New Home Sales Dropped Back in September

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Sales of new homes fell 3.6 percent to an annual pace of 402,000 units.  In addition, the previous  three months saw a net revision of -26,000 units.  Weakness has clearly reappeared but we are still off the first half lows.  

  • The 3.6 percent drop is the most since March.  Still, we are well off of the lows set in the first quarter.
  • The looming new home-buyer tax credit expiration at the end of November is likely responsible for at least some of the drop.  Since new home sales represent contract signings,the lead time required to close before the deadline is significant even if the home is already completed.
  • Inventory levels continue to improve and have reached levels not seen since the early 1980’s with just 251,000 units on the market.  With a relatively low amount of new building in the pipeline, inventory levels will likely remain tight.  (Historical average is around 300,000 units for sale)
  • Prices moved higher, likely reflecting a change in the compostion of sales.  As new home-buyer tax credit eligible sales dry-up, the excess low end transactions will fall out of the data.

Keep an eye on the existing new homes for sale number.   Go back and read my blog of July 29, 2008… it was noted then that in July 2006 it was 572,000 homes.

Source:  U.S. Department of Commerce and Wells Fargo Securities, LLC

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Existing Home Sales…Best Performance since Summer 2007

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Nationwide, existing home sales jumped 9.4 percent in September to an annual pace of 5.57m units, the best performance since summer 2007.  Buyers and Sellers continued to take advantage of the first-time home buyer tax credit. 

  • The 9.4 percent increase is the biggest jump since the combined single and multi-family series began in 1999.  Single- and multi-family properties both saw increases of more than 9 percent.  The longer-running single-family series saw its biggest monthly increase since 1983.
  • Inventory levels have improved, but are still a long way from “normal”, and equilibrium may be years away.
  • Buyers are likely rushing to complete transactions ahead of the looming tax credit expiration.  We would expect higher sales levels to persist through October and into November before collapsing in December if the credit is not extended.
  • Average and median sales prices remain under pressure as buyers with access to the tax credit tend to purchase lower-end homes, which are dominating the marketplace at this point.

Source:  National Association of Realtors and Wells Fargo Securities, LLC

( My comment:  Locally we are seeing this parallel that is being reported on the national level…   Lower-end homes are dominating the marketplace/  October sales have been fantastic/  Inventory levels have improved slightly; meaning that the high amount of inventory is subsiding, but we still here locally have a long way to go to get to “normal”)

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Lakehome Sales.Alexandria, MN: Quarter 3, 2009

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In reporting the sales statistics, I really like looking at the data.  No matter what it says, nonetheless, it is still data.  How we use the data to make decisions is what counts.  I will continuously report the market data as long as I can.  I have always found the Alexandria, MN real estate market to be stimulating and upbeat.  This data might show sales statistics that are down.  So what does that mean and what are you going to do about it?  As statistics go, they won’t always be down (once at zero, they have to go up…even one sale at that point would be 100% increase) nor will they always be up; but knowing where they are is powerful in decision making.  What will the data be like, say  4 years from now?    There’s a parable about wealth under your feet, I read it about 28 years ago.  The gist of the parable is about two brothers, one left home searching for riches and the other stayed home toiling the soil.  After several decades, the brother came home, broke and penniless.  The other one discovered, I think, it was diamonds under the soil many years later.

These Lakehome statistics are from the Alexandria, MN MLS system.  They are refined to Douglas County sales in that system only.

3rd Quarter 2009:  29 lakehomes sold.    Total for 1st three quarters in 2009 is 54 lakehomes sold.  This represents a 14.71% decline against the same period in 2008.      Of the 54 sales,  41 sales(75.9%) have been under $400k…4 sales have been at or over $600,000…No sales over $800,000.      Of the 54 sales, 30 sales of the first 3 quarters had an Alexandria, MN address.  Of the 30,  9 (30% of the 30 sales) of them were over $400,000/ Miltona address had 6 of the 54 sales, Brandon address had 8 of the 54 sales)

3rd Quarter 2008:  34 lakehomes sold.     Total for 1st three quarters in 2008 is 61 lakehomes sold…36(59%) sales have been under $400k…7 sales were over $600,000…Two sales over $800,000  (44 sales or 72% had an Alexandria, MN address.  22(50% of the 44 sales) of them were over $400,000/Miltona address had 9 of the 61 sales, Brandon address had 1 of the 61 sales.

