Price point, price point, price point
Location, schmocation -- the really interesting trend in the housing market today is about price range.
To wit: Half the homes that sold last month in the Baltimore metro area were under $250,000. A year earlier, it was 42 percent. In August 2007, it was 40 percent.
A year ago, the same number of homes sold for less than $150,000 as sold for $500,000 or more. Last month, a change of fortunes: Buyers snapped up 30 percent more under-$150 homes and 8 percent less in the half-mil range.
So, more people are getting less-pricey homes. But how easy is it to sell one?
If you'll recall, there's a number in real estate that helps you tell if it's a buyer's, seller's or balanced market. How many months would it take to find buyers for all listed homes at the current pace of sales?
This is called "months' supply," and the generally accepted balanced-market figure is six. More than that, and it's no fun for sellers. Less than that, and buyers start feeling the pinch.
Here's how things stood in the Baltimore metro area last month, according to Metropolitan Regional Information Systems data:
In the $200,000-$249,999 price range, there was a 6.3-month supply. Yup, just a bit over the magic number.
In the $150,000-$199,999 price range, the figure was 7.3.
In the $100,000-$149,999 price range, it was 9.7.
And under $100,000, it was 13. (Rehab-required places in search of investors?)
As for pricier ranges:
There was a 7.4-month supply of homes priced at $250,000 to $349,999.
... a 7.8-month supply of homes priced at $350,000 to $499,999.
... a 14.3-month supply of homes at or above $500,000. (Get up to the $2.5-million-plus category, and the months' supply is more than 100.)
So a sweet spot appears to be $200-$249k.
But slice the data even more thinly, and you'll see that the $400,000 to $449,999 range had a 5.4-month supply. Whoa! That's a big improvement from last year, driven both by an increase in sales and a decrease in listings. Are all the move-up folks who sold $200,000-$249,000 homes buying $400,000-$449,000 ones?
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Comments
Absolutely! You are finally having first time home buyers scooping up those $200k-$300k homes and those people selling are moving up to the bigger homes.
When the market was good we saw a lot more of this, but we are starting to see it again the last few months as a result of the first timer credit. That is one of the main reasons why I argue the credit should be extended. The housing market is a domino game and a great place to start is first time home buyers who buy the less expensive houses of people looking to upgrade and so on all the way up.
Posted by: M | September 14, 2009 8:46 AM
I cannot disagree more. How much more can we add to our trillions of deficit by giving away money (housing credits, cash for clunkers)?? I agree this is a domino game. Our kids and grandkids are standing in the shadow of the last humongous domino. Dumb dumb.
Posted by: Darwin Rules | September 14, 2009 10:12 AM
While, name calling probably isn't the best way to handle a civilized argument, I do agree that we shouldn't be mortgaging our children's future on everything under the sun, some of these programs work very well for the overall economy, while others just run up the already growing deficit. What would have happened if the government didn’t step in at all? You wouldn’t have time to write on a blog with all the hours you would have spent in soup lines. This is a blog about housing, not overall economics. Stabilizing housing prices are one of the first steps to a full economic recovery, plain and simple. You need to take a step back Darwin from your hate everything the government is doing outlook and try to see the big picture. Maybe I can forward you some research from people much smarter than you and I about this topic?
Posted by: M | September 14, 2009 1:08 PM
OK - let's stick to housing. Why should we "stabilize" bubble prices (which, by the way, were the primary #1 cause of our near - and possibly still pending- financial collapse). Is there some new paradigm that I am unaware of? Are McMansions and granite truly precious?
Posted by: Darwin Rules | September 14, 2009 2:35 PM
Darwin, your premise is rejected.
While there may be some transactions that "stabilize bubble prices" most don't and to discredit the larger intent and effect of the program on that basis is at best unfair to it.
If you to object to ALL stimulus money, well that is a fair enough topic to explore but so long as the tap is open and so long as housing inventory (at whatever price) is so de-stabilizing I (we?) say to you: "lighten up!"
The $8000 is not making a difference with the McMansion market but it sure can help the working family town house market.
That said, none of this should be construed as agreeing to keep it going. It largely succeeded but to maintain it will change all those statistics that imply success from it.
Posted by: MrRational | September 14, 2009 4:00 PM
Thank you! I do not want to seem like I am in favor of government propping up everything out there, but some areas need some help in order to shore up other parts of the economy. I agree, bubble prices should not be stabilized, but look at how far prices have fallen. Jamie, where are we average price wise compared to before the bubble? I think I remember seeing that prices were below the 2002 level, so what stabilizing bubble prices are you talking about? We are trying to stabilize pre bubble numbers if I’m thinking the right numbers.
I don’t know about you, but I don’t want to see them fall much further because of the strain it puts on everyone. While it is great to be a renter right now and watching these prices tumble, it is not the best thing overall. Too high of prices is bad (as with the bubble) but too low of prices can hurt just as bad. The era of McMansions is over and should be, but for people that were responsible and bought an “average” place, these falling prices are detrimental. Either way, this is a good discussion Darwin.
Posted by: M | September 14, 2009 4:05 PM
M, you asked for a price check -- here it is:
The average sale price in the Baltimore metro area last month -- about $295,000 -- is a bit under what sellers got four years earlier. (Specifically, $14,000 lower.) It's about $28,000 above Aug. 2004 prices.
Whether these averages are capturing what most sellers are experiencing with individual homes, I don't know. Averages can skew up and down.
Posted by: Jamie Smith Hopkins | September 14, 2009 4:14 PM
I do not see the benefits of any of these bailouts. Fiscal irresponibility is rewarded, and even encouraged. I assure you that the carrot of $8000 "free" dollars will ensnare more borderline borrowers in the trap of fiscal overextension, especially if prices continue to fall. Something for nothing and free lunches are myths. Ron Paul is so right. Oh well, I'll just keep hoarding gold, short ther dollar some more, and poop some more popcorn. My inverse dollar ETF fund in up 20% since march.
Posted by: Darwin Rules | September 14, 2009 4:43 PM
Ok, Darwin you go poop that popcorn! Oh dear...
Posted by: Lesley | September 14, 2009 11:48 PM
Thank you MrRational, now I know where you get your name from. Darwin, I think you are just getting way off topic on this one and it’s not even worth discussing further, but it's good to hear that your investments are doing well. Maybe you can discuss them more in another blog entry...
Thanks for the info Jamie, I guess I was a little off, but my point was made that housing prices are below the bubble and we are not stabilizing bubble prices.
Posted by: M | September 15, 2009 7:37 AM
M, Thanks for the compliment.
But please remember this exchange the next time I appear to be going out on a limb on one topic or another in this or another venue where I may be posting.
be well.
==
My ex-wife gave me this nick in one of the many er uhm conversations we had attempting to resolve one issue or another. A nicer variant would be: "Why must you insist on being Mr Rational about this". ;)
Posted by: MrRational | September 15, 2009 9:07 AM