January Twin-Cities Home Sales Data “Staggering”

by Alex Stenback on February 11, 2009

From the MAAR:

The Bad:

The overall January median sales price of $155,000 is 24.4 percent and a $50,000 lower than last January’s mark of $205,000. However, a staggering 59.9 percent of closed sales in January were from the lender-mediated segment, which had a dramatic downward effect on the overall median sales price.

The Good:

Pending sales during the month posted a figure of 2,827, an increase of 10.3 percent from last January. This is the eighth consecutive month of year-over-year increase. Closed sales saw an increase of 2.1 percent in January, posting 2,010 units.

The Meaningless?:

Traditional properties, which exclude foreclosures and short sales, had a January median sales price of $215,000,cdown 4.3 percent from last year, while lender-mediated homes had a median sales price of $122,000, down 21.4 percent for the same year-over-year comparison.

When “lender mediations” are 60% of the market, it’s getting tougher to say “just ignore that other market” when it mostly IS the market.

And also, aren’t lender mediated sales, by definition, failed traditional sales? I mean, IF the original owner could have sold the home without taking a loss, they would have, right?  But they couldn’t, so the bank gets them. 

Anyway, where exactly does this ”tale of two markets” narrative get us?  Anyone? 

The only thing it might tell us is that the banks have gotten cheap and/or crap condition homes back first, since those are the ones they are selling. 

{ 4 comments… read them below or add one }

Patrick February 11, 2009 at 4:29 pm

I think that this shows us something pretty important. Not only did the lenders INFLATE the price of homes excessively on the way up, but they are DEFLATING the prices excessively on the way down. I have seen several instances in which the bank-owned homes are being listed for far less than what market value would be, no matter what the condition. What do they care if they get $100,000 less than what the market value would dictate? They get bailed out by the government. However, your average homeowner cannot take that $100,000 hit… and they don’t have anyone to bail them out.

If you want my honest opinion, there should be some regulation that doesn’t allow the banks to sell their homes for less than a certain percentage off what they “thought” it was worth to begin with. Since they can sell their assets for pennies on the dollar without any serious hit on their balance sheets (since we will either bail them out or they will go bankrupt), what incentive do they have to ask fair market value? None. Since MY balance sheet (bank account!) cannot suffer such a big hit, I have to sit here and suffer the consequences of their bad behavior.

Alex Stenback February 12, 2009 at 5:34 pm

This is, of course, not to say that there is zero value in tracking the percentage of transactions that are lender mediated – there’s all sorts of valuable info that can be gleaned from the data.

I am watching primarily for the shift in percentages – once the lender mediated share of the market is trending down, and inventory numbers are doing the same, then we are going to be much closer to a balanced and healty market.

So, by meaningless, we of course mean that the notion that “if you take foreclosures out of the market, things actually don’t look so bad” – which isn’t at all what the folks at MAAR are saying, but we’ve heard this line trotted out by a more than a few real estate professionals.

Aaron Dickinson - Edina Realty February 13, 2009 at 11:07 am

I wrote a blog post a few days ago that I think addresses much of this: http://www.twincitiesrealestateblog.com/2009/housing-liquidation-all-foreclosures-must-go/

We had our first quarter of fewer new “lender mediated” listings coming on the market in Q4 of 2008 and we see in many communities that Q4′s new listing activity was down substantially while sales were still very strong. That’s led us to 600 fewer lender mediated properties from the end of Q3 to the end of Q4… also a first for the data.

The way I look at the lender mediated sales is to compare it to Circuit City and Best Buy. The lender mediated sales are a relatively short-term product and once they are all gone they are all gone. Traditional sellers are like Best Buy in that they will be the only thing left standing when this housing cycle is completed. I’m sure Best Buy’s sales are hurting some today and that they’ve adjusted some prices to compete, but there are still many consumers that will go to Best Buy and pay a higher price for a better product and/or experience.

I suspect that Traditional Sellers’ prices still have a little further to fall… particularly in neighborhoods where there isn’t a lot of competition from lender mediated sales. Only time will tell on these things but the dialog is good for everyone to hear and hopefully participate.

Ross Kaplan February 15, 2009 at 1:04 pm

“When “lender mediations” are 60% of the market, it’s getting tougher to say “just ignore that other market” when it mostly IS the market.”

While you could certainly make the case that it’s metastasizing — even Edina now has some foreclosures — from my perspective, it still seems that foreclosures have a pretty definite geographic concentration. Obviously, once foreclosures surround you on a give block, it’s pretty hard to overlook them and instead grab a “traditional” sale miles away as a comp (believe it or not, that what the tax assessors do!).

Bottom line: lumping foreclosures together with traditional sales is a “bruised apples to oranges” comparison.

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