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As you can see, not a lot of sales or pendings compared to the number of listings. As a rule of thumb, figure the sales went pending 30 to 60 days ago, and the pendings occured in the last 30 days. Pendings are a more immediate reflection of what’s going on although you have to be careful as a given a home could be pending more than one month, whereas a closed only happens once.

There’s not much separating any of the price ranges. The two active listings in the under $200K price range are a “mistake” (probably intentional to get more views) as they are actually condos that should be listed as condos.

The following shows continuous days on market (CDOM). It’s much more representative of the condition of the market than simple days on market. Days on market (DOM) is how many days the home has been on the market under the current listing – but a home could have been listed many times by one or more agents. CDOM only resets to zero when a property has been off the market for at least 90 days.

As you can see, homes in the $300K-349K price range have been sitting a long, long time. They’ve probably been listed and relisted by multiple times by multiple agents.

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Note, however, the CDOM for the 2 homes that sold – only 24 days.

You can just feel the “stickyness” of home prices. Sellers are hanging on to yesterdays prices, and buyers are waiting for them to drop. I usually calculate inventory numbers (how many months of inventory given the current rate of sales assuming no new homes come onto the market). But with no sales in all but one category…

Of course one can consider an overall average for Milton and say there were 55 homes on the market during the period and 2 sold, so the inventory is 55/2 = 27.5 months or just over 2 years. That’s pretty ugly.

But two homes did sell and its not rocket science why. It comes back to whether a seller wants to list their home or sell it.

Here’s what the Zillow report details year over year median Zestimate (Zillow’s estimate of value) for local cities:

The report goes into much more detail. But the bottom line is that all areas have experienced a decline in values over the past year (at least as measured by Zillow’s median Zestimates).

The spring selling season is upon us and it shows in the stats. You’ll find some big jumps up and down in prices and inventory depending on the area. Some areas like NE Tacoma (MLS areas 94-95) don’t have a lot of actives/sales so the median figures need to be taken with a grain of salt.

Much to the relief of sellers, the inventory numbers have come down in most places.  Unfortunately, Pierce County prices continue to deteriorate overall.

• Number of Active listings: King & Pierce County WA
  
• Number of Active listings: Edgewood, Milton, Sumner, NE Tacoma, & Federal Way WA

• Number of Sold listings: King & Pierce County, WA
• Number of Sold listings: Edgewood, Milton, Sumner, NE Tacoma & Federal Way WA

• Average days on market: King & Pierce County WA
• Average days on market: Edgewood, Milton, Sumner, NE Tacoma & Federal Way WA

• Months of housing inventory: King & Pierce County WA
• Months of housing inventory: Edgewood, Milton, Sumner WA
• Months of housing inventory: NE Tacoma WA
• Months of housing inventory: Federal Way (100) WA
• Months of housing inventory: Federal Way (110) WA

• Median sold price: King & Pierce County WA
• Median sold price: Edgewood, Milton, Sumner WA
• Median sold price: NE Tacoma WA
• Median sold price: Federal Way (100) WA
• Median sold price: Federal Way (110) WA

I was asked: “Well, what exactly is coming down the pipe?“

As you probably know, many exotic loans were originated during the 2004-2007 period. Exotic loans are characterized by an initial “teaser rate” that is substantially below market (at least for the credit risk) for some initial period. After the initial low rate period ends they “reset” to new higher rates. Here’s what the reset schedule looks like:

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As you can see, the peak (at least for subprimes) is occurring over the next several months.

According to a recent Wall Street Journal Article, some 42,000 (21.7% of total) “high rate loans” (what the WSJ is calling subprime loans) were made in the Tacoma Metropolitan Statistical Area (MSA) from 2004 to 2006 (NOTE figures do not include 2007).

Even though our local economy is good (currently 4.5% unemployment) relative to the rest of the country (at least for now), the general consensus is that 16-20% of the exotic mortgages holders will not be able to continue making payments after their rates reset.

If that percentage holds, 7-8,000 units will be forced onto the market as sales, short sales, and/or foreclosures over the next year and a half (time is approximate as a property can take up to 200 days to hit the market after an owner first defaults on payment(s)).

Also keep in mind that a large number of the short sales/foreclosures we’re now seeing are not the result of rate resets. Many of the buyers currently defaulting are simply unable to make payments according to the original (low rate) schedule. Plus, with prices down in Pierce County over last year, you have to wonder how many people who bought zero or near zero down are now upside down (owe more that their house is worth) on their mortgage.

Of course you have to consider various government bailout plans may ameliorate the situation… but I’m not holding my breath.

The numbers may not be exact and it’s difficult to get a handle on the timing (because defaulting buyers may walk away or try to sell before their reset, defaulting buyers may try to work something out with their lender, etc.), but I expect significant downward price pressure and time on market regardless.

If you’re considering buying or selling a home over the next year, it will behoove you (and especially your real estate agent) to not only understand the market, but to also have a viable strategy to deal with it.

Forewarned is forearmed.

I don’t know if it’s sellers unwilling to grasp that yesterday’s sales prices were available yesterday, and/or if their agents don’t know what’s going on… and, more importantly, what’s coming down the pipe.

I continue to see homes that have been on the market for hundreds of days being re-listed with a yet another new listing agent. I guess hope springs external. Sometimes there’s a price reduction, but more often than not, not sufficient get ahead of the (sales price) curve.

I know of one home that’s been on the market for nearly 500 days. Over that period they’ve dropped their price almost $100K. What were their listing agents thinking/doing? They could have sold it a long time ago at much more than it’s listed for today if they had priced it appropriately from the “get-go” (or anywhere along the line).

