And it is. While January and February closings will likely be weak, recent charts of early-stage Redfin demand suggest that in a few months sales volume will be just fine. From January to December, visits to our website increased 35%. Customers touring homes increased 26%. Customers writing offers increased 35%.

We aren’t in a tizzy about such growth, because most of it is seasonal. We get big jumps like this every year.

But we are seeing one trend this season that isn’t normal. And it could really crimp sales volume and, by extension, the whole economy. Inventory, which normally starts climbing steeply in January, has just kept dropping. In our wildly popular home-buying classes, which are mostly sold out, the most common complaint is that there’s nothing good to buy.

In some of the biggest counties, there were 30% – 40% fewer homes for sale this January compared to last January, and most counties saw the problem only get worse in the past month:

And the same is true of smaller counties, too; only Chicago has seen an uptick:

We see why this is happening in listing consultations across the country. We sit in people’s living rooms, explaining what they can likely sell their home for, and they just decide to wait a year instead, either because they want more money for their home, or they flat-out need more money just to pay off the mortgage.

The banks have an enormous number of mortgages in default, but, after the robo-signing scandal, foreclosures have been at or near three-year lows because it takes nearly a year to foreclose a property. In Atlanta last year, there was a 13-month supply of bank-owned homes; now there’s a two-month supply.

As a result, the limit on sales volume, which has long been demand, is increasingly now supply. American real estate is, in some places, like a giant store, the shelves half-full, often with damaged goods. Fixing this problem will be hard because it requires a fundamental re-structuring of debt, whereas stimulating demand is often a simple matter of lowering interest rates.

What this means for the individual home-seller is that Tim Ellis was right. Tim, Redfin’s real estate analyst, prepared a comprehensive analysis showing that homes listed in winter sell for more money, faster, with less risk, than homes listed in summer. The findings were so surprising that I delayed their publication for nearly a month, insisting that Tim look at possible confounding factors. After I ran out of reasons to block the report, we published it, but I still didn’t believe it.

But anyone who listened to Tim, and hung a sign in their yard this winter, is probably glad she did. Good listings have very little competition just now in most markets, and plenty of demand. Just this weekend, we sold a Portland home in 48 hours, with four offers coming in all over asking price.

This may change, as many sellers who took their homes off the market before Thanksgiving will be back on the market in February or March, after waiting the requisite 90 days for brokers to market the property as new again. But in many places now, we see a lot of demand, and not much to buy. It would be interesting to hear from real estate consumers and agents alike if your experience has been different or the same.

Worse yet, when they do finally find a home that they want, they often submit an offer only to find that theirs is one of multiple offers that the seller has received—increasingly our agents are reporting bidding wars and multiple offers in numerous markets.

So what’s going on? How can inventory be high but buyers are hitting slim pickings and multiple offers? Well, for starters, although listings may be up from January—which is true every year due to the annual winter hibernation of the housing market—on-market inventory and new listings aren’t actually all that high for this time of year. In fact, in every Redfin market except Las Vegas, new listings are down from last year:

Not only that, but new listings of non-distressed homes, which are more frequently well-kept and owner-occupied (i.e. the kind of home that most non-investor buyers are interested in), are falling over twice as fast as bank-owned (REO) listings:

This result isn’t suprising at all if you’ve spent any time talking with home owners lately. Anyone who doesn’t absolutely need to sell seems to have decided to wait out the market, either hoping for a better opportunity to list their home next year or just renting it out to take advantage of a supposedly increasingly hot rental market.

Of course, if we’re trying to figure out what’s going on in the market today, and where we’re headed, we can’t just pretend that the distressed listings don’t exist.

When it comes to pricing, REOs are selling for 20% to 50% less than similarly-sized non-distressed listings, but the price trends of the two have been moving in the same general direction over the last year (click any of these charts to enlarge):

The overall price trend (both for REOs and non-distressed homes) has been down in most markets over the last year (Boston and Washington DC’s flat prices are two notable exceptions). Meanwhile, sales are slowly clawing their way out of the post-tax-credit gutter, but a decent recovery in sales is currently being held back by a serious lack of quality inventory.

