from Local Attorney, Michael H. Wasserman

Tuesday, March 31, 2009

More on Current Market Conditions - not there yet

I have been thinking - and reading - a lot lately about the price disparities between REO transactions and "conventional" closings. To recap, even with overall declining market prices, sellers (and the professionals they hire to help them sell) need to recognize the gap in prices between sales of bank-owned properties and sales for everyone else.

Here are two more indicators of where we are and how far we may still need to travel.

First, the monthly bad news report from Standard & Poors; the monthly Case-Schiller index. You will see this one in all the newspapers, and broadcast news reports. No doubt scores of bloggers will talk this one too death too.
Prices were down from a year ago January in all 20 metro areas tracked by the S&P/Case-Shiller Home Price Indices, with 13 of those markets seeing the steepest rates of decline since the downturn began. The three worst-performing markets in terms of annual declines were Phoenix (down 35 percent), Las Vegas (down 32.5 percent) and San Francisco (down 32.4 percent)

Listed below are the changes in home value from December 2008 to January 2009 , as well as changes from January '08 to January '09:

Chicago home values:

  • Month-to-month: -4.6 percent (-4.3 percent)
  • Year-over-year: -16.4 percent

Chicago condo values:

  • Month-to-month: -2.4 percent (-2 percent)
  • Year-over-year: -8.6 percent
So we have clearly established that prices are still trending downward. But have we gone far enough? Consider this data provided by @ Properties agent Steve McEwen.

Steve's data points cover a different time frame, but are illuminating. He has been tracking the stats on Chicago area closings, comparing short-sales & REOs against conventional deals. During the week March14- 20, he counted 333 transactions. Of these, 157 (47%) were either short-sales or REO sales. Stop and think on that one for a moment, nearly half of all transactions were distressed. Measuring the sales prices, the median sales price of the REO sold condos & townhomes was just 25% of the median price of of the conventional sales. The median price for single family REO homes was an eye-popping 15% of the median for conventional sales.

To be sure, these numbers are probably skewed by the likelihood that more of the REO sales involved properties that were of less value than those that are not yet distressed to begin with. Also, there is a strong likelihood that seasonality is playing some part in the variances (fewer conventional sales during the early spring, anyway). Still and all, look at the graphical representations of this data below, and tell me whether you think that home prices are not being dragged down by the number of bank-owned properties on the market.

Sellers who really want to sell, are going to have to suck it up and price their homes more realistically, in order to compete with the banks. Or, they are going to have to wait this market out.

Somebody (anybody) tell me I am reading this all wrong.