Better to walk away from a listing than dis-serve a seller that way.

On the flip side, I see an agent who purchased a new home one year ago who just listed it for sale… at $100K less than purchased. Think that agent “gets it”?

Phil Hover at the Boise Real Estate Blog covered the subject yesterday in a post that reflects my sentiments.

With proper analysis and good marketing you can sell your home in today’s market. Or you can remain in fantasy land and add it to some agent’s sea shell collection of listings.

In yesterday’s market a lot of agents picked a number that would satisfy the seller and wait for the market to catch up. That technique appeared to have some success when prices were escalating 15% a year or more. I say appeared because although a home might have sold, it may not have been sold at the highest price possible.

Another technique that seems to have had a lot of agent and seller following, particularly for higher priced properties located in south Puget Sound, is to intentionally overprice a property and then gradually lower it over time. This isn’t a matter of making a mistake with initial pricing. It’s an intentional strategy. Kind of like a reverse auction. Just keep lowering the price plumbing for the bottom until someone bites.

Problems with this strategy include:

1. Becoming shopworn is the obvious first issue. As a property languishes on the market, agents (and buyers) begin to wonder what’s wrong with the property – why hasn’t it sold?
2. Good agents will check the property history right off. Often you can see what’s going on, especially if the listing agent is one known to use this technique. Why make an offer in the face of today’s listed price when you know it will be lower tomorrow?
3. The power of scarcity has been sacrificed . If you know you be able to buy tomorrow, there’s no hurry today (even at the same price). This is a far different from a scenario from where there’s only one, everyone wants it, and you know it will be quickly sold.
4. Homes get maximum exposure within the first couple of weeks of hitting the market. There’s a pent up pool of buyers who’ve been unable to satisfy their requirements with existing homes on the market. These buyers are the “parade“. Once the parade has passed everyone goes home… and getting them back is damn near impossible. From here on it’s just new buyers entering the market. Getting the parade back requires a really dramatic price drop.
5. Emotional cost to a seller increases dramatically over time.
   • Where’s the bottom on pricing?
   • As Barb Swartz would say (yeah, I took the course), “the way you live in a home and the way you sell it are two different things.” In other words, no one can live like this for long.

Is this to say anytime you have to adjust a price it’s a screw-up that could have been avoided? No, I’m not saying that. The market changes, and although perfect pricing is the goal, it’s not always possible. But you can correct it before the parade goes home.

Price the property appropriately and expose the ‘heck’ out of it.

Note I said simple, not easy. The distinction reminds me of something I heard or read about Bob Hope being “accused” by a reporter of being worth $22 million – back when a million dollars was really something (sorry I can’t remember the exact details). Bob responded with “it’s really pretty simple, all you have to do is make $1 million a year for 22 years.”

Of course the devil is in the details. Pricing a property appropriate to a buyer’s perception of value can include enormous variation. The gap between pricing “as-is” and preparing a home to “market-ready” condition is where the majority of my efforts are spent.

Most of the marketing I do takes place before a home is ever placed on the market.

What are we selling? – we’ll probably need a home inspection to find out. What repairs are mandatory… what repairs/improvements will also provide a significant return on investment? We can’t properly price the home without knowing these things first. Who will complete the repairs and/or improvements and will I or the client incur the expenses (and risk)?

When will the home be ready for staging by a professional designer (I use professional designers rather than stagers, but that’s another story). When will it be ready for professional grade photographs? Four color laminated brochures can’t be sent to the printer, nor can we built the property’s web-site without the photographs first being completed. All support a buyer’s perception of a home’s value.

All pre-listing marketing must be completed prior to “show-time”. We only get one chance to make a first impression, to be “new on market”. NWMLS rules require all listings be turned in within 24 hours of signing, so we’re doing the all the up-front work on a handshake.

Only agents genuinely confident in their knowledge, abilities and client relationship are going to be prepared to make the full pre-listing investment in marketing. Nothing separates the talkers from the doers like having to put a significant sum of your own money at risk.

Exposure is a topic for another time.

Negotiating agreements and then getting them closed also take time and effort. But without an offer, they’re moot.

When an offer materializes within the first week or two of a home coming onto the market, there’s always someone who comments on how simple it is to sell a home. And they’re right of course… just like Bob Hope said.

Ah yes, the office tour… I concur. It’s a poor excuse for marketing offered up to anxious sellers. It always bothered me that tours were presented to a seller as meaningful exposure. And I must confess to having had and been on many office tours during 15 years with JLS.

In the end (I generally quit going or having them), the only time they were useful was if a home was otherwise very difficult to see (high end & appointment only).

The company line was that you needed to support your fellow agents by going on tour. Actually, it was a requirement for new agents to attend weekly office tours, ostensibly to learn the market and to “support” their fellow agents.

I always thought that if you had a buyer for whom a home might be a good match, why wait for the weekly office tour? You’re out the door the day it first comes on the market.

And if you’re keeping up with the market, it’s much quicker and efficient to tour alone or with one other like minded person. You only see the homes of the type and location in which you specialize.

Ditto with broker’s open houses.

I see so many agents desperate for traffic today. The level of bribes offered to tour a home keep rising. Again, I’m sure, offered up as meaningful exposure to a seller, which, of course is nonsense.

It’s one thing to offer a cup of coffee and a snack as a courtesy. Quite another to offer money or ‘big’ prizes. (It will be interesting to see how long that persists given the current title company issues and the deteriorating state of the mortgage business.)

If you think about it, a desperate listing agent will never know whether their traffic was legitimate, the result of the home (presentation) or a response to the level of a bribe.