It’s time again for a check of the pending sales snapshot taken from May 1st. [Note: see 30 days later and 60 days later for the history on this exercise]
On May 1st I recorded 2,220 pending transactions. Today we revisit those pendings….
Ninety days later 48 percent have now sold. Nearly thirty percent remain pending. And 22 percent have either re-entered the market or have been withdrawn altogether.
The low rate of closings is not surprising given that the majority of these pending transactions were short sales. Receiving a response from the underlying lien holders in a short sale transaction can typically take ninety days or more.
| June 1st – 30 days later | July 1st – 60 days later | August 1st – 90 days later | |
| Sold | 20.9% | 39.3% | 48.4% |
| Withdrawn | 5.4% | 10.0% | 13.5% |
| still Pending | 67.0% | 42.2% | 29.6% |
| Back on Market | 6.7% | 8.5% | 8.6% |
Note, the Back on Market number appears to have leveled off, however that’s because some of the properties that have reentered the market have actually gone pending again.
skeptical
Not really sure what to make of these numbers without the historical context of knowing how many pendings have typically failed over the last 1, 3, 5, or 10 years.
I can only comment as a dispassionate pedestrian observer that a business whereby 50% of your pending business deals fail doesn’t seem like a good place to be. Fwiw…
Sleezy
Not a huge surprise here.. I have noticed more and more “back on the market” “extended” etc recently. I have also noticed a lot more “price reduced” as well.. With most of these being in the sub 200k segment..
Sleezy
Correction*
$250k and under segment
Old Realtor
Ten years ago,and for pretty much for years and years before that, it was fairly rare for a pending deal to not close within 45 days or so. Not unheard of certainly, maybe 10% of deals fell out or got delayed for some reason. Those were the days when your average realtor or escrow person did not know what a short sale was, as they had never encountered one. Those were the days when lenders applied traditional standards of creditworthiness that everybody knew and understood. That 50% of all deals fell out of escrow or didn’t close for months and months would have been unfathomable to the average realtor or mortgage officer or escrow/title person.
Randy Vanderpool
Thanks for keeping us in the know on how things are going this summer. It helps us when we gauge activity from other parts of the country!
Sleezy
Soo… Is it possible to get a chalet in montreux for around
$500k yet?
LikeBigBottoms
Definitely the bottom, definitely….
http://finance.yahoo.com/news/Why-John-Paulson-Will-Be-minyanville-2955085062.html;_ylt=Ah6izI1V3vg7S4A.Xln5ayu7YWsA;_ylu=X3oDMTFhYjFhNDl2BHBvcwM3BHNlYwNzcGVjaWFsRmVhdHVyZXMEc2xrA3doeWpvaG5wYXVscw–?x=0
HighlyTrainedRealEstateAnalyst
Outstanding article LBB.
Love this quote from the article:
Whom do you believe? The paid mouthpiece for the National Association of Realtors, the Wall Street shill, or an impartial economics professor who has done rigorous analysis using 120 years of housing data
HighlyTrainedRealEstateAnalyst
Here’s a link to another article regarding foreclosure activity in 2010.
http://theeconomiccollapseblog.com/archives/foreclosures-continue-to-dramatically-increase-in-2010
MikeZ
Mortgage rates now 4.5%. WOW.
http://tinyurl.com/2b3fgah
HighlyTrainedRealEstateAnalyst
MikeZ,
It’s an interesting article. You would think with rates this low housing activity would be taking off. But, as the article mentions, demand is weak and refi’s are also very low.
Makes me wonder what will happen when rates start to go up?
Raymond
“Makes we wonder what will happen when rates start to go up?”
The NAR will commence a massive advertising campaign as follows:
“You better buy NOW before rates go up any further, which economists are predicting. These are once in a liftime rates and the opportunity to own the American Dream will never again be this easy. Call your local Realtor@ today!”
MikeZ
HTREA, it seems obvious that low mortgage rates are driving SOME of the sales demand and price stabilization that we’re seeing in housing right now.
But that wasn’t my point. Borrowing $n00K at 4%/4.5% fixed for 15/30 years is an exceptionally good deal. That’s some of the cheapest consumer funding you’ll ever find.
If the inflationists are right, and we’re heading to 10%+, holding a 4% fixed mortgage in a time of 10%-15% mortgage rates will be a huge advantage for those who re/finance now.
HighlyTrainedRealEstateAnalyst
That’s pretty funny Raymond. Would be really funny if it wasn’t so true.
I laugh every weekend when I hear on the radio that this is the best weekend EVER to buy a car. Prices have never been this low, we have never had deals like this, etc. Does anybody actually believe these commercials?
