Industry Realtor Survey
For those who may be unfamiliar with our survey, we center our indices around 50
so that readings above 50 indicate positive or improving trends and readings below
50 indicate negative or worsening trends. Please see page 5 for a full description of
our survey methodology.
Agents see additional pressure on home prices: Our Monthly Survey of Real Estate
Agents indicated further pressure on home prices in August, with the trend likely to
continue through at least the end of the year, but likely into 2011. Our price index fell to
22.9 in August from 26.8 in July, now back to the levels of early ‘09. The downward trend
to pricing was seen across markets. The key driver appears to be the lack of buyer traffic,
which has forced sellers to become more realistic about their asking prices, if they want
the sale to be completed in the short-term. In addition, the rising inventory levels are
problematic as there are more homes to choose between, but fewer buyers looking.
Clearly this doesn’t bode well for pricing. Our home listings (inventory) index fell to 30.0 in
August, down from 36.3 in July, and the lowest since early 2008 (lower levels indicate
Traffic stable in August, but at depressed levels: Our traffic index was unchanged in
August from July, registering 17.0 vs 16.9 in July. This level of traffic is essentially
untenable, as it will lead both sellers of existing homes and homebuilders to cut prices in
order to spur additional traffic. August was the fourth month following the expiration of the
tax credit and the slowdown appears too prolonged to be just the impact of the expiration
of the credit. Buyers continue to have concerns about job security, the weak economy, and
especially lack any sense of urgency given the increasingly common expectation of lower
home prices in the future.
Consistent weakness in traffic, even in foreclosure heavy markets: All of the top
twenty markets that we survey had traffic readings below 30, reflecting the consistent
weakness seen in August. We saw the lowest traffic readings in Minneapolis, Chicago,
Phoenix, Denver, and Charlotte, but also foreclosure-heavy markets such as the Inland
Empire and Ft Myers have seen considerably less traffic than earlier in the year, as it
seems that some of the investor demand has passed.
Reversal of trends seems unlikely in near-term: We expect to see published pricing
metrics show weakness in the upcoming months based on the trends that we have seen in
our survey. In addition, we think that many of the sellers of existing homes will likely see
the need to reduce prices ahead given the high inventory of 3.98 million existing homes for
sale. Our concerns are reinforced by the lengthening time needed to sell a home. Our time
to sell index, which reflects both the level of traffic and inventory, fell to 19.1 in August,
down from 23.6 in July, and at the lowest level since October 2008.
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