Happiness is Inevitable, Too (Even in Real Estate)

Big news Redfinnians!

Redfin upgraded its service, so you can meet your Redfin agent from the first tour, and he always sees your house. You still get an agent paid to put customers ahead of commissions, digital convenience the whole way through a deal, but now also a face-to-face relationship with your Redfin agent. What took us so long? Honestly, I don’t know.

In other news, for Android, iPhone and iPad, Redfin now has the top-rated real estate applications. And we’ve launched Open Book, a directory of our customers’ favorite lenders, inspectors and escrow agents. Last but not least, you can now sign up for a monthly picture-book summary of all the homes that sold within a few blocks of your place. It’s beautiful.

That’s the Redfin news. But what’s going on in the market? Let’s dig in!

December Numbers Finally Came In. They’re Bad

Yikes, the numbers just out for December 2011 show another 1.1% drop:

Market MoM Price Change YoY Price Change Date of Max Price Change from Max Price Prices Last at
This Level
# of Months
of Decrease
Phoenix 0.8% -1.2% Jun-06 -55.2% Mar-00 0
LA -1.1% -5.2% Sep-06 -40.8% Aug-03 5
San Diego -0.7% -5.4% Nov-05 -39.9% Sep-02 5
Bay Area -0.8% -5.4% May-06 -41.1% Dec-00 5
Denver -0.9% -0.4% Aug-06 -11.9% Apr-02 4
DC Area -1.2% -1.6% May-06 -28.4% Apr-04 3
Atlanta -1.8% -12.8% Jul-07 -36.0% Dec-97 5
Chicago -2.0% -6.5% Sep-06 -34.6% Mar-01 4
Boston -1.2% -2.6% Sep-05 -18.6% Feb-03 5
Las Vegas -0.8% -8.8% Aug-06 -61.4% Jan-97 6
New York -1.2% -2.9% Jun-06 -24.4% Dec-03 4
Portland -0.4% -4.0% Jul-07 -28.8% Sep-04 3
Dallas -0.7% -1.3% Jun-07 -10.5% Apr-02 4
Seattle -1.3% -5.6% Jul-07 -31.9% May-04 5
20 City Index -1.1% -4.0% Jul-06 -33.8% Feb-03 4

But Prices Will Probably Stop Falling

January will probably be down too just because the index is a three-month moving average but, as we predicted last year, the market is turning:

Meanwhile, Redfin agents report flashes of weirdness we haven’t seen since the bubble burst:

  • In Denver, agents mass-mailing colleagues to ask if any listings are about to hit the market.
  • In Portland, buyers who stop waiting for more listings and just sign new-construction contracts on un-built projects.
  • In Seattle, houses that didn’t sell last fall coming back on the market, with only a $5,000-price drop — and selling in a week.
  • In San Diego, sellers asking buyers to ignore low appraisals that scare banks — and just pony up for a bigger down-payment.
  • In Seattle, sellers asking buyers for letters and family photos as a bidding-war tie-breaker.
  • In DC, investors going door to door, looking for people willing to sell their homes.

Whereas last year, only picture-perfect houses got multiple offers, now run-of-the-mill listings are getting bid up too. That said, the market is still bi-modal: dumps and over-priced listings languish.

Is the Bottom Here? Depends on Whom You Ask

So we think the bottom is here. Earlier this year, Redfin forecast that 2012 prices would be between -1% and +1%. Our friends at Zillow still forecast a 3.7% drop.

We have disagreed before.

Last May, Zillow forecast that 2011 home prices would fall another 7% – 9%. In February 2011, Redfin said prices would mostly stop falling in March. From March – December, the Case-Shiller index fell .68%.

Don’t Get Cocky, Kid!

But we shouldn’t get ahead of ourselves. The bottom will be rocky. Whenever home-sellers get a glimpse of the groundhog, real estate junkies over-react, especially since the market always goes a little crazy in spring. And there are still too many foreclosures for prices to go up much any time soon.