I guess the approach was so effective with cars that it will now be tried with houses.
HighlyTrainedRealEstateAnalyst
Mike Z,
You said,
“If the inflationists are right, and we’re heading to 10%+, holding a 4% fixed mortgage in a time of 10%-15% mortgage rates will be a huge advantage for those who re/finance now”
This might be true, but it most likely is not. What we are going to see (are seeing) is not price inflation, but monetary inflation. Price inflation is driven by supply and demand, monetary inflation is driven by a central bank that issues fiat currency.
If we see monetary inflation with stagnant wages, stagnant prices, and low demand combined with rising prices, then we have a term invented in the 60’s (or maybe early 70’s called “stagflation”. Many economists in the past have deemed this situation to be impossible because they assume a society is using a somewhat stable currency, so when demand is low and supply is high prices deflate. This is why historically in this country – prior to the 1970’s – prices deflate during depressions and inflate during booms. I.e, “Cash is king” during a depression.
The point is that we can, and are seeing, inflation for real items such as energy, food, and healthcare in a recession / depression even while interest rates are extremely low.
This is why, as I have mentioned before, inflation (monetary inflation) does not guarantee that home prices and / or rent go up. I believe the example I used was the Weimar Republic where one might pay a week or more of wages for an apple but would refuse to pay higher rent.
CommercialLender
High,
Bravo.
I heard a news clip yesterday on CNBC stating how a few companies are now doing away with 401K matching in order to pay dividends ostensibly (or insert dubious other reason here like sitting on cash, paying down debt, paying CEO bonuses, etc.) and they discussed that employees have no other choice but to take the treatment on account of the poor jobs market. This is just the first of the many shoes to drop. Next are raises if they have not already gone, bonuses if they still exist, expense reimbursement policies, healthcare costs paid by employers, oh and jobs being offshored and efficiencies being ‘created’ by doubling up the workloads of remaining employees rather than hiring new employees. All of this is already happening.
With that backdrop, no appreciable R.E. inflation will happen until real wages rise across the spectrum of labor. At this point, that’s a long time from now.
That said, if you are a long term, patient buyer with very secure ability to continually pay your mortgage payments for years to come, then sure, 4.5% 30 yr rates are fantastic!
smarten
Hey MikeZ, 15 year fixed, owner-occupied, conforming loan amount mortgage rates are now UNDER 4% w/0 origination fees. 3.875% to be precise [3.75% w/.375% in origination fees].
MikeZ
This is why, as I have mentioned before, inflation (monetary inflation) does not guarantee that home prices and / or rent go up.
Oy! Rising RE prices weren’t my point, either.
If we see 10%+ inflation, we’ll see 10%/11%/12% mortgages and HELOCs, maybe higher.
Those who bought or refinanced at 4%/4.5% will be in relatively good shape for that inflationary period.
HighlyTrainedRealEstateAnalyst
I was assuming that by being “in relatively good shape for that inflationary period” you meant that the person’s home value would be rising, or at least not declining, and that he had some sort of advantage over one who did not take out the loan.
If, instead you meant that the person had a good interest rate locked in while interest rates for new mortgages are rising, prices for essential goods are rising, salaries are stagnant or decreasing, demand for homes is weak, home values are flat or decreasing, and unemployment is high then I guess I don’t get the point.
While interest rates are certainly important when determining whether or not to buy a house, there are many other factors to be considered, and I’m pretty sure that many people with 30 year fixed mortgages at a very good rate are currently being foreclosed on.
CommercialLender addressed many other good points that should also be a factor when making the decision to buy a house.
MikeZ
Yes, all good points.
I should explain that I don’t think The Collapse is coming, nor do I think we’re pre-Weimar or pre-Zimbabwe.
Carleton
Maybe The Collapse of the economy is not coming, but the Collapse of builder absurdo pricing continues unabated.
On June 13, 2009, almost exactly 14 months ago, Mike put up a thread and brought our attention to a house in Verdi at 533 Crystal Park. It was a complete redo and came on the MLS at that time at $725K. Absurdo. I commented that it was a ridiculous price as did others, including BB.
Today it is “price reduced” to $475K. Gee, that’s a 250K haircut in 14 months. This house has been “losing value” at the rate of about $17,500 a month for the last 14 months.
Damn good thing some savvy buyer didn’t jump on it 14 months ago considering the “great value” it was touted to be at $725.
Clarence
Good catch Carleton. You have to think how many other people might have paid in the $700s last year and now own a house worth something in the 400s. (Even though they don’t know it). I suppose the only good thing is that that market segment has been basically dead for quite a while now and few houses have sold in the 700s over the past 2-3 years. But a very fine real life example of the continuing dangers in the upper reaches of the Reno market.