Allow me to illustrate today’s market dynamics by way of a Venn diagram (because who doesn’t love Venn diagrams?):

If we don’t start to see more listings from owners who have the equity to put their homes on the market, prices of increasingly rare non-distressed listings seem likely to stop falling soon, just due to basic supply and demand. Of course, that claim leads to the big question: how soon?

Ultimately, supply and demand are the primary drivers of the real estate market, but prices seem to react to these inputs about as fast as a three-toed sloth. While the bubble was inflating, it took over a year of declining sales and increasing inventory before prices peaked and began to fall. Although on-market inventory has been declining since mid-2008, the slow recovery of sales along with a shift in psychology away from home ownership has delayed the turnaround of prices (oh yeah, there was also that delightful government meddling in the form of a giant handout that paused a true price correction for over a year as well).

As Calculated Risk recently pointed out, home prices are not far above their historic lows, although it’s a pretty safe bet that we’ll have a bit of an overshoot on the downside, followed by at least a few years of flat prices (which is down when inflation is factored in).

Foreclosures are still quite high and will likely take three to five years to work through, but growth in both the beginning and the end of the foreclosure pipeline seem to be backing off their 2010 peaks. The worst seems to be behind us on that front.

Every region has different dynamics, but with generally lousy selection, slowly recovering sales, and years worth of foreclosures to work through, where does that put us today, and through the end of this year? Barring some unforseen economic black swan, most of us here at Redfin think prices in most regions will probably stop falling by this time next year, while the more optimistic among us expect prices to end the year higher than where they are today. Sales will continue their sloth-like increases, foreclosures will be slowly but surely absorbed (many by all-cash investors), and hopefully, non-distressed sellers will begin to return to the market.

Is this a bottom call? Not really. Nobody is able to perfectly time the market, including us. No matter where we think the bottom is, we’re probably wrong (just like certain other recent high-profile predictions). Is buying a home today less risky than it was five years ago? Absolutely. Will buying a home ever be a risk-free proposition? Sorry, nope.

At the end of last week, just before sales of new homes fell again, to more than 80% from their 2005 peak, and on the same day that a new poll showed the man-on-the-street’s economic pessimism hitting a two-year low, the Dow rallied for a 52-point gain.

Wall Street and Main Street have never been so far apart. What’s going on?

David Stockman, the Reagan Administration’s budget director, blames Wall Street speculation. He wrote yesterday that “casino capitalism on Wall Street” is almost unrelated to the “disemboweled, off-shored economy on Main Street.”

But speculation isn’t the only problem. The basis for the stock-market rally is improved corporate earnings, not an influx of speculative capital. Technology, financial services and oil & gas businesses are reporting huge profits.

But all of these sectors are noteworthy for their ability to grow without much hiring. And that’s what these businesses have done, profiting by selling more products yes, but profiting even more by doing that mostly without adding people, handing out raises or otherwise spending more money.

I don’t blame anyone for it, but the latest rally has in effect been a squeeze play. The result is a windfall for stockholders like me, but most of that money hasn’t reached home-buyers on Main Street.

This becomes obvious if you just listen to this Wall Street Journal story of a typical family on the Olympic Peninsula struggling to keep its home: a 14-year-old child dies, the father slips into mental illness, the mother gets cancer and loses her job.

These hardships happened years ago but didn’t take an immediate financial toll on this middle-class family; in 2006 the family augmented its meager income with a second mortgage on their home, which is only now about to foreclose.

It’s a perfect example of how Wall Street has recovered from its excess of borrowing, but Main Street hasn’t. Most people’s credit ratings will be thrashed for years after Goldman and Citi have returned to triple-A status; these folks won’t be buying houses any time soon.

