Bob Casagrand’s Realty Report

[powayseller]

I love reading Mr. Casagrand’s reports, since he has MLS access and can explain the pricing trends. I have wondered why prices are climbing despite rising inventory and increasing DOM.

He notes that sold homes are listed for about 10% less, and have a shorter DOM, than the ones left in inventory:
“…the trend of lower asking prices for the sold units versus the one’s left in inventory is a common theme in all the areas I am reporting on. It is almost like we have two market pricing.”

He also notes there are two pricing structures, and the lower end houses are not moving as fast, pushing up the median price:
“We are still seeing a strong decline in the under $400,000 buyer, down about 36% from last January, while our total unit sales are down 29%.”

He states that Feb 05 and Feb 04 have the same number of sales, which could signal a spring bounce in demand. He believes that 35000 sales for this year would be low enough to create serious downward pressure in demand.

[uncle_git]

Bob Casagrand just posted his latest take on Feb’s preliminary numbers.

http://realtytimes.com/rtmcrcond/California~San_Diego~bobcasagrand

If I was in any shape or form staying in San Diego – this man would be my realtor – refreshing honesty given how many realtors are still giving the old “Buy now or be priced our forever” line.

I sincerely hope that Bob prospers in the bust as I’m sure he has in the boom – he’s one of the decent, honest realtors who are providing a service and telling it like it is – one that’s actually a credit to his profession. Hopefully the bubble aware people who’ve been reading his updates use him to buy when the time is right.

#Disclaimer : I’m in no way connected with Mr Casagrand beyond the fact I’ve been reading his realty times postings – I’ve never done business with him and I’ve never met the man.

[powayseller]

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. ”

[an]

I agree with you completely. I’ve been reading his commentary too. It’s very insightful. I will definitely use him when the time comes. It’s quite annoying when real estate agents try to use the standard rosey arguements to buy now.

[uncle_git]

Median price doesn’t actually tell you about what home prices are doing – it’s more a reflection of what people are paying for homes – which *sounds* like the same thing – but it’s not.

Rising rates and the pending extinction of the first time / low end buyer could be the reason for a high % of sales not closing in Jan/Feb.

The pool of first time buyers is rapidly shrinking due to credit tightening and the rising ARM rates – these trade up buyers are reliant on someone buying their overpriced condo so they can leverage up. Once the first time / low end buyers dissappear the whole house of cards starts to fall….

[an]

This is very true, median price is what people are paying for the homes. People tend to have a tight price range of how much they want to spend on a home, especially move up buyers. With this in mind, even if price fall people will still buy that 500k house if they set out to buy a 500k house, except now, they can probably get more house for 500k than a year ago. Which is why the median price is still ticking upward ever so slightly.

[picpoule]

I like Bob Casagrand’s monthly analysis, too. For a realtor, he seems to be pretty candid about what’s going on. A few months back, he wrote about the dearth of buyers for the $400k and under properties. He predicted this would have a ripple effect on the properties in the next higher tiers as $400K and unders would not be buying up, leaving $450-$500K buyers unable to sell their properties and move up, making it hard for sellers of $600K properties to unload, etc.

The higher end properties have been skewing our median prices in the Denver area for a year or so now. But as the Rocky Mountain News reported today, home sale prices in the Denver area took a larger than expected drop in February, prompting some experts to wonder if the upper-end housing market is starting to cool. Maybe that’s about to happen out there, too?

[Anonymous]

Bob notes that there’s no lack of sub $400K listings. Being curious, I’ve been keeping track since Oct 12 of last year.
Just counting condos and SFR, sub $400K listings accounted for 23.2% back on Oct 12. That category has been steadily rising and, as of Mar 5, accounts for 26.8%.
Now I wish I kept track of the $1M+ category.

[Author]

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