Redfin October Newsletter: 61% of September Offers Competitive

We sent our monthly market update out to 126,104 folks this afternoon, a 6% increase from last month. If you’d like to get the newsletter by email, just sign up.

Regards,
Glenn

Howdy Redfinnians!

The data’s in for October, so it’s time for our high-speed, comprehensive summary of real estate trends. And the news is very similar to last month: prices are up for the third straight month, competition is increasing and sales volume resumed its march upwards. On the other hand, foreclosure data is mixed but still scary while mortgage rates are beginning to rise.

And Redfin is doing well! We expect record revenues in October — normally our best month is July — and more profits. November also looks good, but after that we expect our holiday sales to be slow, as always: the number of new Redfin clients signing up to see homes has been declining all month.

To juice up our winter numbers, we’ve got a big new release of the website coming next Tuesday, probably our most important of the year, so come back next week to see what we have wrought. For now, let’s dive into the data.

Prices Increase for Third Straight Month

The Case-Shiller data came out this morning for August, and it shows sizable price increases across all the markets we serve except Seattle, which is still toodling along in the doldrums. Most markets have increased for three or even four months. The Shamu of month-over-month price increases was in the Bay Area, at 2.6%.

City MoM Change YoY Change Date of Max Change from Max Prices Last at This
Level in…
Consec. Mos.
of Increase
Los Angeles 1.3% -12.0% Apr-06 -39.7% Apr-03 3
San Diego 1.5% -8.9% Mar-06 -39.9% Jan-02 3
Bay Area 2.6% -12.6% Feb-06 -40.2% Aug-04 4
DC 1.2% -7.9% Mar-06 -29.8% Feb-02 4
Chicago 1.2% -12.7% Feb-07 -23.3% Mar-05 4
Boston 1.0% -4.2% Nov-05 -14.9% Nov-04 4
New York 0.3% -9.6% May-06 -19.3% Jan-03 4
Seattle -0.2% -14.7% Jul-07 -22.5% Aug-05 0
20-City 1.0% -11.4% May-06 -29.9% Aug-03 3

As usual, we present Case-Shiller’s seasonally adjusted numbers to correct for the summer gains and winter losses that happen every year. Here’s a graph of how prices have gone up and down, starting in January 2000 when Standard & Poor’s baselines the Case-Shiller index for all markets at 100:

CaseShiller

Competing Offers on the Rise

In our own little world, Redfin has started tracking the percentage of offers we handle every month that compete with other offers. This data set acts as a leading indicator of whether prices will go up or down on properties that won’t close for another 45 days. When more than one buyer is bidding on a property it usually sells for more than the asking price; when there’s only one buyer, it usually sells for less than the asking price. Sixty-one percent of the offers we worked on in September ended up facing competition, up from 52% in August.

Market Jul-09 Aug-09 Sep-09
Southern California 78% 83% 73%
Bay Area 76% 78% 77%
DC 56% 43% 63%
Chicago 9% 6% 27%
Boston 52% 40% 48%
New York 75% 80% 64%
Seattle 27% 25% 42%
Grand Total 56% 52% 61%

The Bay Area was the most competitive market, particularly for homes under $500,000, where 92% of the offers we handled in September faced competition from at least one other offer. In Southern California, the numbers are very similar. The size of the sample for each market averages around 75 offers.

But Research Firm Says Bottom is Still Five Months Off

It all looks pretty bullish, huh? Don’t get too excited! A research report published by First American CoreLogic — and touted by the Wall Street Journal — predicts that nationwide U.S. housing prices won’t bottom out until March 2010, based on the assumption that Congress won’t extend the $8,000 first-time home-buyer tax credit beyond the November 30 deadline. But now it seems that prospects for an extension of the federal credit are good. An additional credit for Californians is also being considered by that state’s Assembly.

The Number of Homes Sold in August Increases

And the volume of home sales continues to increase. After crying a river last month over the depressing effects of waning government subsidies, the National Association of Realtors now reports that existing U.S. homes sales in September increased 9.4% year over year, with inventory falling 7.5%. The strongest growth in sales volume was in the West at 13%, and the weakest was in the Northeast at 4.4%. In just one month, September sales volume in California increased 1.0%, with the median price increasing 0.8%. Meanwhile new housing starts increased nationwide in September just a bit, at 0.5%, but building permits fell 1.2%.