So one reason that housing has declined for everyone except investors — whose activity in the housing market is at an all-time high — is that the would-be buyers of those houses are distressed, too. In most markets, including Atlanta, Seattle, Chicago, San Francisco and New York, price drops have been concentrated in the low- and middle-end.

There are other factors, including the limited liquidity of the housing market and the slow pace of price discovery, the absence of quality inventory as sellers wait for better days and buyers hold out for better deals, but the simplest explanation is that the housing market is down because the middle class is down.

The stock market is up because the upper class is up. Eventually, as we’ve argued before, the money will trickle down and the whole economy will buck up. Already housing is at its most affordable level since 1975. But even so, Main Street can’t always afford it.

In both markets, three trends jumped out at us from the August numbers:

1. Sales volume declined, by 7.7% in King County and by as much as 24% in the Bay Area counties. After a disastrous July, we expected sales volume to bounce back, especially in Seattle, which wasn’t affected by the California credit expiring in July. Since prices follow sales volume, this tells us that prices may fall further than most analysts originally expected — and since our revenues have been fairly steady, that Redfin market-share is increasing.
2. The number of homes for sale declined. When sales dip, inventory usually piles up, but most sellers are pulling their properties off the market ’til spring. This means sales volume will continue to be low throughout the winter, as buyers and sellers wait one another out to make the first move. Since we see an enormous numbers of buyers out in the market, conditions could change fast, but probably won’t: most economists expect interest rates to remain low, and employment to be stagnant. When the economy improves, we do think there is significant pent-up demand, just based on the number of tours we’re hosting.
3. Prices were fairly sticky. King County’s drop in dollars per square foot was significant but not drastic at 3.5%, and some counties in the Bay Area actually saw price increases. This tells us that the market can’t correct prices quickly because so many sellers don’t want to sell short, which forestalls a recovery.

For more inside-baseball, read the actual Seattle and Bay Area reports, as well as the lively commentary from Redfin Nation. And tune in next month, as we hope to train our analytical sights on other markets, probably DC.

• In Seattle, Capitol Hill agent Bryon Ziegler talked about three listings where buyers tried to pounce on a deal only once it came off-market. In an uncertain market, he said, nobody wants to make the first move.
• Meanwhile Ballard agent Robin McCue explained why most sellers are balking at bids 10% below the asking price, because listing agents would prefer to offer the reduction to the entire market, not just one buyer, in the hopes of generating multiple offers.
• In San Jose, South Bay agent Brad Le observed that sellers are now more willing to consider buyers using FHA loans, with the listing agent calling the lender to make sure it will fund. This is one of the first signs we’ve seen in a year that Bay Area demand is declining, and also that FHA loans are gaining wider acceptance.

We started these reports assuming that the database underpinning our website would allow us to identify local trends before anyone else: we match data from the Multiple Listing Services used by brokers with property records used by the government, adding in for-sale-by-owner transactions that nobody else has. Then we slice up the data using neighborhood boundaries that we’ve assembled from different sources.

While the numbers are important, you’ve probably already realized that it’s the agent anecdotes that really make sense of it all. Many of the Redfin agents who contribute to the report are the top producers for the entire region, so they know their stuff. And they’re in the thick of deals every day, so their information is more timely than anything recorded in a big database.

Once we publish the reports, we get plenty of firsthand reactions from consumers too. Excellent neighborhood analyses have appeared on local blogs in Maple Leaf and Wallingford here in Seattle, as well as the big sites like Seattle Bubble and SocketSite. As always there’s plenty of discussion on Redfin Forums, some of it more useful than the original report: for example, it was a Forums user who was the first to correct my assumption that interest rates would rise at the end of 2010.

As we get better at assembling data and incorporating agent insights, we’ll expand these reports to Southern California, Boston, Washington DC and beyond. Let us know where you’d like to see The Authoritative Broker strike next, and what we should add to the reports.

