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.