| Howdy Redfinnians, <o> All the real estate data is in for September, and the Redfin newsletter is here to put it all together in one portrait of what's going on in the market! <o> The short story is that prices are up, rates are down and even foreclosures notices are, for the moment, slightly down; sales volume took its first dip in four months, though that may be due to August vacations and limited inventory in markets like California. The big questions are whether there will be a big drop when the first-time home-buyer credit expires and the banks clear out their 2009 books by foreclosing on a bunch of delinquent home-owners. <o> So there's reason to worry prices could go down or up, but the leading indicators within Redfin are way up: demand has been up 10% in September over August, and our new iPhone app has been a big hit in the field, representing 10% of our overall traffic on weekends when home-buyers are out touring homes in force. Since our break-even month in June, we've kept the profits coming; our buyers' agents are still the top producers in almost every market we serve, and we're still hiring as many superstars as we can find. <o> Sleepless in Seattle (But Everywhere Else is Fine)<o>
But enough fist-pumping. Let's dig into the market data! Case Shiller, the index that economists use as the most reliable measure of home prices, reports this morning that July home prices increased 1.2% from June, and decreased 13.4% from July 2008. The biggest gains came in San Francisco, Chicago and San Diego. Most markets have been gaining for three or four months. Besides Las Vegas, Seattle was the only market to have declined month over month, by 0.3%. <o>
| City<o> | MoM Change<o> | YoY Change<o> | Date of Max<o> | Change from Max<o> | Prices Last at This
Level in...<o> | Consec. Mos.
of Increase<o> | | Los Angeles<o> | 1.2%<o> | -15.0%<o> | Apr-06<o> | -40.5%<o> | Aug-03<o> | 2<o> | | San Diego<o> | 2.0%<o> | -12.4%<o> | Mar-06<o> | -40.8%<o> | Sep-02<o> | 2<o> | | San Francisco<o> | 2.9%<o> | -18.2%<o> | Feb-06<o> | -41.7%<o> | Nov-00<o> | 3<o> | | DC<o> | 0.9%<o> | -9.8%<o> | Mar-06<o> | -30.6%<o> | Mar-04<o> | 4<o> | | Chicago<o> | 2.1%<o> | -14.4%<o> | Feb-07<o> | -24.2%<o> | Jan-03<o> | 4<o> | | Boston<o> | 0.7%<o> | -5.2%<o> | Nov-05<o> | -15.8%<o> | May-03<o> | 3<o> | | New York<o> | 1.3%<o> | -10.4%<o> | May-06<o> | -19.7%<o> | Jun-04<o> | 3<o> | | Seattle<o> | -0.3%<o> | -15.4%<o> | Jul-07<o> | -22.4%<o> | Apr-05<o> | 0<o> | | 20-City<o> | 1.2%<o> | -13.4%<o> | May-06<o> | -30.6%<o> | Jul-03<o> | 2<o> |
As usual, we present the seasonally adjusted numbers to correct for the summer gains and winter losses that happen every year. <o>
The Pit of Despair: More Foreclosures Coming<o>
What's tugging at the bottom of the housing market is the supply of foreclosed homes. New foreclosure filings decreased only 1% from July's record highs. But without an uptick in employment over the next few months, the supply of foreclosed homes is likely to increase. A ground-breaking article in The Wall Street Journal estimates that at least 2.7 million homes with delinquent loans have not yet been foreclosed. Of the home mortgages at least 12 months overdue in July, 17% are still not in foreclosure, compared to 8% a year earlier. That may soon change: at least one big bank expects to complete the foreclosure process on many of these homes by year end; the banks are probably trying to clear their balance sheets before 2010. Already, 31% of existing home sales in August were foreclosure-related. <o>
Sales Volume Slips a Bit<o>
From July to August, the number of existing-home sales dropped 2.7%, though the August sales volume was still 3.4% higher than the previous year. Meanwhile after four months of solid gains, increases in sales activity on new homes slowed in August to 0.7% over the previous month. <o>
Ov-er-rat-ed: The First-Time Home-Buyer Credit <o>
Both the Realtors and the home-builder lobbies blame the August slowdown on the November 30 expiration of the $8,000 first-time home-buyer tax credit, but there was still plenty of time for August home-buyers to close before Thanksgiving, and the proportion of first-time home-buyers to veterans was unchanged nationwide from month to month. In our own business, we've seen only a modest increase in first-time home-buyer offers, from 55% historically to 61% in September. <o>
Because Congress is becoming more skittish about spending, we are less certain than others that the credit will be extended, and believe in any event that enough people are rushing to beat the deadline that there will be a small lull after the deadline regardless. But what's happening to demand right now is larger than the credit, and related in part to the good inventory already being gone for the season. <o> A Feeding Frenzy in Northern and Southern California <o>
California is where supply and demand are most out of whack. August sales volume across California increased year-over-year for the 14th straight month, but declined 12% month over month; the average mortgage payment for new California home-buyers in August was 58% below what it was in the June 2006 peak, which reflects both the decline in home prices and mortgage rates. <o>
In the Bay Area for example, sales volume softened in August compared to July, but we think this is an inventory problem more than a demand problem: there was a 15% month-over-month decline in the number of foreclosed bargains selling in the market, in part due to buyer frustration with "multiple offers and all-cash deals" on the limited foreclosure inventory; San Francisco inventory levels are down 11.3% compared to last year. At Redfin, we are operating at very low or negative margins in California because so many of our buyers are getting outbid. <o> What's Really Driving Demand: Mortgage Rates <o>
In our view, the main drivers for an increase in sales volume have been the stabilization of home prices and the decline in interest rates. Bankrate reports the average rate on a 30-year fixed-rate loan slipped over the past week from 5.38% to 5.36%. <o>
Experts mostly agree that rates are likely to remain low, though long-term most economists believe rates will increase because of heavy counter-cyclical government spending. <o> |  <o>
| | WHEW! That's it. Any quibbles, just write back. Our goal is to be comprehensive, to earn your trust, to get it right. <o> Best,
Glenn <o> Glenn Kelman
CEO, Redfin | [email protected] <o> | 
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