But on Tuesday we published our monthly newsletter, arguing that the problem in the current market is weak demand. Then yesterday, we published a contrary point of view from DeeJayOh of Seattle Bubble, arguing that limited inventory was the reason there was limited demand: there has been very little good stuff to buy. And now last night I got another response to the newsletter, from a Seattle real estate agent at John L. Scott, who has lots of experience working with builders on huge new developments.

He argues that a huge wave of foreclosures is coming to the Seattle market, and that local banks — we blotted out their names — will be forced to cough up the foreclosures when they are taken over by the government. He also thinks that the drop in prices has so far been driven by fear and greed rather than distressed properties per se. It’s an opinionated piece, loaded with inside baseball and on-the-ground facts. I don’t agree with all of it — the failure of a local bank won’t cause foreclosures when really it is foreclosures from 2008 and 2009 that are now causing that bank to fail — and I think that fear-driven pricing is more prevalent in the exurbs where the writer lives.

But for all that, it’s a really good read.  The writer agreed to have his email published, but never answered the question about attribution. Guest poster, if you want attribution, please step forward!

Rates need to bump up a to create a fear of loss in the market place.  The focus will then shift from home prices to interest rates.

Fear and Greed Drive Down Prices
Every buyer seems to view each and every listing as distressed, when nationwide about 30% of homes are distressed. And foreclosures are crippling middle-income home-buyers that have had their equity removed.  This was in part due to the economy although from 2005 to 2008 there were also some risk takers in the $400K -$600K price-range.  But the point is these home owners now are tight.  Others like me, I’m upside down and we put $250,000 down in 2004.

I still made great money last year and can weather the storm.  I love our neighborhood and won’t move.  But we have had three homes listed and sold in the last six months that sold for  $125K under market value.

The first seller spoke to the original listing agent of the subdivision; that agent told him he needed to price his home to sell at $409,950 if he wanted to sell in this market.  There was a two-month-old sale 125 feet away that had just closed 60 days before for $539,000. The seller went ahead anyway, and got 5 offers in less than a week.  This was not a distressed sale. The listing agent just had a dismal view on the market or needed a quick buck.

That low sales price forced the hand of a second seller in our adjoining neighborhood, who felt his value was closer to $499,950. He was being relocated, and he used the relocation agent recommended by his company.  He listed the house for $425,000 and was pending in two weeks. Obviously a quick sale and under market value.

Our neighbor lost his job and had a friend who did short sales. The neighbor made a plea to the bank, and his friend bought the house somewhere in the $280,000 range. He put $10,000 into it and then listed and sold the home for $389,950.  His house is identical to the other homes listed; it is 400 sq ft smaller than ours which we paid $520K  for 5 years ago with $250k down.

The point being within a 7 to 9 month period and only until the last sale I mentioned, none were distressed homes.  We had comps at over $500,000.  But agents who were more focused on getting a rapid sale to stay afloat did a disservice to their clients and the entire neighborhood.  We now have 3 sales in 6 months the highest being $415,000, $409,000, and $389,000 or less.  From an appraisal standpoint everyone in both of the two subdivisions is completely screwed.

Two were move-down buyers and both sales had multiple offers and went pending in a week.

The other issue and maybe you have mentioned it previously, is that the local banks are completely and utterly screwed up.  They don’t have asset managers, they have out-of-work loan officers trying to be asset managers.  These guys can’t balance their own check books, let alone assess market value, or figure out how to position property.

The scary thing for Seattle is that [Bank A], a $3-billion bank, had $900 million in defaulted new construction loans. Excuse me?  When the heck did that balance sheet ever make sense? [Bank B, which has been taken over by the FDIC] was as bad.  [Bank C] and [Bank D] are going down in six months or less; they’re well over [Bank A's] load of non-performing new-construction loans. That doesn’t even include [Bank E], [Bank F], and the list of 20 others on the FDIC watch list.

