Summer slump of 2007: For every 2 sales, 3 listings failing in MA

Expired_shot2005_2
Two years ago, The Real Estate Cafe graphed summer sales versus expired listings in Massachusetts across a ten year period:  1996 to 2005.   It’s too early to update the graph but the current tally of 8,628 expired listings during the past seven weeks exceeds the 7,457 peak in 2005, the highest of any ten week summer period graphed above (click on image for larger view).  In addition to expired listings this year, there have been 4,455 canceled listings and another 2,455 withdrawn listings.  That’s a grand total of 15,538 unsuccessful listings, compared to 10,136 sales during the same period.

So, for every two sales over the past seven weeks (6/30/07-8/20/07), three listings failed.  That’s about 2,000 expired, canceled, or withdrawn listings per week.  Unless sellers hold their properties off the market, the unfolding credit crunch could create a higher rate of failure in the final weeks of 2007.

What does that mean for potential home buyers?  Two money-savings opportunities:

Expired & canceled listings:  If you have had no previous contact with the former listing agent or attended any of their open houses, buyers may save money — approximately 5% of the asking sales price — by contacting owners of expired and canceled listings directly.  If you’re interested in that do-it-yourself opportunity, The Real Estate Cafe would be glad to provide assistance "a la carte" on a fee-for-service or flat fee basis

Proactive house hunting:  There are thousands of homeowners getting ready to list their homes this Fall.  The Real Estate Cafe would be glad to tell you how some of our recent home buyers have saved money by identifying homes BEFORE they are listed with a traditional listing agency.

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Draft

Oct. 2007: Foreclose petitions
topped 3,000 in Mass., 4,814 MLS listings sold during same period,
8,976 listings expired or were canceled!

Because October listing represent December closing, maybe more appropriate to compare sales in December 2007:  Sales below 4,000 (3,956) or down about 20% from October 2007.  Expired & canceled listings even higher:  10,982 across Massachusetts in December 2007.  Those listings are now available, at approximately 5% below their last asking price in the MLS.  Estimating that another 9,000 home owners have received foreclosure petitions since October 1, that puts further downward pressure on asking prices.  48,321 active listing and 38,000 in shadow inventory 67,585 MLS sales last year.

Defensive homebuying tip:  The falling number of active MLS listings unstate the potential inventory of homes for sale.  For each home sold in December, there were 2.7 expired and canceled listings.  If petitions to foreclose continued at October pace, there are up to another 9,000 distressed homeowners who may consider in an unsolicited offer to purchase their home:

Petitions to foreclose are the first step in the foreclosure process, and do not always end in actual foreclosure. Some homeowners eventually sell their homes or refinance.

“Petitions to foreclose spiked in August, and are back up near that level in October,” Warren said. “Auction announcements and foreclosure deeds are slightly lower than in previous months, which could mean more homeowners are finding solutions before they lose their homes, or that lenders are slowing down the process. It looks like we’ll see more of the same in 2008.”

Unlisted properties represent opportunity for proactive home buyers

Mainventorypie_011008v6 This graph of active listings versus unlisted properties during the 4th quarter of 2007 reveals two significant trends behind today’s lead story in The Boston Globe: 

"Thousands in Mass. foreclosed on in ’07:
7,563 homes were seized, nearly 3 times the ’06 rate

TREND 1: The Globe reported that "…lenders initiated foreclosure proceedings against 7,467 Massachusetts homeowners" between July and September.  That means that foreclosure petitions during the 3rd quarter of 2007 were nearly equal to the total number of actual foreclosures year round.  Add that trend to the fact that foreclosure petitions topped 3,000 listings during October 2007, and you can see that the problem is growing.  In fact, the number of foreclosure petitions in October approached the number of MLS sales in December 2007 as graphed in a previous blog post.

TREND 2:  The inventory of unlisted properties or homes for "potentially for sale" across Massachusetts is also growing.  It’s difficult to identify how many expired and canceled listings have been already been relisted in the MLS, and we can only guess at how many homeowners facing foreclosure would be willing to sell.  Still, the inventory of homes "potentially for sale" may be approaching the number of active listings during this slow time of the year, as shown in the graph above. 

Should you wait for more homes to come onto the market or be more proactive?  The Real Estate Cafe is exploring ways to help home buyers search expired and canceled listings, and to approach homeowners with "unlisted" properties – particularly those who have received foreclosure petitions – with unsolicited offers.  If you’re a homeowner willing to consider an unsolicited offer, or rent your unlisted property until you put it back on the market later this year, please contact us.  Our qualified buyers are looking for ways to negotiate sales outside the MLS, and recognize that savings can be shared by doing so.  (PS.  Our menu of hourly and flat fees are modest by industry standards; and depending on negotiations, may be paid by our buyer clients so sellers retain more of their home equity.)

CARPE DIEM: Expired & canceled listings create “commission-free holiday” for buyers & sellers

Maoffmarket_junejuly10yrs
Massachusetts home buyers, if you have been waiting for housing prices to slide into your acceptable range, this could be time to "carpe diem."  As shown in the graph above (click for larger image) of MLS activity during June & June over the past 15 years (1994 to 2008):

  • The number of off-market properties — expired, canceled & temporarily withdrawn listings — surged to a new record of 16,319 properties just after midnight.*
  • In contrast, sales have fallen from a peak of 19,180 in 2006 to 12,335 in 2008 (as of 12:30am, August 1). 
  • That means that sales are down by about a third, while off-market listings have nearly doubled since 2005 when we first wrote that expired listings were a leading indicator of the real estate bubble.
  • Over the past three years (2006-2008), more properties have been pulled off the MLS than sold during June & July.  For every three listings closed in the past two months, four were pulled off the MLS statewide in Massachusetts.

What do these raw numbers mean to buyers and sellers?  Think of expired and canceled listings as a two-sided window of opportunity, or the real estate equivalent of a "tax-free holiday."  Sellers can accept an offer about 5% less than their last asking price and still net the same profit because they are no longer obligated to pay a traditional real estate commission.

Will this "commission-free holiday" be enough to motivate buyers to make offers, or will motivated sellers in Greater Boston begin making offers to well-qualified buyers as is happening in other markets? 

The Real Estate Cafe is advertising buyers on Zillow to make it easier for motivated sellers, particularly those who have received pre-foreclosure notices, to find them. If none of our buyers wants to purchase your home, we offer seller services "a la carte" on a fee-for-service basis.  If you’d like to learn more about how to sell your home "for sale by owner," we’re organizing a FSBO support group and invite you to see our "FSBOs on Steroids" presentation.  If you’re not interested in selling on your own, we’d also be glad to do a Listing Agent Report Card to help you select a new listing agent and try to negotiate a reduced commission.  Email for more details.

* Technical note:  Includes all residential property classes in
MLSPin:  single family, multi-family, condominiums and land.
Temporarily withdrawn listings available for 2008 only.

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