 120 days.
> Is this correct reasoning?

Bill, this may be correct but we do not have all the data to confirm since
the average requires lots of data but more imprortantly we usually shy away
from using the average as an indicator. If you look at the web page you
provided which has useful information, you see that the statistics for days
on the market are based on the median price properties and not the average
which tends to be skewed. Interestingly enough, when I looked at the data,
I saw that the average days on the market for Dada County for the emdian
price home in February of 2005 was 68 days but it was 59 days in December of
2005, the last data available. That is not the sign of a collapsing market.
I looked at some high priced areas like Key Biscayne and they were slow
which indicates that the market may have collapsed at the high end but I did
not check many areas.



>
> Bill
>

Re: Market downturn: How will it develop?

Cal,

I see their days on market statistic but I don't understand it. For
example, In Dade county in Feb 05 we had 3273 units available and 914
sold (ratio of 3.6) and the avg. days on the market was 68. In
December we had 5629 units available of which 682 were sold (ratio of
8.3) yet December days on market was 59. This makes absolutely no
sense to me. How can days on market be less in months where so many
more units are left unsold? Can you explain?

The web page doesn't say anywhere that the days on the market is based
on median priced properties. It is simply showing median price on the
same chart as days on market.

Bill

Re: Market downturn: How will it develop?

wrote:
>
> I see their days on market statistic but I don't understand it. For
> example, In Dade county in Feb 05 we had 3273 units available and 914
> sold (ratio of 3.6) and the avg. days on the market was 68. In
> December we had 5629 units available of which 682 were sold (ratio of
> 8.3) yet December days on market was 59. This makes absolutely no
> sense to me. How can days on market be less in months where so many
> more units are left unsold? Can you explain?

If the inventory is increasing, then the time on market for the
ones sold will lag behind the current inventory.

Notice that between Dec and Feb the time-on-market increased
from 59 to 68.

I also suspect that the time-on-market statistics are only gathered
from the unit that were sold. If a unit appeared on the market for
a while and then was pulled back off the market after a while
unsold, then it would be included in the units available for a while,
but it would never appear in the time-on-market statistic.

December 5629 minus roughly 1600 for two months sales gives
4000 units that should still be on the market. But there are now
3273. Clearly some have been pulled off the market since December.
And since some would have bene put onto the market since
December it looks like a *lot* have been pulled off the market.

It makes sense. Try putting your building on the market but
if it has a positive cash flow you don't have to settle for a lowball
offer. If no one offers your asking price, forget it. Pull it off the
market, it fails to appear in the time-on-market statistics, and
maybe you put it back on the market again in a couple of years.

Re: Market downturn: How will it develop?

Bill,

As you know, the median is the midpoint of the market which means there will
be 50% below and 50% above. Real estate economists prefer to use the median
instead of the average. The statistics web page you intorduced me to, does
use the median price and it is labled on the y-axis where it shows the
dollar value of the median price over time (x-axis). You can have many more
listings for example on the high end of the market such as North Miami
Beach, Coconut Grove, Key Biscayne etc. and the market may be a seller's
market or even in a crash in the upper segment but we may have a healthy
market in the low and middle market segments as my be the case in Dade and
Broward counties now. If we were using the average, the days on the market
will be skewed by the lengthy days on the market for the high end properties
in Coconut Grove etc. Since we are using the median and not the average and
since there is a good market in the low and middle, we saw the days on the
market declining. I know it is a bit confusing since most people think in
terms of the average and they think of real estate as all the same. Real
estate economists do not think that way and here lies some of the confusion.




<> wrote in message
news:
> Cal,
>
> I see their days on market statistic but I don't understand it. For
> example, In Dade county in Feb 05 we had 3273 units available and 914
> sold (ratio of 3.6) and the avg. days on the market was 68. In
> December we had 5629 units available of which 682 were sold (ratio of
> 8.3) yet December days on market was 59. This makes absolutely no
> sense to me. How can days on market be less in months where so many
> more units are left unsold? Can you explain?
>
> The web page doesn't say anywhere that the days on the market is based
> on median priced properties. It is simply showing median price on the
> same chart as days on market.
>
> Bill
>

Re: Market downturn: How will it develop?

"Doug Freyburger" <> wrote in message
news:
> wrote:
>>
>> I see their days on market statistic but I don't understand it. For
>> example, In Dade county in Feb 05 we had 3273 units available and 914
>> sold (ratio of 3.6) and the avg. days on the market was 68. In
>> December we had 5629 units available of which 682 were sold (ratio of
>> 8.3) yet December days on market was 59. This makes absolutely no
>> sense to me. How can days on market be less in months where so many
>> more units are left unsold? Can you explain?
>
> If the inventory is increasing, then the time on market for the
> ones sold will lag behind the current inventory.
>
> Notice that between Dec and Feb the time-on-market increased
> from 59 to 68.

Doug,

The time-on-the market decreased not increased from Feb. 2005 to Dec. 2005
from 68 to 59.



