Birmingham Area MLS* Monthly Observations for September 2008
New house sales showed a 9% increase from August to September (302 units vs. 330). This is only the second time that has happened, from August to September, since 1999; the last time was 2003. Also, this is the second month in a row that new home sales have improved!
Total dollar sales decreased 5% to $238,931,589 in September from $252,335,577 in August*. September is historically “down” from August so the decline was expected. Some good news though, in spite of the extreme turmoil in the capital markets the month to month decline was in fact less than anticipated. (Chart section A page 4). This is a 17% reduction from 2007 ($289,658,296) (page A-4).
We keep reporting year ago figures, which are increasingly meaningless. How are we doing now on a month to month basis? We are beginning to see “normal” sales fluctuations, as opposed to continued deterioration. We see normal as a 3% annual increase in transaction volume, after adjusting for the coming fall/winter sales slump. A 3% growth would approximate our historic growth rate. See the Caution Rough Times Ahead , on the web. I’d be surprised to see sales move outside the 2002-2004 range but, the current extreme disruption in the capital markets and the effect on consumer budgets and psyches will have a decidedly negative effect on the outlook. Unfortunately, we may be looking at further deterioration just as the local real estate market was beginning to stabilize. Note that as of October 10 the stock market averages are now in the 2003 range. We see that in the transaction levels in our real estate market but not yet in the price levels. I have posted an article on the web, Manage Real Estate Owned: Sell That House! , I will be posting an article with more crisis related material in the next few days. See https://tbrander.wordpress.com. (You can subscribe for free by e-mail see the links on that page top right).
Sections C and D of the main report present active and absorption data historically by Price Range and by Area. There is a large disparity in performance and trends in different Price Ranges and Areas. For instance used houses over $900,000 had 25 new listings against 6 sales. Please look at them.
Absorption rates for new homes improved to 8.0 months from 9.1 months of inventory last month, slightly better than 8.3 last year at this time (Section E page 3). The last several months has seen big retroactive changes in available inventory. The “failure rate”, (expired listings) has been higher, and sellers and agents have not been renewing expired listings promptly. For example, we reported 8 months of new house inventory for last month which has been adjusted to 9 this month due to the retroactive changes. Don’t read too much into lower inventory figures and lower absorption as the discouraged sellers do generally renew listings, just not quickly. New house inventories are truly excessive at over a year mainly in the higher price ranges (above $500,000). Under this price threshold, inventories are fairly reasonable, in the 6 to 9 month range. Bigger developers in lower price ranges are almost sold out (0 to 5 months of supply), remaining inventory is held in the smaller developments. Builders are slowly reducing inventory.
Total unit sales deteriorated by 3.5% to 1,365 in September from 1,414 in August a decline of 49 units. New sales improved to 330 homes this month from 302 in August, an improvement of 28 units. The Greater Birmingham Association of Home Builders has been conducting aggressive promotional activity with the builders and it looks like it has had a positive result. Used sales declined to 1,035 homes in September from 1,112 last month, a decline of 77 (sect E page 3).
The number of months of supply “absorption” for used homes has been increasing over the last 9 months with a slight drop in September to 11.3 months of inventory. This is a 1.1 month increase from last year’s level at this time (See section E page 3). With the retroactive changes referred to above, and rounding, it’s fair to say that we are now at a 12 month level of inventory for used houses. Overall, for the first time in a while, new listings for new houses were less than sales, (see the chart on section B page 1). Over $700,000 we now see inventory for used houses at over 2 years. Birmingham area builders are doing a better job of reacting to the market, and constraining new construction supply, but consumers who are the sellers of existing houses are having a harder time as the supply of used homes for sale is climbing. The build up of existing housing supply will continue to impact the new housing market. The number of new homes for sale peaked at 3,994 in September of last year, and now sits at 2,663, having declined in each month since the peak. We believe that there is an increasing amount of “shadow inventory” in both the new and used market places ie; houses held off the market for various reasons but that really are for sale. It seems to me that the For Sale by Owners (FSBO’s) are on the rise also but that many will revert to Realtor listings as they discover just how hard the market is.
Active New listings decreased to 2,663 in September from 3,089 in August, a decline of 426 units (E-3). There were 330 new houses sold in the month, so the rest of the reduction is partially due to the higher failure rate, (the number of houses whose listings have expired or canceled without a sale), partially offset by a lower number of new listings. Active Used Listings June set a record of 12,509 used homes were for sale, and September now shows as 11,526 but that will probably show as a larger number next month as explained above (page E-3).
Birmingham area Average Days on Market for new houses deteriorated to 140 days as compared to 130 days last month. Used houses deteriorated to 100 days compared to 96 days in August (sec A page 18). Birmingham area Average sales prices for sold new homes decreased to $236,694 from $246,232 (Chart sect A p2). Average sales prices for sold used homes decreased to $155,249 from $159,319 (Chart sect A p2). Note that the twelve month moving average line on all categories of house, new, used, and total are all now showing a downward slope indicating that sellers are at last showing flexibility on pricing.
TWB 10/11/08 *Caution!: All references to last month (and earlier) numbers show revisions. Each month we pick up late entries (i.e. ones made after our prior publication date) to the MLS system.