So the August numbers are in and the L-shaped recovery continues. It's not exactly time to bust out the Dom Perignon but I think most people would agree they can put away the hemlock as well.
Here are some of the highlights based on my reading of the data. I'm sure others will differ and some will predict double dip recessions or great depressions.
Without further adieu:
For the Optimists (including me):
- Pending sales for August 2009 were consistent with August 2008 (up 1.5%)
Closed sales were only ~5% lower than August 2008
- Note, pending sales were almost 50% lower than 2008 for the months of February and March.
- Median prices have held firm all year long hovering just under $300K (never falling under $260K), coming in at $280K this past August, 4% higher than July.
For all the Downers (you know who you are):
- Given the amount of inventory and number of closed sales, it'll take 9 months to absorb what's currently out there. Economists like to see it closer to 6 months for it to be a balanced market.
- Median prices for August were 10% lower than August 2008.
- Flat metrics do not mean we have a recovery. It just means we're not in free fall.
I had to struggle to find ammo for the downers this month. I think if you look at the last several months, it's pretty clear prices are not dropping precipitously but holding pretty steady and condos are being bought and sold (the market is clearing). In fact, 50% more condos were sold in August than February, the low point of the year.
Alright, you can have at it now.
If you fall out of a 10 story window, you eventually stop falling and you might even get a bounce. As you go past the 3rd floor on the way down, you still feel pretty good. I think this is that bounce, but dead is dead. Call it an L shaped recovery, if you will. When Ali stood over Liston after the knock out they were L-shaped, but Liston never got up. He just kinda laid there. Eventually when it was over he got, up showered, and went home
Flat is good for now.
Wendy, not trying to be a downer, but do you think that this small bounce could be a consequence of the season (summer is the best-selling season, right?) combined with the small percentage of prospective buyers who didn’t see their income/investments fall as much as or more than real estate prices and decided to take advantage of the 20% discounted prices? What is fall/winter/spring going to look like now that the selling season is over and the “richest” buyers aren’t in the market anymore?
Got my 2010 RE assessment for my downtown full ocean view 2 bedroom condo today – minus 23%, sweet! Since I bought in 2000 and have no plans to leave anytime soon no biggie. But for someone looking to buy in 2009, beware!
I’m told if I bought a two bedroom in the (empty)twin Bellevue Towers I can get a free unit thrown in so I help pay the homeowners dues and taxes….
This mess has a long way to go before we reach any point of stabilization!
I can’t believe the notion of the recovery being under way is at all controversial. That’s pretty much been the consensus view by economists, bankers, and federal regulators for months. Wendy, don’t tip toe around these people. The simple truth is we’re bumping along the bottom, prices aren’t going up or down, and anyone thinking they’re gonna get a great deal by waiting a year will be disappointed. To be fair, anyone thinking they’re gonna buy now to flip next year will also be disappointed.
GP, in securities trading a similar price movement is called a “dead cat bounce”. Seems appropriate to what you describe.
Economic recovery is on it’s way… for unemployment, stock market, etc. I said it would happen come September-October of this year. However, economic recovery does not translate to real estate prices back on the rise. Remember what got us in this mess to begin with; prices were over-inflated BIG TIME. It’s going to take a very long time to witness “recovery” when it comes to the real estate market. In all honesty, it isn’t a recovery at all for the real estate market…. It was never real in the first place. It will take a minimum of three to four years before prices are where they were at peak. If you want to talk about the real estate market in terms of a “recovery,” I think its best positioned to accept we are indeed getting closer to a healthier balance of inventory to buyers as clearly the inventory in recent months has been much higher than buyers’ demand. Again, when we meet this optimal equilibrium of inventory to buyers’ demand, this does not and will not mean prices rising. Prices rise only when inventory is less than what the buyers demand. We won’t see that for a very long time. You can mark this statement too! So, call it a negative statement if you will, because I really don’t care. Truth is truth.
People in the financial markets all agree that the weath effect caused by a rising stock market is not sustainable without corporate profits in 2010. The stock market will fall, unemployment will rise and real estate values will again decline. Perhaps as much as another 10% – 15%. Recovery equals jobs and jobs means consumers, both are missing right now.