>
> I also suspect that the time-on-market statistics are only gathered
> from the unit that were sold. If a unit appeared on the market for
> a while and then was pulled back off the market after a while
> unsold, then it would be included in the units available for a while,
> but it would never appear in the time-on-market statistic.
>
> December 5629 minus roughly 1600 for two months sales gives
> 4000 units that should still be on the market. But there are now
> 3273. Clearly some have been pulled off the market since December.
> And since some would have bene put onto the market since
> December it looks like a *lot* have been pulled off the market.
>
> It makes sense. Try putting your building on the market but
> if it has a positive cash flow you don't have to settle for a lowball
> offer. If no one offers your asking price, forget it. Pull it off the
> market, it fails to appear in the time-on-market statistics, and
> maybe you put it back on the market again in a couple of years.
>

Re: Market downturn: How will it develop?

Thank you, gentlemen, for trying to explain.

I have a feeling that Doug is correct in that the days on the market
statistic is calculated only for the properties that were sold. If
this is true, then it is very misleading because in market where
inventories are rising, the statistic will understate the potential
days on the market for a property going on the market today for the
reasons that Doug mentioned. I suppose that the reverse is true for a
market where inventories are falling. I guess it's a little like
trying to measure the average age of the population by counting only
the age of those who have just died!

I fully understand the concept of median and how it compares to
average, but I don't think that the median number of days on the market
would be very easy to compute from rough figures like inventory
turnover. In fact, you couldn't really calculate a median days on the
market unless you had data for the whole population---something we
appear not to have.

I also understand that certain segments of the market do better than
others and that it's not out of the question to have a vibrant market
in one segment and a crash in the other as CalNeva has pointed out.
Even so, I think that the general trend appears to be the same no
matter what segment or geographical location you look at here in
SoFla--inventories are rising steadily.

CalNeva and Doug--Do you have a access to similar data for your
markets? If so, what are they showing?

Bill

Re: Market downturn: How will it develop?

<> wrote in message
news:
> Thank you, gentlemen, for trying to explain.
>
> I have a feeling that Doug is correct in that the days on the market
> statistic is calculated only for the properties that were sold. If
> this is true, then it is very misleading because in market where
> inventories are rising, the statistic will understate the potential
> days on the market for a property going on the market today for the
> reasons that Doug mentioned. I suppose that the reverse is true for a
> market where inventories are falling. I guess it's a little like
> trying to measure the average age of the population by counting only
> the age of those who have just died!
>
> I fully understand the concept of median and how it compares to
> average, but I don't think that the median number of days on the market
> would be very easy to compute from rough figures like inventory
> turnover. In fact, you couldn't really calculate a median days on the
> market unless you had data for the whole population---something we
> appear not to have.
>
> I also understand that certain segments of the market do better than
> others and that it's not out of the question to have a vibrant market
> in one segment and a crash in the other as CalNeva has pointed out.
> Even so, I think that the general trend appears to be the same no
> matter what segment or geographical location you look at here in
> SoFla--inventories are rising steadily.
>
> CalNeva and Doug--Do you have a access to similar data for your
> markets? If so, what are they showing?

Silicon Valley inventory is still very low. Multiple offers within one week
of the listing which were common, are rare now.
Also, it is taking a bit longer to sell 30 days+ as opposed to one week.
Prices are rising at a slower pace or near 100% of list.
But, when the spring begins, we may have a slight pickup due to seasonality.

A different picture in San Diego, Las Vegas & Reno with inventory build-up
and prices declines.



>
> Bill
>

Re: Market downturn: How will it develop?

Not to dwell on this, but the statistics are in for January (see
) and the trend continues, even accelerates.
Sales are still dropping off and inventories are at about 11 or 12
months now. CalNeva suggested that this may be a return to normal, but
the following article



suggests that many parts of the state have record or near record number
of homes for sale.

Bill

CalNeva wrote:
> <> wrote in message
> news:
> > Thank you, gentlemen, for trying to explain.
> >
> > I have a feeling that Doug is correct in that the days on the market
> > statistic is calculated only for the properties that were sold. If
> > this is true, then it is very misleading because in market where
> > inventories are rising, the statistic will understate the potential
> > days on the market for a property going on the market today for the
> > reasons that Doug mentioned. I suppose that the reverse is true for a
> > market where inventories are falling. I guess it's a little like
> > trying to measure the average age of the population by counting only
> > the age of those who have just died!
> >
> > I fully understand the concept of median and how it compares to
> > average, but I don't think that the median number of days on the market
> > would be very easy to compute from rough figures like inventory
> > turnover. In fact, you couldn't really calculate a median days on the
> > market unless you had data for the whole population---something we
> > appear not to have.
> >
> > I also understand that certain segments of the market do better than
> > others and that it's not out of the question to have a vibrant market
> > in one segment and a crash in the other as CalNeva has pointed out.
> > Even so, I think that the general trend appears to be the same no
> > matter what segment or geographical location you look at here in
> > SoFla--inventories are rising steadily.
> >
> > CalNeva and Doug--Do you have a access to similar data for your
> > markets? If so, what are they showing?
>
> Silicon Valley inventory is still very low. Multiple offers within one week
> of the listing which were common, are rare now.
> Also, it is taking a bit longer to sell 30 days+ as opposed to one week.
> Prices are rising at a slower pace or near 100% of list.
> But, when the spring begins, we may have a slight pickup due to seasonality.
>
> A different picture in San Diego, Las Vegas & Reno with inventory build-up
> and prices declines.
>
>
>
> >
> > Bill
> >