This week our listings saw an average of 1 showing each. This is the lowest number of showings we’ve seen since I’ve been writing these status updates. The slowdown is certainly expected given that the holidays are coming and people are beginning to shift their focus. Of course, the holiday slowdown only magnifies the already weak national real estate market. Given that we are now well into November, I do not expect to see any increase in market activity until at least the first of the year.
Our monthly E-Newsletter will be distributed this week including Mecklenburg County market data for October. Here’s a sneak peek at the results for October 2007 compared to the same period in 2006:
Home sales are down 21.2%
Average sales price is up 2.4% to $239,616
Average time on market is up 5.7% to 74 days
Pending home sales are down 33.6%
Housing supply is up 25%
Mortgage rates are up by 2.2%
One of my clients pointed out a great concept in reviewing market data to me this past week. He said that market data has “a tail”. This basically means that when looking at data such as I have provided here, we must consider that even though the data is fairly recent, it really represents market activity that could be 90 days old or more.
Consider the home sales data for example. In order for any of the given homes that sold to close, they must first go under contract. A buyer typically makes the offer 30-60 days prior to the home actually closing. So a home sold in October, as reported by my newsletter, likely went under contract in August. Since my newsletter reports data from the previous month, this adds another month to the “tail”, which could now be 90 days old. This is true of my newsletter and the national media’s statistics alike.
The point here is that the market reaction to the media reports are typically based on data that could be more than 90 days old. So when the market improves or worsens, we really don’t know it until after its happened. This is why market timing is nearly impossible. Its not surprising that we continue to see weak numbers since the subprime mortgage situation just happened about 90 days ago.
I suspect we will continue to see negative reports well into the first and even second quarters of 2008 because of this data “tail”. However, I still believe we will see a real market improvement beginning after January 1. Unfortunately even if that does happen, the general public will not know about the improvement until after its reported 90 days or more later.
One way of keeping up with the true, real-time direction of the market is to watch the “pending home sales”. This indicator will give a better picture of the current state of the market because it lets us know about contracts that are being reported (but have not yet closed.) Savvy investors will be watching that indicator very closely. Once that figure begins to increase, it is a good sign that we have come through the storm.