South Bend Real Estate Report: September 1, 2012 – February 28, 2013

Pick your favorite news source and odds are it’s promoting a story of a housing recovery this Spring. Another not-too-risky bet is that it called the drop in house values and the slowdown in sales the “correction” of a bubble.

But it can’t go both ways. If the crash was a correction, then prices headed back where they were is re-inflating a bubble. Using terms that conflict with themselves is just one symptom of the news media repeating press releases undigested.

And there are strong forces pushing a ‘recovery’ in housing prices:

• record low interest rates,
• diverting of homes that would hit the market to >100% LTV refi programs,
• delayed foreclosures eased by government bailouts of banks,
• low-downpayment government-insured loans that the open market won’t offer,
• REO to rental funds buying now to rent and then sell/IPO in a few years in anticipation of higher prices,
• Cities including South Bend spending millions to demolish abandoned homes
• And the drumbeat of “buy now or pay more later” that I thought disappeared in 2008.

But the most problematic element is that, after the most catastrophic housing market in 30 years or more, thinking has not changed. A rational view of the housing market is that any change benefits someone and hurts a different group:

• Prices go up? —-> good for owners, bad for buyers.
• Prices go down? —-> good for new buyers, bad for sellers.
• Prices are stable? —> good for communities, banks, and long term investors, bad for flippers.
• Prices fluctuate wildly —> good for quick turn traders, bad for most everyone else.

The unspoken idea that constant appreciation of real estate prices is to be desired and is a positive outcome is driven by groups who benefit from rising prices; banks, real estate agents and established homeowners.

Early Spring sales in 2013 are not wildly better than in recent years. February sales volume is down 2013 compared to 2012. Even if they were up, it pays to be cautious making 30 year decisions on two months data and to ignore anything the mass media reports on real estate. There is probably no market more manipulated than the housing market, and it pays to think your decisions through carefully after getting advice from someone who knows the relevant area -think blocks not cities.

Here are the numbers from the Greater South Bend – Mishawaka MLS for sales 9/1/2012 – 2/28/2013. That bring us up to date on this blog.

• September 2012: 254 sales for ~26.9 million in volume
• October 2012: 270 sales for ~28.5 million in volume
• November 2012: 241 sales for ~30 million in volume
• December 2012: 206 sales for ~24.5 million in volume
• January 2013: 163 sales for ~15.3 million in volume
• February 2013: 181 sales for ~14.8 million in volume

Here are the graphs:

All sales prices at a glance, coded by type of financing:

 

For clarity, the same graph excluding the 28 sales over $350k:

 

For context,  the long term sales graph:

 

 

And that same graph showing only Q1 for 2008-13

 

So if the market overall is still anemic, where is the media finding stories of homes selling in days with multiple offers? They are finding the markets with an undersupply of homes for sale, those lacking a Realtor’s “inventory.” And it’s true, there are spaces where it is good to be a seller right now. In Granger, if you have a decent house without any major flaws (on a highway, under a power transmission tower, with a failed septic system, etc) that is in the $250-300k range, you’ll probably sell it.  Here’s my reasoning:

Granger easily supports that price point (graph below does not show the few sales over $1m, but does use them in calculating the trendline)

 

And sales in zipcode 46530 at the 250-300k price point have decreased from the boom, but seem to be on stable footing

• 2008: 48 sales
• 2009: 34 sales
• 2010: 39 sales
• 2011: 44 sales
• 2012: 55 sales

So, it’s uncertain but reasonable to guess that  about 44 will sell in 2013 (the average of the post boom figures). And there are 21 for sale today, with 2 closed sales this year and 4 pending sales. That’s 17 short of expected sales. More buyers looking for a type of house than sellers selling that type of house = few days on the market and selling near list prices.

But that setup is particular to specific niche markets. If you are selling a farmhouse on 5 acres or a townhouse near Notre Dame or 1920’s house in South Bend you might as well use stats from San Francisco as those from Granger.

If you’re buying or selling or just trying to better understand real estate, don’t follow the TV news. You won’t get good information in a 30 second segment put together by a reporter contracted to produce ten stories a week. And it won’t be specific to your situation. Do your homework, or hire someone to do it for you. The real estate market is no longer moving as a single block. It is fractured so that some markets lack inventory and some lack buyers.

More frequent posting to commence. Have questions? Need advice? Hit the comments or find me with your favored messaging system, http://www.realst8.com/contact-us/

-Nick