April home sales drop 17 percent in Baltimore area
Above: The month of April in the Baltimore metro area, measured by home sales and newly signed contracts.
Sales last month were the second-lowest on record, while contracts were third-lowest (the recessionary years of 2008 and 2009 were worse). Year-over-year drop in the number of sales, which compares now vs. the homebuyer-tax-credit days of April 2010: 17 percent.
The average home sale price in the metro area was about $255,000, down nearly 4 percent.
You can find data by jurisdiction at Metropolitan Regional Information Systems' stats arm, RealEstate Business Intelligence.
A truly perfect way to compare home prices so as to avoid skewing doesn't seem to exist -- every measure has its downsides. But I like to see repeat-sale indexes that compare the same homes over time. Here's how Clear Capital's repeat-sale index looks for the Baltimore metro area (the city plus the surrounding suburbs) in the last five years:
Source: Clear Capital
The measurement here is an index, not the dollar value, just in case it's hard to see. What should be easier to make out is the long downward trend, interrupted by two upward bumps at various points of the homebuyer tax credit period. The price decline has continued after that.
Some of you have asked about the much-discussed "shadow inventory" of foreclosures, so I chatted with John Burns Real Estate Consulting for its most up-to-date estimate. (The company takes into account all the homes whose owners are behind on payments and predicts how many will end up as distress sales, accounting for the fact that someone who's 30 days behind is more likely to catch up than someone who's 90 days or more in the hole.)
Its calculation: 14 months' supply of shadow inventory in the Baltimore metro area. Inventory measured by MRIS -- the stuff that's actually listed for sale -- is just over eight months' supply, meaning it would take eight months to find buyers for everything at the current pace of sales.
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Comments
Those graphs you used here are excellent. Of course volume is down, but the reason is not just the expiration of the tax credits last year. Volume is down at levels from 15 years ago--below 1998, more similar to '96 or '97. And the prices seem headed down to pre-bubble levels, too. The consensus I'm seeing on other sites is another 8-10% before this thing is over.
To make a long story short, it looks like the housing market will lose everything that was "gained" during the real estate bubble. We'll be back to 1998ish prices, but with higher inflation and taxation. Oh, and sellers have to compete with 14 months' worth of shadow inventory that any intelligent buyer knows is going to come onto the market at some point. Ouch! If this weren't so sad, it would make a fantastic feature film.
Posted by: chappy10 | May 11, 2011 11:13 AM
I've been hearing and been asked about about the "shadow inventory" for the past 2-3 years and it's always just about to hit the market next quarter or next year.
It seems a little like the bogeyman that parents tell their children about to keep them in line.
And I think the "shadow inventory" is about as real as that story.
As an investor, I like that this myth may keep my less-savvy competitors out of the market, though I am being outbid on many homes, so I think the smart money has already decided that this is a great time to start expanding one's portfolio.
But when I rehab a house to sell to homeowners, this repetition of the always-coming shadow inventory does put a damper on the number of potential buyers who are afraid to buy a house if they think that the price will soon drop.
Here's a link to the best analysis of why there is no shadow inventory.
http://bit.ly/UuqYG
By the way, notice that this was written in August, 2009 so that this story had been around long enough to warrant such a detailed breakdown of the numbers.
Posted by: Alan Chantker | May 11, 2011 10:03 PM
Alan, part of the issue is that people are using "shadow inventory" to mean different things.
The link you provide primarily focuses on -- and tries to debunk -- the idea of banks sitting on a lot of REO property that isn't listed for sale yet. The John Burns folks don't think that's a big issue -- they're talking about the delinquent-mortgage homes that haven't been repossessed yet, and that number is substantial.
Posted by: Jamie Smith Hopkins | May 11, 2011 11:34 PM
There are a lot of Alt-A arms that will be re-setting late summer/early fall. There are graphs available at a few sites. I believe Calculated Risk and Seeking Alpha have covered this topic.
Moreover, with property prices continuing to fall, and with most mortgage modifications failing, does anyone harbor illusions that people behind on their mortgage have many incentives to play catch up? This does make it a great time for investors to "pick off" new investment properties in the form of short sales, estate sales, foreclosures, and under-pressure sellers willing to make a deal. A good landlord should be able to get prices that will "cash flow" for them. An experienced flipper can probably rehab and make a solid profit in the right neighborhood. But as far as buying to live in the house? Better be sure you plan to stay a long time and be sure you really want a house to sink your money into.
Last point--with governments running deficits at every level, people's budgets are going to be getting tighter. At least a few types of taxes will be increasing, whether it be gas taxes, property taxes, income taxes, or other related fees.
If you don't think taxes are going to rise, then I have a bridge in Brooklyn to sell you. Government deficits will be growing and they'll need money from somewhere.
Posted by: chappy10 | May 12, 2011 12:21 AM