Get the Goods on 1 Million Agents (September Roundup)

Big news Redfinnians!

Now you can use the brand-new Redfin Scouting Report to look up stats on any agent — where he sold homes, how quickly, at what prices, with how many price reductions — all on a map, with pictures of every sale. It doesn’t work in Seattle and DC though.

The gerbils we tried it out on absolutely demolished their cages after we took it away. On the New York Times and across the big blogs we’ve been getting rave reviews, with one editor commenting that this is “the most disruptive real estate play in years.”

Meanwhile, Redfin’s own real estate agents now handle short sales, and our new Android app is already the top-rated real estate search tool on the Android Market. The iPad app is coming this winter, but what we really need are a few more San Francisco software engineers to get the job done; just write me back to apply.

Prices Up, But It’s Just a Seasonal Thing

Now let’s talk about what’s going on with U.S. real estate: home prices ticked up from the summer-time rush, interest rates are dipping below 4%, inventory is down, foreclosures are on the rise again, and demand is still weak but getting stronger.

The numbers for July just came out this week, and prices rose for the fourth straight month, which tends to happen during the summer:

Area MoM Change YoY Change Date of Max Change from Max Prices Last at
This Level
# of Months
of Increase
Phoenix Real Estate -0.1% -8.8% Jun-06 -55.8% Feb-00 0
Los Angeles Real Estate 0.2% -3.5% Sep-06 -37.9% Oct-03 4
San Diego Real Estate 0.1% -5.9% Nov-05 -38.0% Dec-02 4
San Francisco Real Estate 0.3% -5.6% May-06 -38.1% Apr-02 4
Denver Real Estate 0.0% -2.1% Aug-06 -10.2% Jun-03 0
Washington DC Real Estate 2.4% 0.3% May-06 -25.2% May-04 4
Atlanta Real Estate 0.2% -5.0% Jul-07 -23.4% May-00 4
Chicago Real Estate 1.9% -6.6% Sep-06 -30.1% Mar-02 3
Boston Real Estate 0.8% -1.9% Sep-05 -14.6% Aug-03 3
Las Vegas Real Estate -0.2% -5.4% Aug-06 -59.3% Dec-98 0
New York City Real Estate 1.1% -3.7% Jun-06 -21.9% Apr-04 4
Portland Real Estate 1.0% -8.4% Jul-07 -27.2% Jan-05 4
Dallas Real Estate 0.9% -3.2% Jun-07 -7.5% Jul-04 4
Seattle Real Estate 0.1% -6.4% Jul-07 -28.5% Nov-04 5
20 City Index 0.9% -4.1% Jul-06 -30.9% Jun-03 4

Even when you say, “OK, that was just the summer,” and wipe out the gains, it’s still a big deal that prices haven’t fallen since April, especially since most pundits predicted another 8% drop from April – December 2011.

Case Shiller Index - West

Case Shiller Index - East

One reason stable prices are a big deal to me is that this is exactly what we said would happen in April. And the other reason is that when prices stabilize, buyers can start coming out in greater numbers, with more confidence.

The hitch is that many sellers will still hold off until prices actually rise; we all think our house should be worth more than it really is right now. This is the main reason why the number of home sales has been down, near the lows it reached last summer when the federal tax credit expired.

Demand Among Buyers Up Right Now, Listings Way Off

Hungry buyers and fewer listings are exactly what we’re seeing in our own business. Demand among buyers using Redfin agents increased fairly sharply over the past three weeks. This was unexpected since sales usually dip a bit in the fall, and the stock market has been a Rocky Horror Picture Show.

Last week, customers requesting tours was up 5% from the four-week average, and customers writing offers was up 7%. Demand in Seattle was weak but not anywhere else, and Southern California and Boston were really strong.

When we ask people “why now, when the summer’s over?” we hear about low interest rates, higher rents and “I couldn’t wait forever.” New Redfin listings on the other hand were down a whopping 64%. Many of the in-home listing consultations recently hosted by Redfin agents end with the owner deciding to wait until next spring.

So Why Is Inventory So Low?

The reason Redfin has been so confident about stable home prices is that the inventory nationwide is dropping. The number of homes for sale has declined 17% since last year. Shadow inventory, which represents the scary backlog of distressed properties that haven’t yet reached the market, has actually declined 16% year over year.

Existing Home Inventory

It isn’t hard to imagine why inventory is so low. Regular home-sellers are waiting for better days unless they absolutely have to sell. And banks that used to flood the market with foreclosures have been slowly withdrawing from the market, for now.

What worries us is that default notices – which the bank sends you when you don’t pay your mortgage for three months – spiked 33% in August. But foreclosure auctions are still near three-year lows. When we look at individual court records, we see the banks threatening to kick people out but never following through.

