Housing market tanks

Prices still too high

Nearly 49% of all homes sold in Atlanta in April were sold at a loss.  The figure is 47% for Miami, 40% for Las Vegas, 35% for San Diego, and 30% for Chicago.  For those of you who think the housing collapse was confined mainly to the four states of California, Florida, Nevada and Arizona, the figure is 35% for Toledo, 36% for Minneapolis, 24% for St. Louis, and 21% for Seattle.

The number is a surprisingly low 18% for the New York metro area.  But that is due to the collapse of sales volume throughout the entire New York metro area in the past six months largely because sellers have refused to drop their asking price.

Most Sellers Are Reluctant to Lower Their Asking Price

Trulia.com was the first website to track what percentage of home sellers had dropped their listing price since posting the house on their site.  In April 2009, Trulia reported that 27% of all listings had lowered their asking price.  A year later, that figure had declined to 20%.  The CEO of Trulia described the change in this way: “We’re beginning to see early signs of stabilization in the housing market.”  Is that really what it indicates?

A mid-April Gallup Poll published in the Washington Business Journal announced that 34% of respondents thought that home prices would rise in the next year.  Only 23% of them believed that prices would fall.  For respondents on both the east and west coasts, 39% thought that prices would climb.

This poll seemed to show that optimism about the housing market was returning to a growing number of Americans.  A great influence in this change was the many real estate analysts who had confidently been announcing over the past six months that housing was “bottoming.”  If home prices were likely to be higher a year from now, why would a seller drop the listing price?

The May report issued by trulia revealed that the number of listings on their website with price reductions through the end of April had increased to 22%.

Twelve of the fifty cities studied showed more than 30% of their listings with price cuts including Minneapolis, Dallas, Jacksonville, Boston and Nashville.

Regardless of whether the percentage of homes with price cuts is 27% or 22%, the one clear conclusion to draw is that the great majority of home sellers have been very reluctant to lower their asking price.

Most sellers have probably not seen a less-widely reported study by the online brokerage firm ziprealty.com.  On May 17, the Wall Street Journal posted this revealing report online which showed the percentage of sellers listing with ziprealty in 27 major metros who had lowered their asking price in the past 18 months.  For all 27 metros, the average percentage of home sellers who had dropped their listing price was more than 41%.  This means that more than 40% of the homes listed on ziprealty in these major metros had not sold as of April 30 in spite of dropping their listing price at least once in the past 18 months.

Soaring House Rental Listings Offer an Enticing Alternative to Buying

A continuing problem for home sellers throughout the country is the attractiveness of renting a house for potential buyers.

As early as 2005, apartment landlords were facing heavy competition for renters from investors and speculators who had purchased houses during the bubble years.  An article in an August 2005 issue of the Wall Street Journal entitled “Speculators Push Rents Down” pointed out that a glut of investor-owned properties was dragging rents down and creating a “shadow supply of rental units that doesn’t show up in traditional rental market measures.”  This was a key factor that caused the vacancy rate for all rental properties to climb to record levels of more than 10%.


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4 responses to “Housing market tanks

  1. Anon

    I lived in Atlanta. Land is basically free so they just keep building. It’s also the first time I had heard brokers use the term “used” house. The basic feeling was that houses were like cars and depreciated accordingly. I bet if you stripped out the new house prices over the last ten years, the market has never appreciated. Plow baby plow, the suburban dream.

  2. Anonymous

    Even feds can’t prop up markets forever: physics of business cycles are beyond any sovereign manipulation

    Many renters/homeless/squatters will be chronically jobless or underemployed, esp in high-tax, high-cost, unionized locales like NYC/NJ/CA/IL/MI/OH, etc

    In a more virtual, more globalized economy any new jobs can be located in more efficient locales…but housing is fundamentally immobile and illiquid

  3. Retired IB'er

    “The number is a surprisingly low 18% for the New York metro area. But that is due to the collapse of sales volume throughout the entire New York metro area in the past six months largely because sellers have refused to drop their asking price.”

    Certainly echoes FWIW’s real time commentary…

  4. Old School Grump

    I’m sorta confused by this stew of stats.

    In the first paragraph, for instance, the fact that such a high percentage of houses have been sold at a loss doesn’t tell you anything about the direction of “the market.” It only tells you that the owners probably bought in the past ten years. Even if their local market has bottomed or turned around, and their loss in April 2010 is smaller than it would have been in April 2009, it’s still a loss.

    The next one intrigues me. In NY metro, only 18% sold at a loss. Even if volume was too thin to be considered predictive, it still means 82% of the transactions weren’t at a loss. Who? How?

    Am I missing something here?