Foreclosure Data Mixed, But Still Scary

What has been preventing any type of serious price recovery has been the seemingly bottomless pit of foreclosures. And the problem may be getting worse. Nationwide, foreclosure filings increased 5% in July – September as compared to April – June. But the most recent data is a little better, showing a 4% decrease in September from the month prior. Bank re-possessions increased 21% in the third quarter as compared to the second. It seems like the banks are getting more aggressive about clearing their books of bad loans, either by re-negotiating the loans or foreclosing.

In California, mortgage default notices declined for the second straight quarter, by 10.3%. The median month that a California loan in default first originated has only moved forward one month, from June 2006 to July 2006 — the worst loans came in mid 2006 — so the pig is moving pretty slowly through the python. There’s still a lot of bad inventory out there, and it seems like traditional home-owners are scared to compete with the banks. Distressed homes accounted for 29% of September transactions.

Mortgage Rates Fairly Low, Probably Headed Up a Bit

But enough about prices. A bottoming of prices — whether temporary or long-term — only accounts for part of the increase in demand. The other big factor is interest rates. After drifting down for six weeks, interest rates ticked up last week, with the average for a 30-year fixed-rate loan reaching 5.34%, still lower than the 5.36% we reported last month. For folks who don’t plan on staying more than five years in a property, adjustable rate mortgages were very low (4.69% average rate); but watch out for those — we still worry you could get trapped in a loan when rates take off.

BankRate30yrfixed

55% of Bankrate’s panel of mortgage experts think that rates will go up, mostly because the federal government is losing its appetite for the mortgage-backed securities that banks use to unload risk.

That’s it! Another month is in the books. Any questions, just drop me a line. We love to hear from you, and we’re always thankful for your support.

Happy Halloween!

Glenn

Discussion

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  • Lance Pitt

    Plunging housing prices, all time low interest rates, and tax credits are creating a favorable environment for renters to convert to homeowners. You may very well find that in today’s market you are able to afford a larger home for the same amount of money or even less money than you are currently paying every month in rent. If you dream of having a home office, starting a family soon or expanding your family, now could be the best time to get the additional space that you need for the right amount of money. I have found a really interesting tool which has the ability to determine if a property is a good investment. It’s a smart real estate rating engine which provides lots of information & insight for making a safe real estate investment and can help produce positive cash flow for you. Look into http://www.smartzip.com/info/score

  • Nathan

    Perhaps this is my lack of knowledge in the real estate industry, but I feel confused every time I see new data on pricing. It doesn’t seem like there is a real benchmark being used. For example, if we say that prices were up month over month (on sold or unsold homes), does that mean that the value of homes is going up? Or does that mean that only the more expensive homes are selling/for-sale? The difference between these two causes, I would argue, could change the decisions of buyers and sellers. Is there in fact a way to benchmark last month’s data? Whether it’s by some sort of price band, or even by home?

  • http://www.appraisalfulfillment.com/ jeffrey

    You will be an Independent Contractor and getting paid on commission so you have the freedom to work any way you want.

    I would start off by calling some real estate offices and ask what the commission split is.

    For example one company may say 50/50 so each transaction you close the co. gets 50% you get 50%.

    Then there are companies that give 70% to you and they get 30% and you want to find the highest split to you.

    Since you are new make sure there are no desk fees or expenses they charge.

    However some things you will be required to pay most likely are Realtor fees, MLS fees, and you have to get a lock box key and they run over $100 for the key alone.

    The mls fees (To be online and work from home) are reasonable and you can pay a year at a time or every 6 months etc..

    Now the next thing is what is called FLOOR TIME or OFFICE CARAVAN.

    Some companies require you to go on these events but if you say you want to be a part time agent they will understand and not require you to do this.

    Right now they will basically do anything you tell them as many agents are quitting real estate as they can’t handle the challenging market.

    I myself am an agent and I personally think for you,this is the best market to start in! Because you are not starting at the best and highest part of the market only to see it crash on you.

    You are starting after the crash has already happened and the market is now in the improving stage.

    So even if you want to work full time just say Part time so they don’t expect you to attend office meetings and caravans etc..

    It is normal however that many top producers (Even me!) work a lot from our home also. Most of the time I work from the office but even at home I have a phone, internet, fax printer and I have sold many homes from my home.

    I would however strongly suggest you get a web site. Especially if you are working from home. You can get one just like mine below.

    appraisal management

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