He wrote last week that Feb 06 and Feb 05 would have equal sales, based on January’s pendings. I was worried about a spring bounce.
Today he writes that Feb 06 sales are down 25% from Feb 05 (1831 vs 2486, respectively).
What happened to the 600 January pendings?
If he adds those 600 January pendings to February pendings, March 06 sales will be down 20%. So this would be a sustained -20% y-o-y sales change. If the 600 January pendings are just builder gimmicks, then March 06 sales would be 35% y-o-y decline.
This may explain the rise in median price:
“The sales mix in 2006 has 9% fewer homes under $400,000 and 20% more homes over $900,000 versus 2005. This skews the average upwards without indicating that the price of a home has actually increased.”
I e-mailed Mr. Casagrand, and asked him how he explains the rising median price. Here is his response:
“The reason that both the average and median prices have increased during the past year is that the sales distribution has shifted dramatically. The low end of the market has been crushed by the loss of buyers due to the increasing interest rates, especially the ARMs. The net effect is that the mix of homes sold has proportionally more expensive homes than previously. So comparing the average price now to the average price a year ago is like comparing an apple to an orange. Price reductions are real and ongoing and increasing. One neighborhood has not sold a house over $900,000 in the past 5 months where in the spring the over $900,000 sales made up 33% of all sales, and I see this trend all over.
The way to watch the market is to track inventory and unit sales. As long as inventory is in the 6 month (180 days) supply range there will be downward price pressures. The key indicator is the “days supply” this gives you the relationship between homes on the market and buyers. When prices were shooting up we were running about 30 days supply, to give you some perspective. ”