To put it bluntly, there is not a shadow inventory of undisclosed real estate held by the banks and the FDIC, there is a frickin AVALANCHE.  [Big Bank A] and [Big Bank B] have not settled with the FDIC.  The amount of debt, distressed loans, and non-performing properties are enough to flood the market and crash Seattle.  You would see bank-owned properties topping 50% of all product on the market in our area if they brought them on.

For as many tech-savvy, business-savvy people who are in this state, as a whole we still react like we think we are some unique part of the world.  Read “Seattle magazine” March 2008. YIKES.

I try to answer every email. It usually takes a few hours. One or two have complaints about our service, which I try to resolve. Some have questions about very specific areas like northwest Washington DC or a neighborhood in San Diego, which I can’t answer without the help of one of our agents. Whenever we mention interest rates, I get political rants, often about immigrants too (I am the grandson of immigrants who were very lucky to be allowed in, so I never know what to say).

And we always get parents trying to help their children, usually by complaining about the decisions made by a son-in-law, as in: “My son-in-law sold my daughter’s NYC apartment to buy Phoenix houses at the peak. What should I do?” For some reason, I enjoy answering those the most.

Almost every month, someone offers better insight on the market than the original newsletter. For example, when we argued yesterday that demand was weakening even as distressed inventory declined, Dennis Oldroyd, aka deejayoh at Seattle Bubble, wrote back to argue that the inventory was also limiting demand. It was such a good argument that I asked Dennis if we could publish his comments, and he graciously granted our request. Here’s Dennis’s email:

Hey Glenn –  Enjoyed the newsletter today. One quick thought for you on demand. I think too much is being made of the drop in new home sales as being indicative of a major drop in demand.

The issue with new homes is not demand, it is supply. See the attached chart from Calculated Risk – the ratio of sales to starts is very high. Housing starts are at a ~40 year low — so given that it looks like the market is clearing everything that is being built, I am not sure how the market could service any more demand.

Overall demand may have slowed – but that doesn’t appear to be the core issue driving down new home sales.

Also, if you look at the ratio of sales to starts going back for the last couple years, it is clear that the market has been drawing down inventory of unsold houses over time. What I have read in other places is that the inventory of unsold homes is quite low. Given you have the bully pulpit of the blog, I thought I’d share my viewpoint.

Thanks Dennis! I agree that stale inventory or limited inventory is part of the problem, but still think demand is weak too.

It’s hardly news that one of the world’s biggest brains dedicated his life to modeling the havoc created by a million subprime mortgage brokers. If “A Beautiful Mind” had been set in the 1980s, it would have ended at a hedge fund, not in a Nobel Prize. It’s sort of a tragedy. I’ve sometimes wondered if God calibrated the size of our brains and the amount of fuel in the sun to give us just enough time to figure out the universe & send a space-ark toward a new galaxy, but the only guys who could figure this out are working for Wall Street.

What’s interesting now is that they’re fanning out to other industries on Main Street and Sand Hill Road. The most coveted employees in Silicon Valley may no longer be software engineers, but mathematicians. And the reason is simple: we now record so much data about what people are doing within the vast virtual world of the web that our biggest challenge is just making sense of it.

My last trip down to the Valley was a field trip set up by one of our investors, Greylock Partners. I met a mathematician who once developed models for predicting the likely locations of nuclear weapons in Iraq. He’s now spending his time more profitably at a social networking site, working out when to send diffident users a “win-back” email. Later that same day, I met a Chief Marketing Officer at one of the world’s largest retailers’ websites. He had no interest in my questions about branding. The team he ran was a team of mathematicians.

And the world he described was fascinating. Imagine if, every time you walk into Anthropologie or Macy’s, a guy with a clipboard follows you around, noting the path you take through the racks, the clothes you pick up, the ones you try on, the ones you get in line with, and the ones you finally buy.

He measures how much time you spend on each floor, and he comes into the changing room with you to measure how long you spend at the mirror sizing up each shirt. The next time you stop in, the whole place is re-arranged so that you don’t have to walk as far, or see clothes you don’t like, and its decor has shifted in subtle ways, which somehow makes you want to stay longer.

