May Real Estate Prices Increase 2.2% as Inventory Continues to Fall

Who needs another home-price index? For years at Redfin, we focused on serving customers, not calling the market. As a local broker, we couldn’t really say what was happening nationwide.

But now that Redfin covers about as many markets as the Standard & Poor’s Case-Shiller index, we are publishing our own monthly report on prices, sales volume and inventory: the Redfin Real-Time Price Tracker. Our goal is to offer the deep data access and market insights of a local broker, but on a national scale.

As brokers we know which way the market is headed before anyone else does. We have direct access to the local Multiple Listing Services real estate agents use to list properties and record sales. And of course as real estate agents we have first-hand experience with home-buyers and sellers, capturing far-flung customer activity in a central database.

This means that, ahead of any U.S. government agency, media company or analyst firm, the inaugural Redfin Price Tracker already has May 2012 numbers, on prices, inventory levels and sales volume. And the Tracker can be more accurate too, just because Redfin double-checks each sale against county records when available, comparing numbers from the MLS and then reconciling the two.

Long-term, the Price Tracker is only one part of our effort to give customers a complete view of the market. Last week, we published a quarterly survey of more than 1,000 active home-buyers working  with our agents,  the Redfin Real-Time Home-Buyer Tracker. Later this summer, we’ll probably start publishing a weekly measure of the number of Redfin customers beginning a new home search or requesting  a listing consultation, so you can see what a wild roller-coaster ride this whole business really is.

The Price Tracker report is available in full below; if there are topics you’d like to see us address in the report, please just leave a comment!

Redfin Real-Time Price Tracker

Technology-powered real estate broker Redfin today released a new 19-market analysis of May home prices, sales volume and inventory levels. The Redfin Real-Time Price Tracker, the U.S.’s first broad analysis of May prices, showed an annual price gain of 2.2% and a monthly gain of 2.7%. Inventory levels were down 23.5% compared to last year, and down 1.7% compared to last month. Sales volume was up 7.4% over this time last year, and pending sales were up even more, by 10.7%.

“We expected real estate to soften in May along with the larger economy, but we actually saw home prices continue to increase,” said Redfin CEO Glenn Kelman. “This trend seems likely to hold at least through mid-summer. Redfin’s business saw a stronger-than-expected rebound from Memorial Day weekend: with rates low and rents high more new home-buyers were touring homes last weekend, and more are now writing offers. The limit on sales volume is inventory. Not enough sellers have stepped in to provide the liquidity that once came from banks with foreclosures to sell.”

“The 2011 decline in inventory was seasonal and largely expected,” said Tim Ellis, Redfin’s real estate analyst. “But once the trend continued into the outset of 2012′s home-buying cycle, inventory shocks resulted in the first sharp price increases for many areas in five years.”

Prices Up 2.2% Over Last Year; Strongest Gains in Phoenix and Denver

From April to May, prices strengthened in 17 of the 19 markets Redfin surveyed, with the largest gains coming in the San Francisco Bay Area, Phoenix, Chicago and Boston. Twelve of 19 markets saw year-over-year price gains:

Perhaps most remarkable, Phoenix home prices increased 30% since last year and Denver gained 10%.

Inventory Down Year over Year by 20% or More in 15 of 19 Markets

The primary reason prices increased was falling inventory. In 16 of the 19 markets measured, the number of houses for sale declined since May 2011; in 15 of the 19 the decline was by 20% or more:

Nearly One in Three Listings Now Sell Within 14 Days of Debut

The decline in inventory led to a major shift in how long new listings took to sell. The proportion of new listings under contract within 14 days of their debut increased 73% over the last year:

In Silicon Valley last month, more than half of all listings were under contract within 14 days of debut:

Closed Sales Up 7.4%

Demand is also rising, as evidenced by the 7.4% increase in sales volume since last year. Sales are especially strong in California, whereas in Phoenix they are limited by the lack of available houses for sale.

Pending Sales Up 12.2%

If we look at pending sales, which is a measure of houses under contract but still not closed, the market improvement seems to be strengthening as the summer approaches. For pending sales, the annual gain was 12.2%:

About the Redfin Real-Time Price Tracker

Redfin’s monthly report on home prices, inventory levels and sales volume is an up-to-date, accurate portrait of the U.S. real estate market, coming weeks or months ahead of other market reports. As a broker with access to dozens of Multiple Listing Services (MLSs) used by real estate agents to list properties and record sales, Redfin gets data within minutes of a sale, pending sale or listing activation, well before any government, media or analytics organization. Using MLS fields, Redfin is able to distinguish houses from condominiums and townhouses — which often sell for less money.

To validate the accuracy of the data and to account for sales not handled by a real estate agent, Redfin compares MLS data with county records as they become available, using sophisticated algorithms to identify and resolve disparities about square footage or price for each address. Data at the local and neighborhood level are available in a spreadsheet, and the report methodology is available as an Adobe document.