At least that is what the Mainstream Media and the Florida Association of Realtors® (FAR) would like you to believe.
I started this site mainly because of my frustration with my local paper, the Sun-Sentinel, and its primary real estate reporter, Paul Owers. Today’s article on Broward home prices illustrates that frustration where Owers writes:
“The median price of an existing home sold in Broward last month inched up 1 percent to $354,000 from $349,400 a year ago, the Florida Realtors group said Wednesday. The county's prices have been up and down in recent months, but analysts say prices are trending downward across the region.”
“Existing-home sales dropped 28 percent in October, to 428 from 591 a year ago.”
“Broward's median price has slipped nearly 10 percent since peaking at $391,100 in November 2005. One analyst said area prices could drop another 10 percent in the coming year, with some neighborhoods experiencing more severe declines.”
Once again, Owers uses the ridiculous statistic provided by the FAR, "Median Home Price," to describe the direction of home prices. As explained in a previous post on this subject, this statistic is actually the median price of homes actually sold. When using the statistic, Owers and other media should properly describe it as the "Median Price of Homes Sold." Instead, he never bothers to describe the statistic. As a result, the typically uniformed, naïve reader would read this article and believe that homes prices are actually going up modestly in Broward County.
Anyone who follows our local market or reads this site knows that nothing could be further from the truth. It isn't that prices are going up; the statistic is still increasing because high-end homes are still being sold in our market albeit slowly. On the other hand, sales in low-end market have slowed to a trickle. So, the statistic is skewed by continued activity on the high-end and miniscule activity on the low-end.
If Owers wanted to present a realistic account of our current real estate market, he would at least counter FAR’s statistic with a much more representative statistic, the "Median Listing Price." This statistic looks at all homes listed on the market (on the MLS) and determines its median price. When we look at this statistic, it tells a much different story. As I reported on Tuesday, the Median Listing Price is now down 11.46% since last year -- a much different picture than the 1% increase that Owers and FAR are trying to dupe people into believing.
Another ploy by media is to ignore the severity of the slowdown in sales. Back when the market was healthy, nearly five times the number of homes sold in Broward County. For instance, in June 2005, 2,477 homes sold in Broward County. Right now, there are 17,407 single-family homes for sale in Broward County. In other words, we currently have nearly 41 months of inventory on the market (a healthy market normally has less than six months of inventory).
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18 comments:
I haven't seen an index yet that tells the truth. I think people should stop looking at indices all together. They are totally irrelevant.
Just look at your own house (if you are an owner or seller), or the house you want to buy (if you are a potential buyer). Then, look at the comps for that specific property. We've already seen 50% drops in some subdivisions. What an index says is irrelevant to any potential buyer or seller in one of those 50% subdivisions. Other subdivisions may only be down 10-15%. So, it's important to be specific when trying to gauge where the market is.
The "F'd Buyers" segment on this website provides specific examples of the deterioration of the market. That's much more useful than these incredibly inaccurate indices.
I agree that "median listing price" is better than the median sales price (since it is more current), but even that could get screwed up because it is susceptible to the same problems as the median sales price.
For instance, if a whole bunch of new condo towers come on the market with inflated asking prices (which they soon will in the Miami area--the number of high priced luxury towers on the market is set to double in Miami over the next 18 months or so), it could throw the median listing price way off as well. The overall median listing price of Miami condos could easily go up over the next 2 years, even as same-unit sales prices go down.
So, I wouldn't pay too much attention to anything involving a broad mix of properties--especially if it is using "median" or "average".
How long can the Banks hang on to the REO's withholding them from the market. I would expect that there is a lot of pressure to hold off here. The RE players here in SE florida appear to operate by different rules than the rest of florida.
PB,
You've got great points. No statistic can tell the whole truth behind the direction of the market.
You're also correct that the Median Listing Price is problematic even if we are trying to predict the direction of the entire market. Why?
I think the biggest problem is it uses listing prices (AKA "wishing prices") to predict the direction. Anyone who follows the current market knows that the MLS is loaded with homes that are listed for 10, 20, or even 30% more than their current market value. These homes don't have a chance in hell of ever selling at their listing price.
For instance, I follow the Coral Springs market closely and I often see 3/2 pool homes listed for over $450,000 when similar homes are selling for around $300,000.
Of course, the Median Listing Price doesn't exclude these bozos. Therefore, it is also prone to overstatement.
However, I still think it's important to follow the direction of the market by using multiple statistics (listing price, inventory, REO level, foreclosure levels, days on market, price per square foot, et al).
Without following the direction of the overall market, it would be nearly impossible to predict the eventual bottom (actually I'm looking for the 2 or 3 year stagnant trough that usually follows a RE downturn).
"How long can the Banks hang on to the REO's withholding them from the market. I would expect that there is a lot of pressure to hold off here. The RE players here in SE florida appear to operate by different rules than the rest of florida."
I see the dam starting to break. When I look at neighborhoods and find the least expensive homes, 9 times out of 10 they are either REOs or approved short sales (prices also set by lenders).