Polly
How can a house lose 35% of its “value” in 14 months? Not in any 14 month period since the bubble began to collapse has the market dropped 35%. The explanation is that this house was grossly overpriced when it came on the market, as Carleton, BB, and others said at the time. There are houses in Reno that have lost up to 60% of their “value”, but that decline has taken 60 months to unfold. NO house has lost 35% in 14 months. This house was simply never worth the $725K it was priced at. Not even close, obviously.
Norton
This Crystal Park house has 2673 sq. ft. and it came on the market 14 months ago at $725K.
Today there is a house on Waterbuck, a very “upscale” street in Verdi with 4,539 sq. ft., in excellent condition, priced at $699K.
The market in Verdi, which overall is a fairly upscale place, is deteriorating before our very eyes. Too many people on this blog have become so obsessed with 2 or 3 percent monthly flucuations in the median price, and whether or not “The Bottom” has arrived, and are oblivious to the obvious price erosion going on in the upper reaches of the market.
Sliced Rye
I have some personal knowledge of that house at 100 Waterbuck. To say it is in excellent condition is an understatement. It is in pristine condition. And no, I am not the realtor selling it. The house was bought back in 2002 for about $880K, and there is probably another $100K-$150K that has been put into it since 2002.
The Verdi market has been on loose ground for the last couple years, and now that ground is beginning to give way. Deterioration is actually a pretty good word to describe what is happening to prices in Verdi.
Whether the median last month was $170K or $160K or $180K is really irrelevant to Verdi. The market is swirling downward there without question.
NevSouth
Been following this blog for quite some time. Very informative and educational.
I live in Vegas. What is the correlation between Las Vegas prices and Reno prices? I’m sure some math wiz out there with a bunch of stats can figure it out. There is a correlation, but it’s hard to quantify.
Have we reached bottom? Well, maybe my cousins up in Reno can have a hot debate about it, but I will submit that Vegas has seen the worst. Just look at any graph of median prices.
From a view on the ground, I share the following. The best schools in Vegas are in Summerlin or Henderson. I prefer Summerlin for a variety of reasons. I recently rented a 2br/2bath condo in the best school zone in Summerlin so my boys could attend the elementary school. Cost? $1300/month for a 2br/2bath 1400sqft townhome apartment. Call me crazy, but that’s the cost of doing business. That’s what the market will bear in this part of town.
I then did a quick scan of the listings. You can find hundreds of non-descript 3-4br/2+batch detached houses in the same neighborhood for less than $200k.
So how is that possible? You can own and have a mortgage for less than $1000/month, or rent a crappy condo for $1300/month. Well, in my opinion it’s all about this twilight world of foreclosures and short sales. There are still plenty of people making a decent living, even in this economy, but either their credit is shambles or they don’t have down payment money. Hence, they cannot buy and must rent.
So, my theory, conjured up from personal experience and a quick view of rents vs. prices in the LV market is that if you can afford to buy and rent it out and hold it, and you are not stupid, you can pretty easily get positive cash flow. That seems to me to be a good sign.
Maybe Reno is not as far along as Vegas in this part of the market, but I think the time is on the horizon where the median sales price will stay stable or go up. Investors will continue snapping up properties to rent for positive cash flow.
OBTW, no need for rants about how Reno is better than LV. I prefer Reno as well. I’m just talking about money here. Just the bottom line. If I can make a buck buying a place and renting it out to a family of four, I don’t care where it is or how much the town sucks.
smarten
Sliced Rye [BTW, I like the name] said “Whether the median last month was $170K or $160K or $180K is really irrelevant to Verdi.” I agree and have said several times before that if your preferred segment of the marketplace is a McMansion in Montreux, you could care less what’s going on with a Smithridge condo [and vice versa]. Neither is demonstrable, per se, of “THE” market.
So I again ask that if the median sales price isn’t either, then precisely what is?
Sully
Regrading 533 Chrystal Park; I’m thinking it’s still overpriced at the new reduced price. I can see a couple more reductions before it attracts any significant interest.
Sully
*regarding 🙂
MikeZ
Maybe The Collapse of the economy is not coming, but the Collapse of builder absurdo pricing continues unabated.
…
Damn good thing some savvy buyer didn’t jump on it 14 months ago considering the “great value” it was touted to be at $725.
The fascination with asking prices makes no sense to me.
Help me understand why someone should be concerned with the asking prices of homes like that, which did not sell, nor (as best I can tell) even go under contract.
If I want $50,000 for my $25,000 automobile, does that have any real effect on car prices or the automobile market?