This is what’s happening within every well-run website. Just ask Jeff Hammerbacher, who built the data storage system for Facebook. He visited Redfin last month to talk about Hadoop, an open-source data storage system built to support the analysis of vast data sets. Jeff observed that most data now is collected by machines monitoring other machines, not by a machine collecting the input of a Macy’s sales clerk, or storing a letter to your mother.

The difference in volume between machine- and human-produced data is as great as the difference in volume between Model Ts and their hand-built predecessors. With a single setting adjusted, a web server can increase the amount of data it sends to another machine by a thousandfold.

It dawned on me then that Jeff hadn’t come to talk about how Facebook stored all your messages and status updates; he came to talk about what turned out to be a far larger data set: how Facebook stores data about what you were doing before posting that message, and what you do next.

The result? Facebook was capturing a terabyte of information about its users every day. A trillion bits of data. In 2007. Back then, Facebook was a tenth its current size.

This data creates a new competitive dynamic. First, it favors size: Lowe’s knows better than the corner hardware store what to stock because it has more data about what people want. CarMax can price used cars better than a mom-and-pop dealership because it has more data on what people will pay for, say, a 2008 Honda Odyssey. CarMax’s founder, Austin Ligon, called this information dominance.

More importantly for Redfin, this dynamic favors company-owned operations over franchises. Last Tuesday, I visited CNBC on the same day as the CEO of Coldwell Banker. We were both interviewed about the market. And the CB CEO should have known far more about it than I do: he has decades of experience, not just a few years; he manages an organization with tens of thousands of real estate agents, not a few dozen. In short, he has forgotten more about real estate than I will ever know.

But outside of calling one agent after another, the CB CEO has no way of knowing what his agents are doing; most work as contractors, for franchises, recording their deals in spreadsheets and notepads. Redfin on the other hand has a system for scheduling home tours and writing offers, which means we also have a system for storing data about every tour & offer. Months before the numbers are recorded at county courthouses or by federal agencies, we know when bidding wars are back, or when tire-kickers have taken over the market. We can see the whole elephant, and we’re minutely sensitive to when he’s about to roll on top of us or stampede through the jungle.

When Redfin was asked what would happen when the Commerce Department announced its numbers at 10 a.m., others guessed. We didn’t.

(Earlier we said that Coldwell Banker’s CEO writes a column for Inman News. This was incorrect. We apologize for the error.)

It will take months to sort this out, as contracts signed on May 1 and beyond won’t close until June, and may not reach the national data services until July. But we can already see a sharp drop in the earliest leading indicator, traffic to Redfin.com.

Generally in the past few months, Redfin’s traffic has enjoyed double-digit percentage-point gains in traffic. But if you compare traffic on Monday, April 26, before the credit expired, to Monday, May 3, after the credit expired, the difference is stark and uniform: an 8% drop in one week. Here’s a table that provides details on which markets dropped the most:

We have measured the drop across several different time frames, comparing this past weekend to the weekend prior, and the data are the same. It confirms the prediction we made before the credit expired that summer demand would not grow as much as it usually does from April – July.

Sasha Aickin, the leader of our search engineering team, first noticed this change, and further observed that California’s decline was less drastic than other markets, probably because California has a state tax credit that began on May 1. As you would expect, the decline in California markets was more moderate (-6.6%) than all the other markets (-11.0%).

And there are, of course, complicating factors. On one hand, our Seattle traffic may have declined in anticipation of a May 4 – May 6 suspension in listing updates from one of our data providers, the Seattle-area MLS. And our agents report being very busy, in all markets. On the other hand, agent activity often lags traffic changes by a few weeks. And the markets (Phoenix, Portland, New York) where we recently opened the site for business have had such strong traffic growth until last week that any decline is noteworthy.

