Posts Tagged ‘NAR Statistics’

Increases In Home Sales & Prices of Homes Explains An Influx of Realtors In Certain Regions

June 29, 2009

An article by Erik Pisor, published in today’s Inman News, discusses some recent statistics that seem to outline current real estate market conditions.

The article can be found at: http://www.inman.com/news/2009/06/29/realtor-membership-rises-in-some-areas?page=0%2C1

After reading the statistics and trends that Pisor outlined, I actually came to a different conclusion that he did.

While NAR reports a 10% decrease in membership, some local and regional associations are showing an influx of Realtors, which might be a result of a rebound in the real estate market, or at least the expectation of a rebound sometime soon.

The San Diego and  Sacramento markets show both an increase in homes sales as well as an increase in the number of Realtors joining their regional associations.

In California as a whole, sales are up 35.2% from May 2008, AND more people are taking the Realtor exams than last year. Maryland is showing a similar trend as well.

What does this mean for Phoenix, Tennessee, New York, Arizona, Texas, Washington D.C., & North Dakota – all of which show a similar influx of Realtors?

While Antuoun & Kleinhenz both claim that people commonly turn to Real Estate when they lose a job, it seems that the influx of Realtors into various regional associations is more likely due to the increase in the number of home sales.

This goes back to a simple economic model of a perfectly competitive market that has free entry and exit. When any given market that has free entry and exit becomes profitable, firms enter the market to get their share of the economic pie. When the market is not profitable, firms exit the market because they are losing money. After so many firms exit the market, the competition decreases for those who have stayed in the market, and those who have stayed become profitable again. Of course, that means that firms will start entering the market again because it is profitable for them. We see this ebb and flow in many different markets: the fast food market, the automotive industry, the computer software surge in Silicon Valley, and the door-to-door pest control and security salesmen.

Realtors are becoming profitable again in certain markets, and this is why there is a regional influx of members of local realtor associations. This is supported by the fact the Boston, MA has seen a continual drop in the number of Realtors, along with a continual drop in transactions.

Additionally, while Thompson, a Realtor in Boston, MA claims to have entered Real Estate when the market is down (see article), she is doing so with the expectation that it will rebound soon and that she can become profitable. Even if even if Realtors in other markets are still struggling to be profitable, it seems that those Realtors entering the market again at least have the expectation that doing so in their particular market will soon make them profitable.

While the median price of homes is still down 30.4% from May 2008, house prices have steadily been recovering for the past several months, and economists at NAR expect them to continue to rise. If the price of homes is starting to rebound,  and if the number of transactions is also on the rise (as shown in the cited article), it should not surprise us if more Realtors are entering the real estate market again.

It all goes back to a simple economic model of a perfectly competitive market with free entry and exit.

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Economists’ Commentary: Home Sellers Seeking Professional Representation Rising

June 15, 2009

February 12, 2009

By Harika “Anna” Barlett, Senior Research Analyst

http://www.realtor.org/research/economists_outlook/commentaries/commentary_falling_fsbo

With housing inventory at its highest since the early 1980s, a greater number of home sellers understand the value of professional representation. This is understandable given that the housing market has been challenged in the past two years and inventory of homes for sale reached its highest point since the early 1980s.

The 2008 NAR Profile of Home Buyers and Sellers reveals that among recent home sellers surveyed in August 2008, the pure For-Sale-By-Owner (FSBO) sales – those cases where the seller did not know the buyer – remain historically low at 7 percent. It had been closer to 10 percent during the housing boom years.

Among the shrinking pool of FSBO sellers, the outcome results of such sales are highly questionable. FSBO sellers, who sold their home to someone they did not previously know, sold their homes within a median of six weeks. By contrast agent-assisted sales took a median of nine weeks. In addition, the median selling price as a percentage of the asking price was 97% for those FSBO sellers, compared to 96% among agent-assisted sales.

At first glance,  FSBO transactions appear to be doing quite well. However, the median selling price of an open market FSBO home was $150,100, while the median price for agent-assisted sales was $211,000.

FSBOs have typically been more popular among lower income households trying to sell lower priced homes. So one may argue that price difference results between FSBO and agent-assisted sales is due to characteristics of lower-valued and smaller-sized FSBO homes. Indeed, the average home size in FSBO sales is smaller. The median home size in open market FSBO sales is 1,515 square feet, compared to the median of 1,850 square feet in agent-assisted sales.

However, when we compare median prices per square foot of home, the data show that it was $92 in FSBO sales, and $116 in agent-assisted sales, with a difference of $24 per square foot of home sold. Considering the median size of 1,515 square feet in FSBO sales, this translates into a price difference of $36,360 on a size-adjusted base. So the claims that FSBO sales are getting completed faster and the owners get a price closer to their asking price are misleading. The FSBO homes, given the nature of the market, are being listed at deeply discounted prices. Because lower prices get buyers’ attention, any subsequent price concession afterwards tend to therefore be small. FSBO owners have in essence mispriced their homes too low.

The chart below shows the price comparisons between FSBOs and agent-assisted sales. The FSBO segment is broken out between those sellers who already knew the buyer to delineate arms-length transactions like those that with occur within a family or friends.

Regarding the length of time a home was on the market prior to sale, the time will obviously be much shorter for mispriced, discounted homes. That result is revealed in the chart below. The length of time a home was on the market prior to sale also changes by location, in addition to sale method. In open-market FSBO sales, the median time on the market was six weeks, compared to the median of nine weeks for agent-assisted sales. This difference gets bigger in the sale of those homes located in a small town – five versus ten weeks. However, it is smaller for those sales that take place in a suburban area (six versus eight weeks); and it is reversed in those sales that take place in an urban area.  In urban areas,  open market FSBO sales take a longer time, a median of ten weeks, compared to the median of eight weeks for agent-assisted sales.

Consumers are smart. In more difficult times for housing and the economy, a greater number of people are seeking professional real estate advice. Consumers in the end are also greatly benefiting as a result of having sought out professional representation.