Birmingham Area MLS* Monthly Observations for December 2008
Good news for the New Year! While consumers were staying away from the shopping malls during the holiday season, they were busy buying homes in the Birmingham area. Total dollar sales were up 22% from the abysmal November level of $156,937,684 in December vs. $128,494,806 in November. Lest we get too overjoyed, this is still a reduction of 35% from last December ($243,122,274).
December is usually even with November so the increase for the month was a pleasant surprise. (page A-4). The gross dollar sales were about even with the 2002 levels, which could imply a recovery like what occurred after the 9/11/01 attacks if we are very lucky.
Continuing good news is that the absolute inventory of houses available for sale has been trending down for several months, which will eventually bring demand into balance with supply. The New home inventory is approaching more normal historical levels now at 2,335 Active, down 38% from a peak of 3,790 in October 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.
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 19 New listings against 8 sales (a better ratio than last month). Out of 865 Active New and Used houses over $500,000, only 23 sold. The market for houses requiring “Jumbo” loans is challenged. Please look at sections C and D.
Absorption rates for New homes improved to 8.2 months from 9.1 months of inventory last month, somewhat worse than 7.9 last year at this time (Section E page 3). We continue to see large retroactive changes in available in inventory**. The “failure rate” (expired listings, particularly at year end, which is a natural contract expiration time), has been higher, and sellers and agents have not been renewing expired listings promptly. 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 and concentrated in the higher price ranges (above $600,000). Larger 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 October 2007, which was the peak.
Total unit sales improved by 20% to 938 in December from 784 in November, an increase of 154 units. This is a decline of 27% from December 2007 (1,285). New sales improved 31% to 203 homes this month from 155 in November; an improvement of 48 units, with the improvement concentrated in the $200,000-$500,000 range. Used sales also improved 17% to 731 homes in December from 624 last month, an improvement of 107 (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 December to 10.2 months of inventory. This is a 1.3 month increase from last year’s level at this time (See section E page 3). Overall, New listings for New houses were up this month, while New listing for Used home declined somewhat. Birmingham area builders are 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 generally climbing. Sales have dropped faster than the supply drop, resulting in generally increased number of months of inventory. The absolute number of Used homes for sale has actually decreased each month since June of 2008. The build up of existing housing supply will continue to impact the New housing market. 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 2,335 in December from 2,751 in November, a decline of 416 units (E-3). There were 203 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 higher number of New listings. Active Used Listings June set a record of 12,516 Used homes were for sale, and December now shows at 10,003, but will probably show as a larger number next month as explained above (page E-3). Total inventory is down 12% from last year at this time 12,338 vs.14,075.
Birmingham area Average Days on Market for New houses went up to 165 days as compared to 160 days last month. Used houses went up to 117 from 94 in November (sec A page 18). Birmingham area Average sales price for Sold New homes increased to $247,733 from $222,911 (Chart sect A p2). Average sales prices for sold Used homes decreased to $145,099 from $149,354 (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 (chart section a-2) indicating that sellers are at last showing flexibility on pricing. Used house average prices are now at early 2005 levels.
Note: In past years I have included something of a year-end summary. This is the presentation that I prepare for the Greater Birmingham Homebuilders Association and is now located on the web. There are 4 sections, see https://tbrander.wordpress.com.
*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.
**As noted in prior months we continue to see a number of expired listings being renewed retroactively which is slightly distorting the current month numbers which is why we wait as long as we do before getting the report to you, last month for instance there now appears to be 263 more Active New homes than we reported in the last report, and why the months of inventory for November is up somewhat this month vs. what was reported in November. That is why we restate the history every month.