My very sharp friend and Trulia’s VP of Marketing Heather Fernandez, who was interviewed by Diane Olick, described the Internet as a database of intentions (I wrote that down). Intended consumer behavior, that is.
And if you do the math, the clip shows the broadcast aired at 8:07 EST so for Heather it was 5:07am in San Francisco.
Posted by Jonathan J. Miller -Wednesday, August 18, 2010, 12:30 PM 1 Comment
The drive towards homeownership still seems to be ingrained in our culture based on the survey results of both owners and renters but there seems to be a “big dose of realism” by Pete Flint co-founder and CEO of Trulia.
25 percent of the home listings on the market in the United States as of August 1, 2010 have experienced at least one price reduction. This makes August the fourth straight month in increases for national price reduction levels. The total dollar amount slashed from home prices in America’s 50 largest cities was $30.1 billion, and the average discount on price-reduced homes continued to hold at 10 percent off of the original listing price.
The number of homes with price reduction has been rising since bottoming out in March 2010, the month before the expiration of the tax credit.
With one out of every four homes experiencing at least one price reduction, sellers are feeling no relief this summer, in a market climate of fewer qualified buyers and widespread uncertainty about the job market. If buyers are unqualified to buy, it doesn’t matter how low interest rates are or how discounted a home is,” says Pete Flint, co-founder and CEO of Trulia.”
Although there is only a little more than one year since this metric has been published, the last 3 months are the only period without the federal tax deduction as part of the federal stimulus program. If there is seasonality in play, we would expect the price reduction percentage to peak now and next month to see stabilization or reduction as the demand for housing improves in the fall. However I suspect we may see a continued increase in this metric through at least the end of the year as the lighter demand caused by the poaching of demand back to last spring from the tax credit takes hold.
24 percent of listings currently on the market in the United States as of July 1, 2010 experienced at least one price reduction. This represents a nine percent increase from the previous month. The total dollar amount slashed from home prices was $27.3 billion and the average discount for price-reduced homes continued to hold at 10 percent off of the original listing price.
This is the post-housing stimulus/tax credit affect I mentioned in previous months. Intended to jumpstart the housing market to the point of standing on its own, the federal tax credit likely was more about short term churn. In other words, the incentive to purchase was moved ahead 60-90 days before the April 30th contract date requirement and perhaps brought in other people (more likely in lower priced housing markets.) Sellers weren’t oblivious to the credit because it served to prop up prices and volume a little and sellers responded by raising their asking price.
“Sellers are feeling the heat this summer as the economic recovery simmers down and home inventory levels climb,” says Pete Flint, co-founder and CEO of Trulia. “We’re seeing more and more sellers reduce their home listing prices to attract potential buyers, who definitely have the upper hand in negotiations this season. The slow start to the summer season is a major concern that we are heading towards a double-dip in the second half of this year.”
As I said last month, is something happening in Minneapolis? For the third month in a row, Minneapolis, MN saw 40 percent of its listings reduced in price.
Markets that have been thought of as markets in better shape seem to be floating near the top. In fact the top five markets have seen lower impact to date on housing prices than many other markets.
Markets at the bottom of the list each tell a different story. New York’s position suggests relative strength with fewer price reductions and a modest average discount. Las Vegas has been in upheaval for 4 years and there isn’t much room left for price reductions. Detroit is near the bottom in the same context as Las Vegas but posted the largest average discount, a wopping 26%.
22 percent of listings currently on the market in the United States as of June 1, 2010 experienced at least one price reduction, which is a slight decrease from 23.6 percent in June 2009. The total dollar amount slashed from home prices was $26.7 billion and the average discount for price-reduced homes continued to hold at 10 percent off of the original listing price.
Last month (May) I speculated that the number of listings with price reductions will rise sharply after the tax credit expiration flows through the numbers. Pete suggests the same thing in this release.
“Sellers are optimistic heading into the summer season because of the strong sales figures from the spring. The spring sales were fueled by the expiration of the tax credit and my concern is that this heavy activity is providing sellers with a false state of optimism,” said Pete Flint, co-founder and CEO of Trulia. “We are already starting to see rising inventory levels and I believe this will be the story of the summer. For the unforeseen future, buyers will continue to have the negotiating power and I expect we will see sellers get aggressive via price cuts throughout the summer.”
Is something happening in Minneapolis? For the second month in a row, Minneapolis, MN saw 40 percent of its listings reduced in price.
At 21%, the luxury market (>$2M) is consistent 22% for the overall market.
* Price reduction levels for luxury homes (those listed at $2 million and above) continue to hold steady with 21 percent of homes seeing a price reduction, averaging 14%. Luxury homes account for 2% of the inventory and 25% of total dollar volume cuts. It consistent with the overall weakness at the high end of the US housing market brought about largely from the higher underwriting requirements for jumbo financing and the disappearance of the secondary jumbo mortgage market which had largely been run through the capital markets.
I was somewhat surprised to see Phoenix in the top five since price reductions had been so severe over the past 4 years.