Of course, it is still early yet, and the fundamental forces driving the market are prices and interest rates, not government programs. Moreover, Redfin is only one of many real estate-related websites that consumers visit. We’ve heard from at least one other leader of a major real estate site that traffic is down this week, but we’re interested to learn if this trend is consistent across all real estate websites. Leave a comment and let us know what you’re seeing or, if you’re a home-buyer, how you’re feeling…

(Photo courtesy of Warner Brothers Pictures)

And then, because we are sensitive creatures who live for praise, we wait for the responses… When the market was going down, Realtors would complain that the newsletter was fanning the flames of an already catastrophic market while consumers said it was a breath of fresh air. Given Redfin’s history as a consumer advocate, this didn’t bother us. As Franklin Roosevelt would say about industry fat-cats, “They are unanimous in their hate for me, and I welcome their hatred.”

But now that our newsletters have taken note of a market up-tick in some areas, we get all sorts of outraged screeds from bubble-bloggers and market-vultures. Here’s one of the briefer responses to this month’s newsletter:

The NRA  [likely a reference to the National Association of Realtors, not the National Rifle Association] obviously your Master.

p/s i wonder about your resume.

Enjoy your turkey

And here’s one from last month:

Dear Glenn,

How stupid do you think we are? Housing prices aren’t rising anywhere. 10% of houses in America have delinquent mortgages. If we didn’t buy yet, how are rising prices going to get us to pull trigger? Face it- the market has run out of stupid people. You are actually going to have to tell your clients to lower their prices to make a sale, especially when rates go up.

BTW- Spreading rhetoric like this has made me decide to never be a Redfin customer. I thought you might be different than NAR but I guess not.

-Kyle

We’ve seen the same tone on our forums. Yes, by all means, let the fur fly. There’s a very good argument to be made that prices will decline further, and it’s largely hosted on Redfin’s site.

But it’s hard to understand complaints that we’re the ones boosting the market. Most of the screeds cite the huge number of foreclosures as evidence the market will keep dropping  (whereas we tend to think that a big increase in interest rates is the most important swing factor). But every Redfin newsletter already discusses foreclosures at length, using words like “scary” and “bottomless.” Here’s what we said about foreclosures last month:

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… Bank re-possessions increased 21% in the third quarter as compared to the second.

And here’s what we had to say about foreclosures in the latest newsletter:

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… 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.

For the bubble bloggers, it is not enough for Redfin to recognize that trouble lies ahead. We must also suppress any evidence that that good news has occurred in the past. The primary source of this good news has been the Case-Shiller index, which shows a price increase in most areas over the summer.

Anyone looking for bias in the Case-Shiller index is looking in the wrong place. The Case-Shiller index is the most well-respected, academically rigorous index in the world, created by Robert Shiller, aka “Mr. Bubble,” the only economist credited with predicting both the tech and real estate bubbles. Case-Shiller economists painstakingly cull sales records for months in order to throw out sale prices inflated by kitchen-remodels and the construction of big new houses.

When we report on the Case-Shiller data, we aren’t providing a projection on the future, much less our own opinion, neither of which we tend to offer in our monthly digest of market news. In fact, the only projection we’ve offered on real estate prices was last month, and it was the kind of projection designed to tell anyone buying a house now to wait six months: 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…

Like a broken clock that’s right twice a day, either one of those opinions is bound to be right sometimes, and bound to be wrong other times. As even the perpetually depressed philosopher Albert Camus once had to concede, “happiness is inevitable, too.” The truth is more complicated than any one ideology allows, but people need to hear it.

So we’ll put together a panel of enthusiasts and skeptics to talk about where they think the market is headed, and maybe that will provide a more balanced view of a very complicated subject. And we’ll keep assembling all the facts. If you’d like to be on the panel, send us your credentials. If you feel we’re suppressing important facts, let us know what they are and where to corroborate them, and we’ll include them in the next newsletter. And by all means, keep posting, commenting, arguing and writing us emails. We love the debate. We just want to keep it civil & fact-based.