Mid-year Data Analysis Traverse City real estate market

Hello Record-Eagle readers,

As promised, this week I am going to delve into “the numbers” from the first half of 2009 in the Traverse City real estate market. I am primarily comparing the first two quarters of 2009 with the same period from 2008 in an attempt to discern both the current state of our real estate market, and where I think it is heading in the future.

For those of you who develop hives reactions from data analysis, skip to the bottom of this Ask the Realtor blog for my summary, but understand that I look carefully at data daily when working with clients so that my professional opinions are based on more than conjecture. That’s part of the Unfair Advantage that my clients enjoy.

There are currently 5,096 single-family properties actively listed for sale on the Traverse Area Association of Realtors’ MLS system as of July 13th, 2009, and on average they are listed for sale for 221 days on the market (DOM). The median asking price is $190,183 and the average asking price is $296,704 — that in an area where the estimated median household income is around $45,000. It doesn't take a statistician to see the problem there, does it?

Of the properties that have been listed for sale, 1,301 expired in the first half of this year, and another 1,086 were withdrawn from the MLS during the same period. The average DOM were 302 and 261, and the average asking prices were $271,941 and $312,150, respectively, for the expired and withdrawn properties. This is not surprising data given the elevated asking prices still prevalent in the greater Grand Traverse real estate market.

Just as importantly, 943 single-family properties have sold on the MLS during the first six months of 2009, with an average DOM of 179 and average sale price of $149,514.

In other words, less than 20 percent of the houses listed for sale have actually sold so far this year, or there is almost three years worth of inventory currently listed for sale on the TAAR MLS, if not one more piece of property is listed for sale during that period. That’s too many.

The data suggests that more than 60 percent of all the single-family properties currently listed for sale will not sell. Realistically, many of the over-priced homes that don’t sell will be foreclosed upon, then eventually relisted by those institutions at drastically lower asking prices after the former owners have beaten the properties up and the banks have assumed all of the costs and liabilities of ownership. Those properties will eventually sell, but only after the foreclosed upon families, the financial institutions, and the economy as a whole takes it in the chops first. [Look for my discussion of this ridiculous and unnecessary pattern in an upcoming Ask the Realtor blog]

At this point it is difficult to accurately assess just how many of this year’s property sales have been bank-owned, but it is roughly a third of all single-family sales. That’s far too many.

Quick studies will notice that not only are the less expensive properties selling with far greater success, but that they sell considerably more quickly, too. To be fair, the numbers are skewed by the fact that many overpriced properties for sale either expire or are withdrawn without selling before being relisted again with lower asking prices, sometimes by private parties and sometimes by their creditors. Nonetheless, accurate and precise pricing is still paramount for success. [You can become an expert on the subject by reading previous Ask the Realtorinstallments here.]

Comparisons of 2009 year-to-date data with that from 2008 are also very illuminating. In the first half of 2008, 1,048 single-family properties sold with an average DOM of 174 days and an average sale price of $176,542. That is 10 percent fewer sales on properties that spent four fewer days on the market by average, but nearly $30,000 less expensive on average and roughly 30 percent below the peak average sale price of $215,000 in 2006. That is a 15 percent drop in average sale price of a single-family property in our board in just one year. How many properties were purchased for more than $200,000 in the middle of this decade that are now selling for much, much less?

The S&P/Case-Schiller index of home prices was down more than 18 percent nationwide when compared to May of last year, although there was only a small decline from April to May of 2009. This index has declined nationally every month since July 2006, and many metropolitan markets are down considerably more than that just in the last year.

San Francisco home prices have dropped 28 percent since May of last year, Las Vegas prices have fallen over 32 percent, and Phoenix prices have plummeted more than 35 percent. Property values in the greater Phoenix area have evaporated by more than 54 percent since their June, 2006 peak. Makes one wonder where the value was in the first place, eh?

The good news is that housing is becoming more affordable for more people in the Grand Traverse area. There is still a plethora of supply and mortgage rates have headed back toward lifetime lows again; they are roughly 5.6 percent on a 30-year fixed mortgage, and under 5 percent on 15-year fixed notes presently.

Financial responsibility and sound spending habits are paying off for those who have run a tight financial ship — that includes both individuals and lending institutions. There is a decline in the overall number of properties being listed for sale in our area which can only help us all from a Supply-vs-Demand perspective.

Personally, I'm hopeful that the current challenges will teach younger generations of Americans the value of both financial responsibility and all things difficult to put a price on. Optimistic maybe to a fault, I still envision Michigan retaking a leadership position in this country someday through sound decision-making and the hard-working perseverance of her populace. We've been there before, and we can get there again, we've just got to knuckle down in the meantime.

As always, don't hesitate to post your comments, questions, or concerns below, or you can email me directly at Mike@allTChomes.com.

All the best,

Mike Gaines