The truth is that demand at Redfin went nuts in January — did you notice our website crashing under unexpected loads? — then leveled off in February. And sales volume won’t increase as much as everyone hopes, just because there’s not enough to buy. Nobody wants to sell at the bottom.

We’re Worried About Rates

Long-term, we’re worried about interest rates. Everyone says they’ll stay low for years, but the president of the Federal Reserve Bank of New York just gave a speech describing an “unusual period” of very low rates that concluded with: “This will not last.” Gulp.

For now, rates are below 4%:

As even the gloomy French existentialist Albert Camus had to admit “Happiness is inevitable, too.”

Stabilizing prices will be welcomed by all the real estate agents who complained in the past about Redfin’s dark predictions — we have called for 10% drops in a year, 4% drops in a month, and said the market would become like a fat man who couldn’t get up.

As for all the real estate bears who say we’re a sell-out every time we say the sky has stopped falling, gear up. The comments section is open!

Thanks as always for your support. Any questions about Redfin’s service, feel free to leave a comment below! We love to hear from you.

Best, Glenn
Glenn Kelman | CEO, Redfin
Twitter | Blog

PS Check out @REConfidential, Redfin’s new, all-true diary of the porn studios & pot farms we find on home tour!


  • Renting in Mass

    Would you say prices are up, down, or flat since August?

    • http://blog.redfin.com/ GlennKelman

      From August to December, prices fell 4.6% but when asking for partial-year results don't you think it's necessary to adjust for seasonality? Otherwise, we could also ask Nordstrom if sales fell from December to January, or Exxon if gas prices declined from summer to fall. But your point is well taken that prices were mostly flat in 2011, but declined in the back half of the year.

      • Renting in Mass

         I always think it's a good idea to adjust for seasonality. That's why I called you on it in August when you trumpeted a rise in NSA prices from April to August.

        Check the comments section of the August roundup. You said “I think NSA prices will be flat from now to December, within 1% of where they are now.” I took the under.

        Anyway, you can add me to the list of gadflies who bought a house recently. I bought in December.

  • Guest

    Re: The Seattle Seller asking for letters and pictures to be a tie breaker – isn't that illegal on the grounds of discriminatory housing practices?  Not sure if the same rules that apply to renting hold true in home selling (a-la non-discriminatory housing laws) but hard to see what the virtue of having a family picture is worth to the seller other than purely judging a book by its cover.  Just strikes me as fishy…

    • http://blog.redfin.com/ GlennKelman

      That's a very, very interesting point that I had forgot to consider…

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  • Eesa27

    Seriously, on the last post – are you kidding me?

    As for the rosy prognosis – if 1 in 4 homeowners w a mortgage will be foreclosed by the end of 2013 (this is data from the housing analyst at the B of A for chrimminy's sake) I fail to see how we can look at this market as 'up' and this is not even to mention the question of true title to real estate based on the MERS etal gambit to toy with mortgages, notes, securitization and the recording and/or transfer of documents in order to actually conduct business which it is clear they did not bother to do – if Hawaii and other states are now considering state owned banks to come in and clean up the mess and deliver clear title to new buyers  or 'delinquent' homewoners, while offering anyone with proof of claim of holder in due course status to step up; and Arizona is considering a similar but different approach to allow underwater current homeowners to do the same with their mortgages…  don't you think there is more to this story than interest rates and 'available inventory'? 

    Where are all those shadow foreclosures?  How is it that according to the latest real look at foreclosures out of San Francisco it is reported that over 84% of foreclosures are illegal and that this can be considered a nationwide statistic?

    Rents are going up because no one can afford to buy who is booted out and so those who can afford to buy are buying and renting out while the mortgages or not that they pay far undercut the cost of the rent to those in a choked and choking market.
    So do you join the wolves and eat the sheep or do you stand up and be counted in saying the game is rigged, corrupt, broken and causing serious deterioration and destruction to the people, infrastructure and basic working systems of our country?  Hell, no… you just go on looking for how to make a buck.

    And riding the averages.
    And hoping you are right.

    Because so long as you are right and the powers that be hold the deterioration and break down of the processes of law and of markets and of reality at bay, you can still make that buck.

