Home Prices Stabilize, And the Whole Market Grinds to a Halt - Redfin Real Estate News

Home Prices Stabilize, And the Whole Market Grinds to a Halt

Updated on October 2nd, 2020

Every month, Redfin publishes two newsletters on real estate prices. One, usually published on the last Tuesday of every month, is a Redfin Roundup, which synthesizes data collected by economists, government agencies and others to provide a complete portrait of what happened in the market over the past month. The other is Redfin Insider, usually published by the 12th of each month, which analyzes our own databases to identify the major trends in listing inventory and prices as well as sales activity and consumer traffic. To receive these newsletters by email, just sign up! Here’s the June Roundup:
Howdy Redfinnians!
The latest real estate numbers came out yesterday and, as we predicted last February when every economist was headed for the hills, home prices increased in April for the first time since July 2010. Some of this was seasonal and real prices are probably flat.
Prices have stabilized because the supply of homes for sale has been falling, more than most folks realize. We’d be optimistic except that buyers, like sellers, are also waiting for better days. Applications for loans to buy homes haven’t been this low since 1997. After a monster June in our own business, Redfin’s July will be mediocre. To keep growing, we have to take a lot of market-share.

A Silent Spring, and Now A Quiet Summer Too

That’s bad news for the housing economy because July is usually Christmas-time for real estate agents. This year, however, the stores are a little empty: there are very few homes to buy, and very few shoppers too. Prices will be up and down for the rest of the year — after being very bearish in 2010, we are sticking to our contention that the big drops are behind us — and sales volume will be very low.
The exceptions are areas where tech- or government-powered employment has kept demand relatively strong, especially the Bay Area, Washington DC and maybe Seattle:

Market MoM Change YoY Change Peaked In… Change from Peak Prices Last at This
Level in…
# of Months
of Decrease
Phoenix Real Estate 0.1% -8.8% Jun-06 -55.9% Jan-00 0
Los Angeles Real Estate 0.3% -2.1% Sep-06 -38.6% Sep-03 0
San Diego Real Estate 0.4% -4.3% Nov-05 -38.3% Dec-02 0
San Francisco Real Estate 1.7% -5.5% May-06 -39.5% Jan-01 0
Denver Real Estate 1.5% -4.1% Aug-06 -12.8% Aug-01 0
Washington DC Real Estate 3.0% 4.0% May-06 -25.6% May-04 0
Atlanta Real Estate 1.6% -3.5% Jul-07 -25.3% Mar-00 0
Chicago Real Estate -0.4% -8.6% Sep-06 -34.7% Mar-01 8
Boston Real Estate -0.2% -4.2% Sep-05 -19.4% Sep-02 9
Las Vegas Real Estate -0.7% -6.2% Aug-06 -58.9% Mar-99 7
New York City Real Estate 0.8% -2.8% Jun-06 -23.9% Jan-04 0
Portland Real Estate 0.1% -9.2% Jul-07 -28.8% Sep-04 0
Dallas Real Estate 0.5% -4.0% Jun-07 -10.4% Apr-02 0
Seattle Real Estate 1.6% -6.9% Jul-07 -29.7% Aug-04 0
20 City Index 0.7% -4.0% Jul-06 -32.8% Apr-03 0

Case-Shiller Price Index Data for April 2011

The Standoff Between Buyers and Sellers

If you dig into the numbers, what you see is a market grinding to a near standstill, with supply and demand both falling:

  • The supply of homes for sale is at a five-year low, and it isn’t increasing much this summer. The supply of new homes for sale is at the lowest level ever recorded.
  • Foreclosures continued their “freefall,” dropping 2% in May after a 16% drop in April. Foreclosures have driven all the big price drops over the last three years.
  • Rents have been rising, making home purchases more attractive. Price-to-rent ratios for homes are at October 2000 levels.
  • The number of homes sold in May actually dropped, 3.8%, from April levels.
  • Touring traffic to new homes for sale dropped 15% in June.
  • Mortgage rates have stayed very low, at 4.5%, but many folks can’t get credit, leaving the best deals for cash investors.

Applications to Borrow Money for Home Purchases At Record Lows

When Will The Hormones Kick In?

In the standoff between buyers and sellers, no one seems likely to blink in 2011. Over the last three years, when nobody else wanted to sell, the banks would step in and unload half a million foreclosures, forcing prices down; today, banks are tired of taking losses and lawsuits on foreclosures, and instead just modify the loan or agree to take a smaller loss on a short sale.
Before that, buyers kept the party going, snorting up liar loans in the bathroom then macking on the first house they saw, driving prices up. Now, the market looks more like a middle-school dance, with buyers and sellers waiting one another out on either side of a large, dusty gym. It’s always hard to say when the hormones will kick in; maybe in three months, maybe in three years.
For now, that’s our take on the market. As usual, we’d love to hear yours, too, so just leave a comment below. Happy July 4th, and thanks for supporting Redfin!
Best, Glenn

Glenn Kelman

Glenn Kelman

Glenn is the CEO of Redfin. Prior to joining Redfin, he was a co-founder of Plumtree Software, a Sequoia-backed, publicly traded company that created the enterprise portal software market. In his seven years at Plumtree, Glenn at different times led engineering, marketing, product management, and business development; he also was responsible for financing and general operations in Plumtree's early days. Prior to starting Plumtree, Glenn worked as one of the first employees at Stanford Technology Group, a Sequoia-backed start-up acquired by IBM. Glenn was raised in Seattle and graduated from the University of California, Berkeley. He is a regular contributor to the Redfin blog and Twitter.

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