Birmingham Area MLS* Monthly Observations for November 2008
The continuing poor performance of world markets continues to negatively impact the local Real Estate market and consumer confidence is at an all time low.
The good news is that the absolute inventory of houses available for sale has been trending down for several months, which may eventually bring demand into balance with supply. The new home inventory is approaching more normal historical levels now at 2,488 active, down 34% from a peak of 3,795 in November 2007 there is still some distance to go to the 1800 or so that we used to regard as normal before 2004 (See the chart on page C.1, and table on page E-3). Unfortunately, for used homes, the decline in inventory is not nearly as constructive, and is due as much to people withdrawing houses from the market (“failures”) as to sales. In spite of the decrease in the number of active houses, the 12 month absorption rate did not change materially for new or used homes.
This chart is dense but shows the relationship of total gross number of houses (left scale) for sale and the inventory absorption rate in months of inventory (right scale).
Total dollar sales decreased 23% to $124,305,387 in November from the weak $161,575,128 in October*. That is 50% lower than November 2007, at $248,121,442. November is usually pretty even with October so the month was disappointing. (page A-4). The gross dollar sales were the lowest for November since 1999.
Unfortunately, we are looking at further deterioration just as the local real estate market was beginning to stabilize. On a trend line basis, this months sales went decisively below the 2002 levels to the 1999 level while we had previously been tracking the 2003 levels (See page A 4).
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 26 new listings against 4 sales (a worse ratio than last month). Out of 673 active new and used houses over $600,000, only 18 sold. Please look at sections C and D.
Absorption rates for new homes improved to 8.3 months from 9.0 months of inventory last month, about the same as 8.1 last year at this time (Section E page 3). We continue to see large 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 8.1 months of new house inventory for last month which has been adjusted to 9 this month due to these retroactive changes. Don’t read too much into lower inventory figures and lower absorption as the discouraged sellers do generally renew listings, (many retroactively) just not quickly. New house inventories are excessive at over a year concentrated in the higher price ranges (above $500,000). Bigger developers in lower price ranges are almost sold out (0 to 5 months of supply) with remaining inventory held in the smaller and higher priced developments. Builders have been steadily reducing inventory since November 2007, which was the peak.
Total unit sales deteriorated by 27% to 742 in November from 1,017 in October a decline of 275 units. This is a decline of 43% from November 2007 (1,305). (See my footnote as to why this differs from the figures published by the MLS board). New sales deteriorated to 149 homes this month from 168 in October, a decline of 19 units, this decline affected all price ranges. Used sales declined to 593 homes in November from 849 last month, a decline of 256 (sect E page 3).
The number of months of supply “absorption” for used homes has been generally increasing over the last 9 months with a slight drop in November to 11 months of inventory. This is a 1.6 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, new listings for new houses were down, but the sales level dropped faster, (see the chart on section B page 1). Over $700,000 we now see inventory for used houses at over 2 years (approaching 3 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 3,834 in September of last year, and now sits at 2,488, 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 i.e.; 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 tough the market is.
Active New listings decreased to 2,488 in November from 2,861 in October, a decline of 373 units (E-3). There were 149 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 cancelled without a sale), partially offset by a lower number of new listings. Active Used Listings June set a record of 12,490 used homes were for sale, and November now shows as 10,898 but that will probably show as a larger number next month as explained above (page E-3). Total inventory is down 11% from last year at this time 13,386 vs.15,038 .
Birmingham area Average Days on Market for new houses deteriorated to 160 days as compared to 139 days last month. Used houses went down to 94 from 105 October (sec A page 18). Birmingham area Average sales prices for sold new homes decreased to $219,455 from $243,243 (Chart sect A p2). Average sales prices for sold used homes increased to $153,188 from $141,017 (Chart sect A p2). Note that the twelve month moving average line on all categories of houses, new, used, and total are all now showing a very substantial downward slope indicating that sellers are at last showing flexibility on pricing. Used house average prices are now at early 2005 levels.
*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. This month we had an opportunity to review the MLS board published numbers, they came out a lot earlier than usual. I was able to determine that most, if not all the discrepancies between the two reports are due to the different time frames when the data is gathered, in this month my unit sales figures on a unit basis were 23% higher than theirs MLS reported 603 and we report 742, in checking the system we found that yet more sales (8) have now been recorded for the month of November than this report. That is why we restate the history every month.