November Newsletter: Markets Holdin' Steady (Happy Thanksgiving!)

We got our monthly newsletter out just in time for the holiday.  We sent it to 135,021 folks, up 7% from last month.  You can always read our newsletter here, but if you’d like to receive it via email, just sign up.

Enjoy!
Lisa

Happy Thanksgiving Redfinnians!

Lots of big Redfin news this month, and of course we also have the latest real estate stats, hot off the presses. The short story is that September prices ticked up only a bit, October sales volume spiked, mortgage rates just hit record lows, and the number of foreclosures is dropping even as delinquent loans keep piling up.

Redfin Floods the Airwaves

Before we update you on the market, here’s the latest Redfin news… We loaded in pictures and prices of homes that sold from two years to two hours ago, a near-quadrupling of the real estate data we store. We got featured in an iPhone ad during Monday Night Football, and closed a $10-million round of financing from Greylock, the investor behind Facebook, LinkedIn, ZipCar and Pandora. A thousand folks re-posted a Redfin-authored essay on TechCrunch to Twitter and Facebook.

Unprompted, customers raved about our service on their own blogs and in our Forums. We had another month of profits, and our agents were top producers in Seattle, Boston, DC and Chicago. We’ve also created Facebook pages for Redfin in all our markets: Seattle, the Bay Area, Sacramento, LA, Orange County, San Diego, Chicago, Boston, New York and DC.

But enough about us…let’s dive into the numbers on the market!

September 2009 Prices Up Slightly

The Case-Shiller data coming out Tuesday morning was mixed. Across the 20-city composite index, prices in September 2009 gained for the fourth consecutive month but only modestly: 0.3%, once you adjust for the tendency of prices to increase in the summer and to decrease in the winter.

MoM Change YoY Change Date of Max Change from Max Prices Last at This
Level in…
Consec. Mos.
of Increase
Los Angeles 0.7% -9.0% Apr-06 -39.3% Sep-03 4
San Diego 1.1% -5.7% Mar-06 -39.3% Oct-02 4
Bay Area 1.7% -7.9% Feb-06 -39.3% Dec-00 5
DC 0.8% -5.0% Mar-06 -29.1% Apr-04 6
Chicago 1.1% -10.7% Feb-07 -22.5% Apr-03 5
Boston -0.2% -3.4% Nov-05 -15.2% Jul-03 0
New York -0.2% -9.0% May-06 -19.5% Jun-04 0
Seattle -0.3% -13.8% Jul-07 -22.8% Apr-05 0
20 City 0.3% -9.4% May-06 -29.7% Aug-03 4

Some markets declined slightly, including Boston, New York and Seattle; Seattle has been declining since its July 2007 peak. For the markets Redfin covers, the biggest winners were the Bay Area (up 1.7% in September) and Chicago (up 1.1%).

Case-Shiller-Graph

In the Bay Area, DataQuick also reported a price increase for October, up 6.8% for the month and up 4% for the year — the area’s first year-over-year increase in nearly two years, driven in part by increasing demand at the high-end. A year-over-year increase isn’t too hard to come by, since prices dropped significantly in October. That said, in our own brokerage we certainly have noticed that the Bay Area is humming.

Sales Increase 10.1%, Inventory Declines 3.7% in October

The National Association of Realtors reports that sales volume surged in October, with 10.1% more homes being sold in October than September; most of this gain was outside California, where October home sales increased a modest 2.6%. Seattle sales volume has been holding steady, propped up by a feeding frenzy at the low-end, for homes under $200,000.

The supply of homes for sale has started to significantly decline. Nationally the number of homes for sale declined 3.7% month over month, from eight months of supply to seven months, which means that if no new homes came onto the market, all the homes for sale now would be bought up by May. If we dip below six months of supply, the market will be considered by most to be a sellers’ market.

Foreclosures Decline Slightly, but Delinquent Loans Pile Up

But we don’t think inventory will drop much over the next three to six months and it will probably increase starting next year. As usual, we’re worried about the number of foreclosed homes banks will try to sell this winter and next spring. The good news is that actual foreclosure filings decreased 3% in October as compared to September, but this may reflect banks’ struggle to keep pace with the number of delinquent loans: 14% of all home loans had at least one payment past due in the third quarter; 3.4% are 120 days past due as of October, up from 3.2% the month before. Michelle Meyer, an economist at Barclays Banks, does not expect foreclosures to peak until mid-2010.

Competition Among Home-Buyers Eases Slightly

Not only could supply increase, but we usually see a seasonal lull in demand. Here at Redfin, demand was pretty strong — we saw a big bump in the second week of November — but that tailed off last week. And except in Southern California, the percentage of offers we make where there are competing offers declined slightly. It’s still pretty competitive though:

% of Competitive
Offers in Oct.
% of Competitive
Offers in Oct.
(Under $500K)
% of Competitive
Offers in Sept.
Boston 37% 43% 48%
Chicago 26% 36% 27%
DC 56% 57% 63%
Bay Area 75% 93% 77%
Seattle 39% 39% 42%
Southern California 82% 89% 73%

The First-Time Home-Buyer Tax Credit Extended to April

We don’t think the latest government incentives will make a huge difference in demand. Even though Congress ignored our objections and recently extended the home-buyer tax credit, many first-timers have already taken the bait. For those of you who still could take advantage of the credit, here are the criteria for saving $8,000:

  • The credit remains $8,000 for first-timers, but $6,500 is also available for folks moving out of a home they’ve lived in for five or more years.
  • The income limit increased to $125,000 for single folks, and $225,000 for couples filing a joint return. A reduced credit is available for folks who are over the income limit by $20,000 or less.
  • The home can’t cost more than $800,000.
  • The new deadline is April 30, 2010 to have a binding sales contract on a house, and June 30, 2010 to complete the purchase.

Mortgage Interest Rates Hit Record Lows

The real incentive for most home-buyers is interest rates. Despite our prediction last month that mortgage interest rates were likely headed up a bit, rates actually fell further over the past month to record lows. According to Bankrate, the average rate for a 30-year fixed-rate mortgage as of November 19 was at 5.06%. None of the mortgage brokers or bankers that Bankrate surveys thinks rates will fall further, though many think they will remain unchanged. Because banks have had less government support in selling mortgage loans to investors, we have begun to see a surprising number of loans going belly up at the last second. But if you can get a loan to go through, you’ll get a great rate.

Bankrate-Mortgage-Graph

So it’s an uneasy truce between low interest rates driving demand, and a large number of foreclosures mostly keeping a lid on prices. The $24,000 question is whether interest rates will go way up before we work our way through the worst of the foreclosures. We’re not going to try to answer that one before the holiday!

Any questions, let us know. Otherwise, enjoy your turkey or your tofu or whatever you’re going to eat tomorrow, with whomever or whatever you love, and thanks for all your support.

Best, Glenn
Glenn Kelman | CEO, Redfin

Discussion