    I'm not saying that anyone should not buy if they want to and have the resource to do so.
    I'm saying the whole system is broken and if you are buying a limited warranty deed from a bank
    then you might want to reconsider.
    And if you think the market numbers are honest and reflect the number of vacant houses
    you are delusional.

    This is some weird twilight zone of foreclosed and still occupied homes, foreclosed and now vacant but 'invisible to the market' homes, foreclosed and just completely off the radar homes – but if you walk, drive move through the streets of this country you can see them and they are growing – the number of abandoned, empty, derelict housing units.

    and that is not a good sign for anyone.

    And to report 'market data' without considering the reality as being clearly pointed out by the likes of Bill Black, Naked Capitalism, Randall Wray, Ellen Brown, Michael Hudson, Washington's Blog, Zero Hedge, Matt Taibbi, Bill Still, Cynthia Couril, David DeGraw, Neil Garfield, April Charney, Gretchen Moregenson, Elizabeth Warren, Janet Tavakoli and too many to mention…

    Well, this is not reporting, this is cheerleading, and all I can say is, all the best with that. Except I don't mean it because it is not right or honest or fair and it should not prevail until things are set to rights and they are not.

    • http://blog.redfin.com/ GlennKelman

      Eesay27, we have tried to be clear that shadow inventory will prevent prices from rising, but we believe that prices will not fall further. If you disagree, please do so precisely: what do you think the non-seasonally adjusted Case-Shiller composite-20-city index will be for December 2012? I think it will be within 1% of the number for December 2011.

  • Matt

    Feels more like a calm before the storm, the big settlement all of the banks were waiting to conclude has a bunch of foreclosures that still haven't hit yet. To me it seems like we are just now feeling the pause in foreclosures from the introduction of this settlement and it will still take more time for the foreclosures to start ramping up. That feels like a pretty big factor and I would wait to draw any conclusions until we see how rapidly they start releasing the shadow inventory that they have hung on to. We do not know how fast these houses will be foreclosed on which really dictates what will happen to the market, does this seem like a reasonable concern to you?

    Would you happen to have any good sources in regards to shadow inventory, foreclosure notices, people behind, etc? I never really find anything that show me the data the way I would like to see and analyze it. Maybe even geographical? I am mostly interested in the Seattle/Eastside areas

    Not trying to be negative. By the way, I love Redfin and wish I was more active in the community :)

    • Glennhkelman

      Not negative at all. We wish we had better access to information about shadow inventory but we just don't. I agree that it's the big x-factor. We've hired a lot of agents who used to work exclusively as listing agents for banks, who complain their business was 10% of what it used to be. This is especially true in Phoenix, where many people believed (myself included) that a major wave of inventory would hit the market in 2012. It still could but hasn't yet.

  • Observer

    Don't forget, this is an election year. Bad news needs to be swept under the rug for a while…

  • HousingSucks

    We are not buying your faked optimism. The market sucks. A wave of foreclosures to come in the last quarter of 2012 into 2013. My predication, prices will not go up in 2012. Prices will remain flat or further drop.

    • Glennhkelman

      But we're predicting the same thing: Redfin said prices will be essentially flat, going down 1% or going up 1%. After four years of price drops that all told reduced U.S. housing values 30% – 60% it is major news if prices stop dropping. It means the market has bottomed. 

      If on the other hand you think prices will drop significantly, we disagree and time will tell. 

  • Guest

    There is one reason and one reason only that housing prices “seem” to be improving: the stock market. It has gone literally straight up since October despite world economic fundamentals that are absolutely putrid. The economy LAGS the stock market. December's housing numbers reflect stock's August/September swoon. The stock market has or will top in the next week or two and will plummet for years, sucking housing prices right with it. The world is so mired in debt, nothing but a depression to make the 30s look like a boomtime can reset things. Last week China's cracks showed through. Europe is pausing before catastrophe. Greece just defaulted! for God's sake (80% haircuts on bonds). It stuns me how the media can continue to dupe investors. But the piper will be paid. If you don't plan on owning a house for ten years, run, don't walk away from real estate.

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