Maybe the banks just got tired of re-possessing and then selling properties. Maybe they realized getting the owner to sell the place for a loss is still a better outcome than a foreclosure that puts the bank on the hook for a sale. Maybe they had more poetic qualms. Or maybe they’re just gearing up for more foreclosures next year. We don’t know. Our best guess is that they’ve lost their appetite for destruction.

Interest Rates Dip Below 4%

But they certainly haven’t lost their appetite for lending money, at least not when the government is guaranteeing about 95% of all loans. Rates have been dropping like a rock, occasionally dipping below 4%:

Interest Rates on 30-Year Mortgages

Since most people have to buy the money for a home before they buy the home itself, the drop in interest rates has had more of an effect this year on what it really costs to own a place than any change in prices.

And that’s the news from Redfin! If you have any comments just write back and I’ll forward your question to a Redfin agent — if I can’t answer it myself. Happy October and thanks for all your Redfin support!

Best, Glenn

Discussion

  • Chasleon

    I'm in the Southern California market, mostly the Riverside, San Bernardino county areas, “The Inland Empire”. What I've noticed is that home values declined since the first of the year and now that interest rates have followed, I'm beginning to see home values stabilizing and more interest by potential buyers to dip their toes in the water.  I believe that most people are beginning to believe that the bottom has been reached and that even though we won't see price increases, neither will we see anymore decreases, so the item of focus is the interest rates that are offered today. Also, I've concluded that “Subject to Lender's Approval of Short Sales” only seems to possess about 20% of the existing inventory, with Stardard sales, mostly flips, and REO's and Approved Short Sales possessing the 80%. This lends itself to conclude that the foreclosure absorption rate has taken place, especially in San Bernardino County where most of the Real Estate values originally declined in 2007 and 2008, marking the first in the State to experience devaluations.  Most of the “Subject to Approval” Short Sales have gone to foreclosure and were auctioned off to investors and the rest became REO's that the banks just are hoping for someone to be willing to take. The Approved Short Sales lost their Buyers due to too long a wait and make up about 20% of the total.  That's how I'm seeing it.  I don't really expect the business to pick up much between now and the next election but hopefully we'll see some improvement afterwards. I always believed this was going to be a long movie, and it looks just like that, so I'm planning on just getting as comfortable as possible and looking for ways to improve my business any way I can. One thing for sure, we'll be selling homes for the same values two maybe three years from now for what we're selling them for now, the variable will be the interest rates, and probably those will remain under 6% for a long time.  CHAS LEON, “The Real Estate Guy” with Keller Williams Realty in Rancho Cucamonga, California.

    • http://blog.redfin.com GlennKelman

      I agree, the biggest variable is interest rates, not prices.

  • Richard White CA

    I think it would be appropriate to release the income of all employees at Redfin. From customer service reps to web developers to executives. That's what happens when you should a Realtor's production, you are telling the world how much money they make yearly. These aren't corporations, they are individual self employed people – like insurance agents or contractors.

    • http://blog.redfin.com GlennKelman

      It's an interesting point and one I hadn't considered. We do not and are not allowed to display the commission amounts for each property. But you are right that anyone who operates an independent business is open to more public evaluation, on Yelp and now on Redfin. I had always thought most agents want credit for each property they sell, which is why they have their names in large letters on the yard sign. Isn't it unavoidable?

  • Renting in Mass

    Nice summary. Thanks!

    • http://blog.redfin.com GlennKelman

      Means a lot coming from you RiM!!!

  • Reimund Sauer

    what most people don't know about mortgage rates!
    the 5 biggest lenders own 70% of the market. Their average conforming rate for 30y is 4.25%
    The survey rate of 4.03% which you find published (including Redfin) is the unweighted average of more than 100 lenders and in a way a misrepresentation, if 70% of all mortgages are not to be found below the 4.25%. So if you want a lower rate you may have to stay away from the top 5 and encourage your brokers to find the lower rates from the other lenders.

    • http://blog.redfin.com GlennKelman

      Wow, I didn't know that either Reimund! Interested in writing a guest post about that? Why are the smaller lenders offering lower rates?

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  • Renting in Mass

    The Mortgage Purchase Application Index is at its lowest level since 1996:

    http://www.calculatedriskblog….

    That's pretty remarkable considering that rates are still crazy low.

  • Renting in Mass

    Radar Logic's Composite Price Index declined 0.8 percent from
    July to August, the largest decline for this time of year since the
    crash of 2008.

    http://www.calculatedriskblog….

  • Renting in Mass

    I think it's funny how when seasonality was working in favor of housing prices, the headlines were all “Home prices on the rise,” and then at the bottom of the article there would be a note that seasonality may have been a factor. Now that seasonality is working against prices, the headlines are “As expected, the usual seasonal decline in prices has begun.”

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  • http://foreclosureclearance.com/las-vegas-foreclosures/ Las Vegas Foreclosures

    Nice! Just wanted to respond. Outstanding post over again. Thank you Glenn!

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