Leading Indicators…by Gerald Frendt

 Is the worst, over yet?  After a long cold winter, with high heat bills, that question is being asked all over St. Clair County in regards to the weather… the bump-up in last weeks stock market prompted the same question about the economy in general, and home owners and real estate brokers are applying the question to their main area of concern – the real estate market. And then, there’s the Detroit Lions…

 Unfortunately, the answer to all of these questions is the same – it’s too soon to tell. So we look for clues or leading indicators. 

 When it comes to the real estate market, it has been in steady decline for the past three years.  In 2006, prices held steady, but the number of sales fell by 26%, then came 2007, with another 8% decline in units sold, but also with a 15% decline in the average sale price.  The number of sales in 2008, rebounded to the 2006 level, but the average sale price declined another 16%.  The major force is the size of the foreclosure supply.  When a home is foreclosed it takes about six or eight months before it comes back to the market for resale, and then it competes with existing supply.  There were 453 homes sold by the sheriff in 2005, and they mostly came to market in 2006; 706 foreclosures in 2006, fed the 2007 market; 971 in 2007 hit an already over supplied market last year, and most of last years 1,204 foreclosures will impact this year’s supply of homes.  Last year there were approximately 1,460 homes sold through two Multiple Listing Service systems.  That means foreclosure sales would account for more than 80% of total residential sales at today’s level of demand.  The leading indicator will be the number of foreclosure sales – it has to start coming down before the market will improve.

 Other leading indicators – for the weather it has always been seeing a robin.. for the economy, watch the Dow Jones, and for the Lions, it will be when Bill Ford sells the team.