Trulia created the Trulia.com Rent v. Buy Index that is based on the 50 largest US cities by population and divides the average listing sales price by the average listing rental price using 2-bedroom apartments, condos and townhomes.
Top 10 Cities Cheaper To Own Than Rent
[click to open full index]
At the peak of the real estate bubble, cities like Miami, Phoenix and Las Vegas were not affordable for many. Now the opposite is true,” said Pete Flint, co-founder and CEO of Trulia. “Home sellers in these hard hit areas are forced to lower their prices to compete with all the foreclosures on the market. As a result , these unattainable markets are so affordable it makes better financial sense to buy than rent.
Top 10 Cities Cheaper To Rent Than Own
[click to open full index]
That’s the theory since affordability is now so favorable to purchasers – however the problem with some of the former speculative markets which are now very affordable to buyers, is the fact that financing isn’t readily available because of shadow inventory and significant oversupply. There was so much overbuilding back in the day that there aren’t enough buyers now and the mortgage lending net is not cast nearly as wide.
Posted by Jonathan J. Miller -Thursday, May 20, 2010, 11:02 PM Comments Off
Today I Iistened in to an informative conference call hosted by Trulia’s co-founder and CEO Pete Flint and RealtyTrac’s Rick Sharga. As always great stuff, and I got to act like a reporter and ask a question – lots of reporters were on the line. More on my question in a later post.
Pete commented that as we go into a housing market of declining government support, foreclosures will continue to become an integral part of the housing market – loan mod programs were not making an impact on foreclosure volume. Rick suggested the “short sale” phenomenon was over hyped because it will not solve the significant foreclosure problem. Foreclosures will peak in 2011 and then return to normal levels by 2013. 5.5M properties in serious delinquncy, 100k new foreclosures per month with a 55 month supply.
59 Percent of homewoners with a mortgage would not consider walking away from their home no matter how much their home is “underwater”.
1 Percent of Homeowners With A Mortgage Say Walking Away Is Their First Choice If Unable To Pay; 69 Percent Say Modifying Their Loan is Their First Choice
While the stigma around owning a foreclosure has subsided, interest in purchasing a foreclosure is significantly down year-over-year
For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble
18 percent of U.S. adults expect bank-owned homes to offer a realistic price discount of less than 25 percent off the value of a similar home that was not in foreclosure
36 percent saying that they expect to receive a discount of 50 percent or more when purchasing a bank-owned property
78 percent of U.S. adults believing there are downsides to buying foreclosed properties compared to 85 percent in May 2009
The majority of U.S. adults (92 percent) said they would be willing to invest in improvements such as renovations and remodeling if they purchased a foreclosed home
Renters are showing strong interest in buying foreclosed properties, with 57 percent at least somewhat likely to purchase a foreclosed home in the future
The May report showed that the percentage of listings with at least 1 price reductions is rising – now for two consecutive months. I suspect that once confident sellers are softening to meet buyers who are holding to their number. I would think that for us to see the number of discounts rise during the most active time of the year, the market is cooling. We would expect the number of discounts to fall during this period. It will be interesting to follow this metric once Trulia is able to compare year over year this summer.
I think that this metric will rise sharply in a few months after the tax credit expiration flows through the numbers. Pete suggests that we may be in for some turmoil ahead.
“With more than a year of the federal government’s involvement, we are now re-entering the free market system. As we readjust to the free market, we expect to hit turbulence in some markets,” says Pete Flint, Trulia co-founder and CEO. “We won’t know the true severity of the tax credit expiration until the conclusion of the peak home buying season in the summer months. Only then will we have a better sense if the U.S. housing market can stand on its own two feet.”
This is an interesting market quirk:
Luxury Market Unfazed by Tax Credit Incentive
Price reduction levels for luxury homes (those listed at $2 million and above) continues to hold steady from last month with an average discount of 14% in price reductions. The average discount for homes priced less than $2 million remains at 9 percent.
Top 5 cities with highest number of price reductions
Top 5 cities with lowest number of price reductions
“With such a dramatic drop in home price reductions over the past year, we’re beginning to see early signs of stabilization in the housing market on a national level, as well as locally in certain markets,” said Pete Flint, Trulia co-founder and CEO. “As the federal stimulus comes to an end this month, coupled with expected increases in interest rates and foreclosures, the next few months will be very telling for whether the U.S. housing market can be self-sustaining over the longer-term. Trulia will continue to track price reductions going forward as an indicator of health in real estate market.”
The table seems to show that markets that saw large price declines early on have less price reduction activity now suggesting that, at least for now, their markets don’t have large swaths of listing price declines ahead of them as properties approach market value.
I do believe that the likelihood of additional declines in the US housing market in the latter half of 2010 are very possible give the factors that Pete cited in his quote above.
Still, its better news than we’ve grown accustomed to and we’ll take it for now.
Had a fun interview with Tom and Sara this morning on the always MUST watch/listen Bloomberg Surveillance. We talked housing, rentals, vacancy and inventory. An added bonus was the addition of Adam Davidson – co-founder and co-host of Planet Money... Read More