So far, overall sales have shown a decline from 2008 with the 2009 market.  If you compare this year over the previous years, unless 4th quarter spikes up, we are going to see a sales volume somewhere relative to the 1996-1997 market (see chart below).  In 2008, we did 21 sales in the 4th quarter.  So far, in 2009 it shows 5 closed sales….and 15 pending  (7 over $400,000) in the 4th quarter.

If you have been reading my blog since the first of the year, you will see that my printings were consistent with my reading that the 4th quarter could be the strongest quarter of the year.  The past three quarters have all been a negative posting over the previous years numbers.  In the residential and lakehome columns, you may see a positive posting for the fourth quarter 2009 over 2008.  You will also see that the decline in sales, since the runup began back in the mid-1990’s, that reached it’s crescendo in 2004 and the subsequent fall to the levels of 2008 and 2009.  I have been saying all year that I believe 2009 will be the bottom.  With a potential uptick in the 4th Quarter 2009 over 2008, you will start to see that “trough”.  Keep an eye on the Consumer Confidence Report.  An upswing of 20 points will help to put my real estate market on solid footing.

Another point; the Buyers started gaining control of this market in 2005 and they currently believe that they have a full choke on it.  Their grip will weaken  as this market finds it’s bottom, which it (market) may be doing right now.

LAKEHOME SALES CLOSED IN DOUGLAS COUNTY

  • 1995                        56
  • 1996                        66
  • 1997                        106
  • 1998                        132
  • 1999                        141
  • 2000                      127
  • 2001                       113
  • 2002                      136
  • 2003                      137
  • 2004                      152
  • 2005                      120
  • 2006                      107
  • 2007                      121
  • 2008                      82
  • 2009                      59 so far (15 pending)

If you’d like some other info, let me know.  Also, feel free to respond to my blog.  Some interaction would be good, it’s a little lonely out here in cyberspace.

 

Market data from Greater Alexandria Area Assoociation of Realtors Multiple Listing Service.

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Residential Sales. Alexandria, MN: Quarter 3, 2009

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Here’s what I got:   These statistics are from the MLS and the Residential and Residential w/Acreage Section.  They are comparative with 2008 statistics which I think is indicative of where the market is today.  I have added the sales totals for the complete years from 2008 back to 1995 in this report.  It appears that our local sales volume will end up in the 1997 to 1999 era of total sales, which is what I have been telling the folks.  This market has taken a total collapse and I firmly believe that it is in the “trough” (barring any unforseen catastrophes).  We in the real estate industry are going to go through our own paradigm shift as well.  This market that we are entering is probably going to stay like this for awhile meaning that we won’t need as many workers in the real estate industry.  The whole issue of housing will be debated in the halls of Congress for some time to come.  Housing has been a sacred cow since WWII and funded with tax incentives, special interest rates and tax benefits.  Don’t be surprised if housing comes under the knife if we are to compete with China.  I too, sincerely doubt that we will see the “glory days” of housing that we just went through for some time again.

  • Total Sales 3rd Quarter.2009(Douglas County.Residential.Residential w/acreage):  79 (a 24% decline from 2008)
  • Total Sales 3rd Quarter.2008:  104   

 

  • Total Sales:  YTD.2009.  196 (a 21.91% decline from 2008)
  • Total Sales:  1st Three Quarters.2008.  251 

 

  • Sales by price.3rd Quarter.2009:  $0-100,000/25,   $101-125,000/12, $126-150,000/14,    $151-175,000/9,   $175-200,000/6,   $200-225,000/5,   $226-250,000/3,    $251-300,000/1,   $301-350,000/2,    $351-400,000/2.   Total-79
  • Sales by price.3rd Quarter.2008:  $0-100,000/19,   $101-150,000/35,   $151-200,000/30,    $201-250,000/10,    $251-300,000/4,   $301-350,000/4,    $351-400,000/1,   $401-450,000/1.    Total-104

 

TOTAL  CLOSED SALES FOR RESIDENTIAL AND RESIDENTIAL W/ACRES IN DOUGLAS COUNTY.  This data is from the Residential and Res w/Acreage section from the MLS.  It does not include the Condo/Townhome sales.  Sales data is isolated to Douglas County and from January 1st  to December 31st for each given year.  The information is representative of the Alexandria, MN market, however, does not completely represent all sales for the County.

