Our prolific data digger, Jaded, has been at it again and has compiled the following post for our readers. Thank you for contribution, Jaded.
We all have our favorite housing haircut horror stories, and a lot of them get posted here. With seriously declining sales, declining median, rising inventory and rising foreclosures, I was pretty confident the buzz cut was becoming the norm. The median is down almost 20% from the peak, so it seemed logical to me that resale prices would be tracing that downward spiral, putting an awful lot of sellers in serious hurt.
But then I took a look at the last two and a half months of sales at Somersett for a retort I was preparing for Diane, and resale pricing was all over the board, from -18% to +32%, with 5 of the 7 sales in the plus category. (sidebar: that’s an average of 2 closings per month in an area with 136 listings) Somersett is pricy dirt, but the variances were way more than I could explain away with post construction upgrades, sales agreement lag, or landscape costs. Where is that 20% across the board slap-down in pricing the median decline seems to be indicating?
When its 108 degrees out, you have some time to sit in the AC and do a bit of tedious research. I looked at resales that closed 15-30 June 2007, priced $200,000 to $1,000,000, SFR built after 1985, with a purchase date in 2005. The search yielded 15 sales, not a huge sample, but enough for a snapshot of the current market.
8 sold for below the previous sales price, and 7 above. The range was -10.5% to +16.2% with most clustered around +/- 8%.
The average gross resale was up .9% from 2005, with the median resale price down only 2.4%. Certainly no appreciation, but not the Armageddon I was expecting, either.
Sales $2-300,000 – 6. Sales $3-400,000 – 7. Sales $4-500,000 – 1. Sales$5-600,000 – 1. Sales over 6K – 0. The median sales price was $305,000 with an average of $335,000. Sort of tracks with Diane’s latest sales report.
With the under $300,000 market being the relative sales star in this market, resale prices were as likely to be down as up in this segment. Woodland Village (Sam’s Club Somersett) is getting hammered, but that’s for another post.
My negative tenets of faith about this market are being challenged (and by me!). There is a huge disconnect between the declining median and actual resales numbers. What is selling through is generally doing so without Roll-Back pricing. It seems like for every haircut out there, there is a coif to balance it out.
4 comments
Since this blog has, reputedly, a literacy level at the Ph.D. Level (which is, uh, like, you know, smokin’ dude) I suggest that Jaded’s fine work is anything but a “snapshot of the current market.”
The sample is not random. It consists of 15 hand picked subjects out of a pool of 6,000 houses.
The sample is statistically insignficant. It represents .0025% of the pool.
Jaded’s fine post tells us about these 15 non-random houses. That is useful information, but that is all it does. It is not informative of what is going on in the entire market, and it is not a “snapshot” of the market.
Jaded will err if he generalizes from his insignificant sample to the market at large.
If we want to know what is really happening with the entire market, we need a random sample, and we need a statistically significant sample.
I continue to regard Jaded, however, as, like, you know, one cool dude who contributes substantially to this blog. And I can’t wait to hear about the Reno realtor who is bagholding 7 flips gone bad.
While Jaded did not pick a random sample, the selection does prove a point. As I understand it, all properties sold between 15-30 June 2007, priced $200,000 to $1,000,000, SFR built after 1985 were selected. From these the ones previously sold at the top of the market (anytime in 2005) were selected. The conclusion that there is no significant reduction in the market is solid, but with a fairly small level of confidence. The thing to do would be to look at other resales (maybe April 1-June 15, 2007) so that the group of homes resold after purchase is larger. That would be pretty time consuming. For my part, I am willing to accept the hypothesis that the market is not as hurt in all segments as one should think - and naturally, I can be convinced otherwise if additional data says otherwise.
I don’t know why but something about the ups and downs represented in these sales reminds me of the randomly divided perception of reality when it comes to why we are in Iraq when you randomly approach strangers with a question.
I believe there are buyers out there who can be talked in to anything …still.
RE: “My negative tenets of faith about this market are being challenged (and by me!). ”
I think we found Diane’s broker!