Why not look at the SALE prices? Those are the data samples that indicate where the current price points are.
MikeZ
You can own and have a mortgage for less than $1000/month, or rent a crappy condo for $1300/month. … if you can afford to buy and rent it out and hold it, and you are not stupid, you can pretty easily get positive cash flow.
(I know I did a butcher job on that cut/paste, but I think I got all the key figures from your post.)
Having been a landlord, I can tell you there’s much more to the math than rent v. mortgage pmt.
Insurance, property taxes, water/sewer, HOA, maintenance (1%/yr, expect $2K/yr on a $200K home), cleaning, vacancies, deadbeats, damages and legal/evictions.
My general rule was that I needed a minimum of 25% in excess of ALL expenses to make rental property work.
Anything less, and it wasn’t worth the risk; just one bad tenant can cause thousands in damages or lost rent.
Just my 2c.
Sully
MikeZ, what other kind of price should a buyer be looking for? Sale prices for comps help with an offer, however a buyer is not about to buy a house that’s already sold – so as far as I can tell you start with listing prices. No one is fascinated with listing prices, that’s the only price offered!
Have you ever seen a house for sale that listed one price and advertised that it will sell for a lower price?
Carole
This Crystal Park house sold for $880K in 2002 and is now listed at $699K today? And that’s after some signficant additional money spent on the house.
A couple days ago somebody said that prices in Cold Springs are now back to 1998. Are we now back to 1998 in Verdi as well?
Sliced Rye
Thanks Smarten. I find the fixation on the median price to be misplaced when you are talking about houses selling for 4, 5, or 6 times the median. The condition of the upper reaches of the market is just not correlated to the median. The median could be rising and the upper end falling, or the median falling and the upper end rising. Especially today when there are so few upper end houses selling that they hardly impact the median calculation.
Right now, the Verdi market, which is upper end for the most part, is clearly falling while the median may well be stabilizing. ( I am not making any prediction about the median. My whole point is that the median is irrelevant to what is happening in Verdi).
Jason
Asking prices are not an irrelevant piece of information in attempting to ascertain the current state of a market.
If somebody puts a car up for sale and asks $50,000 and nobody buys it for that price, you now know something about that market. If nobody even calls and asks to look at it, you know a little more. Certainly not all you need to know, but something.
MikeZ
[Sully] “MikeZ, what other kind of price should a buyer be looking for?”
Buyers should be looking at comparable sales, obviously. Sales that have closed, not overpriced homes with zero offers.
800 homes sold last month in Reno/Sparks. That’s where this area’s RE market is.
MikeZ
[Jason] Asking prices are not an irrelevant piece of information in attempting to ascertain the current state of a market.
Asking price data is completely irrelevant to a market evaluation when you have actual sale price data.
Observe:
[Jason] If somebody puts a car up for sale and asks $50,000 and nobody buys it for that price, you now know something about that market.
All that tells you is: the price was too high.
But where is the market price? Isn’t that what you really want to know? Actual sale prices tell you that.
I’ll stop now, having beaten this horse to death.
Sully
MikeZ; you’re getting real good at this ‘confuse ’em if you can’t convince ’em stuff. Do you think anyone looking for houses today are still buying the buy now or forever be priced out of the market BS? I’m willing to bet that today’s buyer has a house priced down to the square inch. Hence, my comment about the Crystal Park house needing two more price reductions to get in line with comps in the immediate area.
CommercialLender
[sully] Have you ever seen a house for sale that listed one price and advertised that it will sell for a lower price?
Yes, often. Frankly, just about every open house I walk through has some Realtor saying “make any offer” or “seller is motivated” or “the price will likely end up lower” or otherwise giving far, far too much information away such as bitter divorces, seller already moved to another city, seller lost his job, et. al. I even had one say “if you offered around $X (a huge discount), I think you’d get it.” Frankly, if I were a seller, I’d send a friend to my own open house to hear incognito what their ‘agent’ is telling folks. Realtors, let’s hear it: is this ethical to represent your sellers in this fashion? Normal? Acceptable? Should you just forget the pricing and list it unpriced?
Sully
CL; might be something for local realtors to look into. All I hear them say is how they feel that the house is priced right and is gonna sell fast! 🙂
Of course, two weeks later its still there.
CommercialLender
Sully,
Maybe you look like a guy with money and I look like a guy without, thus they automatically think they have to offer me a discount?! 🙂
Realtors? Please address my above.
What becomes of pending sales? | RRB Home
[…] readers will recall that I have performed similar studies in the past — see 2010′s 90 days later and 2008′s Pendings Schmendings – 90 Days […]