  • 2008 – 313
  • 2007 – 342
  • 2006 – 367
  • 2005 – 379
  • 2004 – 398
  • 2003 – 348
  • 2002 – 369
  • 2001 – 311
  • 2000 – 293
  • 1999  – 278
  • 1998  – 258
  • 1997  – 167
  • 1996  – 116
  • 1995  – 103

 

Statistical information provided by Greater Alexandria Area Association of Realtors Multiple Listing Service

 

  • 2008:  86.5% of the 3rd Quarter Sales had an Alexandria address
  • 2009:  69.6% of the 3rd Quarter Sales had and Alexandria address
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Heart to Heart

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I just think that it is time to have a little heart to heart talk about this market.  I have been working  very hard in this market for 27+ years so I think that I am qualified to speak candidly about this market and these times.

I must admit that I wish that we had never seen the “run up” in real estate after 9-11.  We were doing fine in the markets, they had been improving steadily, businesses were stable and progressing and consumer confidence was rock solid.  Once credit became as easy to get as drive-in hamburger, my business went through the roof and into the stratosphere.  I personally did 117 closings and over $30,000,000 in closed unit sales without an assistant in 2004.  It was absolutely insane.   Once the word was out, we went from 130 real estate agents in our Board  in 2003 to 230 in 2007.    Well, when you are new in the business, you want to get a listing.  Our listed inventory doubled henceforth…and you know Economics 101 (supply and demand?)…we literrally killed the Alexandria market.   Sales have steadily plummeted and inventory has steadily risen.  You know what that does to pricing?  It goes down.  Until I see sales improve (the numbers start to go back up) and inventory start to show SOME sign of decline, will the Alexandria market pricing start to reverse it’s trend and go back up.

I am now seeing listings that are priced close to half of what they were in 2006 (they are still for sale).  30% less is common.   Let’s face it…the MARKET HAS FALLEN.    In my travels, I believe that I give good advice to people about their real estate here in Douglas County.   One of my key points in the listing should be that the property should be listed and sold within a reasonable length of time.  All of the components should be aligned for that event to take place.  What happens next is a combination of errors.   When a market declines like it has been doing for 4 years, Sellers are reluctant to reduce the price to get it sold in a reasonable length of time (I think that180 days or less for residential should be the goal for pricing).   Taking a loss on any investment is not an easy task for a human.  Many studies have been done on this subject, I don’t have the time to delve into that at the moment.  Anyway, if the price of the market does not fit the Seller’s price.  Don’t list it for sale.   Sellers and Agents DO NOT set the market price…THE BUYERS DO!  My job is to inform Sellers what Buyers are willing to pay for property in a reasonable length of time.   And let me tell you, that job lately has been extremely difficult.

Too many listings for a given market only further compounds the pricing issue.  The Local Realtor Board has budgeted for 165 agent renewals this year, so my business will probably see some more attrition in it as well as any other real estate connected endeavor.   This market will settle down, Sellers will know what their property is really worth in time.  In my prediction, I think that this market and it’s eventual pricing that is here will settle in for a long while.   Forget about explosive returns, think about cash flow and making the payment.  Better yet, think about paying off the debt!  The best house that I have ever seen is the one that is paid for.

Source:  Greater Alexandria Area Association of Realtors

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COMMENTS WELCOME!!!!!

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Feel free to comment and interact with the site.  If you would like more data than what is posted…just ask for it.  I will check the data and report back.

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Douglas County Agricultural Land Sales

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In trying to find some sales this year, the Alexandria MLS didn’t have much in there for data so I checked the Douglas County records.  There were 21 total sales of ag land but the top 3 sales were between $8000 and $10000/acre, so removing those…the remaining 18 sales averaged $2356/acre.   For a more detailed breakdown of these sales, give me a call.  I have all the info at the office here in Alexandria.

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