It certainly seems that the banks are recognizing the reality of the marketplace long before the sellers are seeing it.
Still, I don't think we'll see the bold price moves until January. This allows the lenders to avoid recognizing huge losses until their next fiscal year.
I've been following 3801 S Ocean Dr in Hollywood for a while. The owners who bought at around 335 are listing there or higher. The banks have listings for the similar or better units starting at 199. None are selling. It's a 900 unit conversion with 200 for re-sale.
Since home prices are up, maybe Dr. Dani is correct and we were all wrong!
Maybe we were all thrown by her bikini shots into thinking she was really was a blonde bimbo.
Maybe her online PhD was legitimate after all!
That previous posting on the Coral Gables home is scary. If you look at it in zillow.com, four houses in the same neighborhood sold for more than $500,000 in the last 12 months. Zillow shows it worth $738,000. But that's not the scary thing. The scary thing is that he's asking $399,000, or more than 20% off comparable sales prices in the last 12 months, and NO ONE is buying. At $300k, I bet someone would snatch it up. And then two years from now they'll be f@cked also.
Lenders having a decent size auction of South Florida properties in next few weeks. Was advertised in Sundays Sun-Sentinel RE section. USHomeAuction.com. I have plans to check out a few of the places but I'm not to thrilled that they have undisclosed reserves, versus simply starting bidding at their reserve price. Will be interesting to see prices paid compared to what previous defaulted owners paid.
I know this is a South Florida blog, but this caught my attention: a house in Cape Coral is down 62% in price from last year (below its 2002 price). Based on what I've been hearing, the west coast of Florida is truly ground zero for the housing meltdown:
Florida REO: Priced Below 2002 New Home Price
I know we covered this one before, but I see they just dropped the price again. 3851 NE 24TH AV, Lighthouse Point, FL 33064**
Sold for $1.3 MIL, as in MILLION! Boys and girls, now on market (reo) for the bloated price of $830.
MLS #: F854353
Still $200k TOO HIGH, but moving in the right direction.
What I find most disturbing about the real estate reporting is that the reporters don't seem have any understanding of how the income-to-house price multiple is important in valuing a housing market, nor how far from the norm that multiple is in Florida today.
Furthermore, they don’t see how the MBS market (e.g the lack of credit standards, over-reliance on S&P/Moody's ratings, and the need for subprime loan interest levels to fund coupons in tranches), growth of mortgage brokers and lax monetary policy by Greenspan’s Fed created a situation that will never materialize again. No matter how much people think house prices will recover, they wont because of one simple fact. In the end, you have to pay for the house from variable cash flow, of which a portion is allocated to non-housing needs.
pb,
Your point about some areas already dropping is so true.
In Lighthouse Point and Deerfield Beach, some waterfronts are selling for 35-50% below the peak prices of 2005-6.
No index will show that, yet I can show dozens of examples on the market or recently sold.
BTW, The one I just posted on 24 ave sold for $250k in 1987.
Prices on those homes varied little from 87 till 1999, so $250-300 was fair market value in 2000 for that home.
Is it now worth $830k?
140 dollars
Is it now worth $830k?
Don't you know how much value granite and Pergo add to a house?
Jeez, it's like you've never watched TLC.
If they had put in some new landscaping I bet they would have had no problem getting $1Mil+
Waiting_for_a_deal
Let us know how the auction goes. I looked at the properties in some areas and found a very few nice properties and a lot of junk. I don't want to buy yet. Florida taxes and the problems folks are having with the county tax appraisers is causing me to hold off even if the properties get into my price range. I am saving a lot by renting, and prices need to drop by 50%.
Anonymous,
Looked at a few of the auction properties yesterday. Wouldnt realyl be interested in them unless they went for the starting prices, which I doubt. I do have plans to attend the auction on Miami Beach, should be interesting to see what kind of attendacne they get and how the bidding goes.
Waiting
re Auction; sometimes you are competing with 2nd mtg lenders. that happened to us and drove the price up to a point where it was the same as what was owed in total.
alliance mtg stepped in and essentially, paid the first off and paid for their second.
Unfortunately, or more accurately, misinformed and flawed analysis of statistical data causes the distortions noted.
A normal distribution curve is what counts. The standard deviation and coefficient of variation should be used. Then expected distribution and the outliers must be taken into account. Median is a good rule of thumb and a date and interval curve trend in a quantum shift environment give a better indicator of eras. The era of shortages and excessive supply can be better determined by analysis of other data. Economics is not an exact science and neither is statistics.
Certainly, individual experience is no criteria of value. Mass action is more accurate as represented by the various statistical parameters. All economic action is integrated in real markets. No commodity, such as housing can escape the evolving socio-economic effects of production and sale.
Supply and demand are the primary movers of price with a long term effect of the Zumpruder shift due to technology and innovations effecting cost of production, modernization and economies of scale.
This is one of the quality post indeed. Some stunning points i have got from here... Thanks mate..
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