Supply vs demand. I only took 1 economics course in college, but that I remember.

Sales will not pick up until sellers price their houses accordingly. It seems to me that, from a realtors' point of view, they should be "counseling" their sellers about what price their house is actually worth. After all, 6% of x is better than 0% of x + over-pricing.

I put counseling in quotes, because I am not so sure that realtors actually do anything but pull a number from a sale from 2005 and go with it.

The last time I checked, the U.S. population continues to rise as people are living longer, coupled with immigration (legal and illegal). Therefore, the demand for housing will increase. Think long term.

Jamie:

The "percent of what sellers are asking for" metric is meaningless and subject to rampant fraud.

"Months of inventory" is the most important measure of this market.

Houses are coming onto the market at a rate two times as fast as they are being sold (use the MRIS statistics to compare the "new listings" number to the "marked contract or contingent number").

Oh, I look at months of inventory all the time, John. That's one of the first numbers I calculate when I write the monthly sales story (as opposed to the quick-hit blog post).

But I figured that, with all the debate here about asking prices, people might be interested in that stat, flawed though it may be.

Baltimore County prices have fallen below June 2005 figures:

AVG MEDIAN
June 2008 296K 245K
June 2005 301K 249K

I took a look at the MRIS statistics, and the most dramatic shift is to government insured financing (FHA/VA), a roughly 330% increase year over year. The reasons for such a dramatic shift is because private mortgage insurers have dropped out of the home financing market place and many are near bankruptcy. This means high closing cost to both buyer and sellers. It also means there is huge downward pricing pressure on properties selling for over the $560K FHA/VA lending, and the $417K Fannie Mae/Freddie Mac conforming mortgage caps.

The other dramatic shift I noticed is in million properties sales volume dropped 58% year over year. I have no idea how people will get financing without huge down payments, so the sales volume drop is not a surprise. Given the market factors it's holding well.

Supply & demand is economics 101 but buyers set the price for commodities and almost 50% of the homes sold in the Metropolitan area in June were on the market for less than 60 days.

John: 2717 listings expired or were withdrawn from the market in the Baltimore Metro in June. These properties plus the 2349 contracts equal more than the new listings. Some of the withdrawn properties were listed for sale and for rent and the for sale listing is withdrawn if the property rents.

Yes the number of homes sold in June in the Metro area was 31% less than those sold in June '07, however, last month saw the highest number of monthly sales since August '07. You will see this percent drop in the next two months since we have now past the anniversary of the mortgage meltdown. The numbers you are looking at are closings and they lag contracts by 30-60 days typically. Therefore, the meltdown which began in April '07 only started to show up in June '07 numbers and the negative influence on the market grew throughout last summer.

A good statistic for predicting real estate pricing equilibrium is rental cost verse ownership cost.
At the peak of the real estate boom in Naples it cost 40 cents on the dollar to rent verse owning. I know that a large part of the listing expirations are discourage sellers, but does any one know how rental pricing is holding up verses ownership cost?

I just think there is a lack of measurement accuracy, and a fair bit of intentional deception, in these statistics. Nobody is measuring sale price vs initial asking price, and initial asking price is really arbitrary (more a measure of seller sentiment than anything else). Lots of homes come off the market and then go back, not having been sold in between, so the # days on the market is misleading. Actual sale prices don't represent other parts of the deal, like points, closing costs, various taxes the seller may pay to the buyer, repairs made, time concessions, etc.

Realtors seems to be using everything in their bag of tricks to prevent the slide in prices, but it seems counterintuitive to me. Sales might actually accelerate if realtors encouraged sellers to reprice their homes downwards, and to maintain some paper trail to the initial asking prices (rather than obscuring what those initial prices were.)

Most real estate agents in MD have not clue on prices. They would not advise their clients on bid/ask prices.

In my Howard County subdivision (> 1,000 mix housing), prices have been flat for the past two years and houses have been selling even in winter. While the houses are selling for similar proices in the past couple of years, the current loss is unrealized gain. The housing prices have stayed the same probably because no one wants to sell unless they have to.

It is OK to compare regional median prices but even in a region housing prices may tell a different story altogether.

Ross:

You suggest that a withdrawn listing is as good as a sale. This is not the case.

A withdrawn listing is more likely a seller who cannot get the price he wants. Its really a "latent" listing that will reappear on the market. In most cases, the seller's desire to sell has not gone away, it's just that the sales environment is inauspicious and the seller realizes that a decent offer won't be forthcoming.

Withdrawn listing can also be due to foreclosures, which are still rising dramatically.

Ed,

According to the census bureau as reported by Market Watch (http://www.marketwatch.com/news/story/us-census-bureau-new-orleans/story.aspx?guid=%7BFA1A03A2-4051-45F2-807B-ED22F5FBBCB1%7D&dist=hppr) the population in Baltimore is decreasing. There goes your argument.

To Bob: Amen, I couldn't agree more.

John: A listing that is withdrawn from the for sale inventory because it has been rented maybe a latent listing, latent being hidden, but if it does not reappear for one year, it is not part of the dynamics of the present supply and demand. All houses ae latent listings under this concept. Homes in Baltimore City rented through the multiple listing service were up 66% in June '08 over June '07.

As I read through these, I was struck by the comment about listing a house for sale and then renting it out instead. Do these sellers/landlords then dutifully report to the State of Maryland that they are no longer residing there? Obviously, with the budget crisis the State has, that extra revenue would probably come in handy? What about it?

I have looked at houses for sale that are also for rent and I have looked at houses for sale that are completely vacant (I mean not even toilet tissue). Yet, when I look up the address in the State's property division, it is listed as being the residence of the owner. This is called fraud, as far as I know.

To Jamie Hopkins, perhaps this is worth a story? After all, when these investors cheat the government, the rest of us have to pay.

Ross said: Homes in Baltimore City rented through the multiple listing service were up 66% in June '08 over June '07.

Ross:
That's an interesting statistic. Where did you get it? Thanks.

Anon - Are you really going to argue that the U.S. population is decreasing? I did not mention Baltimore City.

Duh, we are talking about the local market, where the population is decreasing. What state's housing values are you discussing?

@ anon. Check out a bill passed last year (http://mlis.state.md.us/2007RS/chapters_noln/Ch_565_hb0436E.pdf) in the General; Assembly aimed at making sure homestead tax credit only go to residential owners. See SDAT's site on the issue here: http://www.dat.state.md.us/sdatweb/Homestead_app.htm

John: I am a MRIS member with access to all the data, not just the compiled market statistics.

Hi Sherry,

Thanks for the tip. But didn't I read that so many people were complaining that they were rescinding it? I hope not.

Jamie the Wonk, do you know if this law is still in force?

Anon, the repeal effort failed, so the law is still in effect. Here's a link to the state Department of Assessments and Taxation's web page about the application process: https://sdathtc.resiusa.org/homestead

Thanks Jamie!