Here’s our monthly round-up of everything that moved in the U.S. real estate market!
But first the Redfin news… Do you remember in Gladiator, when Russell Crowe says “on my signal, unleash hell?” That’s what Redfin did last month, launching:
- A Home-Pricing Tool: see the pictures and prices of very recent comparable home sales — data once limited to real estate agents — to figure out what your place is really worth.
- Instant Updates: get email about new listings and price drops within 15 – 30 minutes.
- Open Book: check out an expanded directory of top-notch, customer-reviewed lenders and inspectors, now in Seattle, Chicago, Boston, Southern California, as well as DC and San Francisco.
- New Markets: tell the world about our new Philadelphia business, or that we finally hired Redfin agents to complement our Austin website.
And we’ve got all sorts of performance metrics, too. Redfin compared its 2011 performance to the market average and found that we sold homes 15 days faster, and for $8,700 more money. And we just published numbers on Redfin Agent pay, which is well above the 85th percentile for full-time agents in almost every market we serve. We also shot a home-movie of Redfin customers and agents.
Now Entering the Twilight Zone
But what’s going on in the market? Prices went down, but we believe they’re now going up in lots of places. Sales volume slipped, but we think that’s because there’s nothing to buy. Every 300,000 years, the earth’s magnetic field flips, and lots of weird stuff happens then too. You want examples of weirdness in the housing market? You got it:
- Multiple offers: 74% of Redfin’s March offers in Orange County, California faced competition. 51% in DC. Our clients are sending baby photos to sellers. We just published a six-step guide to winning a deal. Nationwide, Redfin’s offers increased 50% but its closings only increased 17%, so the competition has made us work a lot harder. Deals are getting stuck at the appraisal, because the price got bid up above the comparable properties used by the appraiser when trying to figure out if the home is worth loaning money for.
- A tale of two markets: prices are mostly softer for condos and townhomes, and homes in the boonies and at the high-end. But entry-level and mid-range houses are getting devoured like cupcakes at a five-year-old’s birthday party. Builders are shifting toward small-lot, in-city developments with vintage materials — and big waiting lists.
- Strange seasonality: one reason we saw lots of action early in the year was because this winter was so much warmer than last year’s. This made for better year-over-year comparisons: “It’s a dead-cat bounce!” exclaimed real estate freakazoid Nick Timiraos when I saw him Thursday. It also might mean demand came earlier in the year, like the cherry blossoms already lining the gutters, rather than actually increasing. Meanwhile, the number of homes for sale is down 27% from this time last year. At this rate, the summer-shopping season will be like a Soviet supermarket.
- Canaries are coming back to the coal mine: the annoyingly smart people who sold homes in 2007 and rented for five years are now buying again. When we surveyed 1,000+ Redfin customers buying a home this year, a whopping 14% were people who had owned, rented and were now buying again. First-time investors are coming out of the woodwork, with Redfin real estate classes on how to evaluate income-generating properties filling up fast.
Case-Shiller Down for the 5th Straight Month. What Me Worry?
So that’s how it feels now. But what about the numbers? Well, nationally, prices are down 3.8%, and California has fallen more than 5%:
|Market||MoM Price Change||YoY Price Change||Date of Max Price||Change from Max Price||Prices Last at
|Phoenix Real Estate||0.9%||1.3%||Jun-06||-54.8%||Apr-00|
|Los Angeles Real Estate||-0.8%||-5.4%||Sep-06||-41.3%||Jul-03|
|San Diego Real Estate||-1.1%||-5.3%||Nov-05||-40.6%||Aug-02|
|San Francisco Real Estate||-2.5%||-5.9%||May-06||-42.5%||Oct-00|
|Denver Real Estate||-0.6%||0.2%||Aug-06||-12.4%||Apr-02|
|Washington DC Real Estate||0.7%||-0.6%||May-06||-28.2%||Apr-04|
|Atlanta Real Estate||-2.1%||-14.8%||Jul-07||-37.4%||Jun-97|
|Chicago Real Estate||-1.9%||-6.6%||Sep-06||-35.9%||Dec-00|
|Boston Real Estate||-0.4%||-2.8%||Sep-05||-18.9%||Oct-02|
|Las Vegas Real Estate||-0.5%||-9.0%||Aug-06||-61.6%||May-96|
|New York City Real Estate||-0.8%||-2.9%||Jun-06||-25.3%||Nov-03|
|Portland Real Estate||-2.1%||-4.3%||Jul-07||-30.3%||Jul-04|
|Dallas Real Estate||-0.4%||-1.2%||Jun-07||-10.9%||Mar-02|
|Seattle Real Estate||-0.7%||-4.0%||Jul-07||-32.4%||Apr-04|
|20 City Index||-0.8%||-3.8%||Jul-06||-34.4%||Dec-02|
Case-Shiller Index for January 2012, Not Seasonally Adjusted
Why is this old news? As Bill McBride noted last week in Calculated Risk, “some portion of the Case-Shiller index will be for contract prices six or even seven months ago… the key point is that the Case-Shiller index will not catch the inflection point for house prices until well after the event happens.”
Is the Inflection Point Here?
- Sales momentum stalled: Pending sales slipped .5% from January to February, when analysts expected a 1.0% increase. Compared to February 2011, sales increased 9.2%. More recently, last week’s home-purchase index increased 3.3% from the week prior, even as re-financings fell due to rising interest rates.
- The big builders are bullish: Toll Brothers reported its best spring in five years. Lennar sales increased 33%, and Hovanian sales increased 30%. But KB’s orders fell 8%.
- Shadow inventory falling: even as properties spend more time in the foreclosure pipeline, the number in the pipe declined because of fewer defaults at the beginning of the process and more sales at the end. Investors are gobbling up foreclosures by the thousands. Seriously delinquent mortgages dropped from 4.4% in February 2011 to 3.8% in February 2012. The historical norm is 1%, so we’re not out of the woods yet.
- Three new bottom calls: JPMorgan Chase’s CEO said “I believe we’re very close to the inflection point. People look at prices that are still coming down but all the other signs are flashing green.” A projection based on opinions from 38 economists predicted new-house-construction projects will nearly double from 2011 to 2014. Bank of America/Merrill Lynch revised its projection for 2012 home prices from a 3.5% drop to a .5% gain.
What About Interest Rates? Uh-Oh…
The monster under the bed is, as we said last month, interest rates. Pressure on rates has been building lately, despite the government’s insistence it’ll be able to keep rates low through 2014. The Wall Street Journal reported Monday that “investors have ramped up bets that a rise in the Fed’s key short-term interest rate, the federal funds rate, could come sooner.” For now rates are still just under 4%:
I like the article’s conclusion: “No one really knows what will happen when the Fed takes the punchbowl away, after so many years of rock-bottom rates.”
It’s a mixed metaphor but isn’t that perfect for these topsy-turvy times? Strap on your miner’s helmet. Grab your punchbowl plastic cup, and a bowl of popcorn too. This summer is going to be a wild ride. Questions, comments, fire away in the comments section below. And thanks as always for using Redfin!
Glenn Kelman | CEO, Redfin