Market snapshot confirms seasonal price reductions even in desirable towns

Waiting by Fireplace

Yesterday, Boston.com rightly blogged, Holiday season a gift for frustrated buyers.  Since there were so few comments and fewer facts, here’s a snapshot of what happened with single-family (SF) homes during the past month from a sample of six highly desirable towns within reasonable commuting distance to downtown Boston:

1.  Only 6 of the 75 MLS listings currently UAG (under agreement) had reduced their prices by at least 5% before going under agreement during the past month (Nov. 2-Dec. 2, 2013).

2.  However, when you look at homes which are CTG — a new MLS status which indicates sales contingent on satisfying an inspection or signing the Purchase & Sales contract, the frequency of SF homes going under agreement for at least 5% off their original price has increased fourfold from 8% to 30%.

3.  The mix of homes selling most recently — ie. those listed in the MLS as CTG rather than UAG — have a lower original asking price, a median of $630K vs $700K.  While the difference in median list prices should not be interpreted as a 10% price reduction on these 33 MLS listings, actual sales prices are likely to reflect deeper savings as stated next.

4. Price reductions have been growing as reflected in CTG status properties.  Compared to UAG listings, CTG properties had reduced their last asking price an additional $9K before accepting an offer — the median price reduction on UAG listings was $16,4000 vs $25,400 for CTG’s.  Actual savings and ratio of original asking price to sales price will not be known until closing, but it’s safe to bet that industry stats will reflect those falling prices in January 2014.

5.  Only 16 of 108 homes currently under agreement or contingent status had reduced their price by at least 5% before an offer was accepted by the seller — that just 15% or one in seven MLS listings.

6.  Significantly, more than three times that many — 50 homes — which have EXPired or been CANceled during the past month in the same six communities have effectively discounted their asking prices by at least 5% because there are no longer any real estate agents involved.

7.  However, hopes that EXPired or CANceled listings may represent deep discounts were dismissed by our snapshot.  Even though one in five EXP+CAN listings had already reduced their asking prices by at least 5%, their median asking price of 21 EXPired listings was still $919K — that’s $289K or 46% higher than the homes currently in CTG status.

8.  Likewise, the median price of the 30 CANceled listings in the six towns was $750K, or $120K (19%) higher than the 33 homes currently in CTG status.

9.  Those homeowners who have withdrawn their listings may be the most unrealistic expectations of all, as they have been more reluctant to reduce their prices substantially, and their $967K median asking price is $337K or $54% higher than CTG sales.

10.  According to our analysis of listing data between 1996 and 2002, one in five Massachusetts properties that went under agreement between Thanksgiving and New Year’s Day sold for at least 10 percent below the original asking price.  While our preliminary snapshot shows increased savings in the six desirable towns surveyed, deep discounts experienced in the past are unlikely this year unless sellers are surprised by the direction of the housing market heading into 2014 and conclude their homes are overpriced.

Related Articles

Misleading medians understate savings opportunities for homebuyers

Surprising_bubblestats1
Posted in response to blog post entitled "Boston Housing Prices" on Boston.com’s new real estate blog, Boston Real Estate Now:

As some of your readers know, focusing on median sales prices can understate the magnitude of saving opportunities in the housing market.  Like the image above, a closer look at sales behind the housing bubble reveals some surprising findings!  If, for example, you focus on sales of single family homes in the 28 most expensive suburban communities in Greater Boston last month (Sept. 2007), these findings emerge from the MLS:

1.  Sales were down nearly one third from last year:  216 sales in 9/07 versus 300 sales in 9/06;

2.  The percent of homes selling below their assessed value, once unthinkable in Greater Boston, rose slightly from 37% in 9/06 to 40% in 9/07;

3.  Those who argue that prices are holding up in Greater Boston can point to these stats: 

3.1  Twelve listings sold for over  their original asking price or 1 in 20 listings;

3.2  Another 13 listings sold for their original asking price or 1 in 20 again;

4.  In contrast, those who argue that median statistics are misleading would point to these stats:

4.1  One in four listings, or 53 of 216 single family homes in the most expensive suburban communities, sold for at least $99,000 less than the original asking price — a trend we mapped last year;

5.  Looking just at the 86 homes which sold below their assessed value, 1 in 3 sold for at least $99,000 off;

6.  Switching from dollars saved to percent saved last month:

6.  One in three listings sold for at least 10% less than their original asking price; and worse

7.  One in ten sold for at least 17% below than their original asking price!

So, if you are a buyer, don’t be too quick to base your assessment of market value, and hence your offer, on median sales prices or market indexes which are showing modest declines.  Historically, one in five homes which go under agreement between Thanksgiving and New Years, sell for at least 10% below the original asking price.  As the statistics above reveal, price reductions are likely to be deeper and more wide spread this year.  We’ll map them on our award-winning real estate bubble map. It’s an open, interactive map so Real Estate Cafe clients can earn rebate bonuses by adding properties, too.

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.”

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