As you know, I am a fan of the old stock market axiom that numbers don’t lie, people (with agendas) do. So I have been looking to the numbers, not the press releases, to tell us what to expect next.  Real Estate 101 tells us its all about supply and demand, not sound bites and catch-phrases.  In September 2007, right after the National Association of Realtors and the Builders trade group launched their “NOW is the time to buy” ad campaign, I said this:

Sorry, but to the average Jane homebuyer out there, the Association of Realtors and the Builders sitting on loads of inventory are not the greatest, most credible source for, shall we say, unbiased information. They want houses to sell, NOW… But, candidly, it may get worse before it gets better.  Anyone who tells you they know for sure that NOW IS THE TIME to buy… well, I’d say “run Forrest, run”, away, as fast as you can. I’m not going all negative here, but call me a realist.

Of course, as we know, even as they launched that campaign, sales continued to dry up, inventory exploded and prices dropped precipitously. We will give them some credit, maybe they were just a little “early”.

Anyway, as I’ve told anyone who would listen, we are struggling to find a bottom and have been somewhere in the lower part of a “U”-shaped bottom for months now. So as I looked at this month’s market data, my analysis gave me a glimmer of hope. Months of Inventory is at the lowest point since Fall of 2007, and has been reduced by a staggering 44.3% since January alone.  That’s a big number.

As important, March Y/Y Months of Inventory saw the first reduction since August, 2005. Read that again, I’ll wait. It’s been almost four years of continually advancing inventory ratios. That was one of the primary formulas I used when telling my agents in September, 2005 that we were forming a top in the market. Price appreciation continued for several more months, but we ultimately “saw the other side of the mountain” and have lived and breathed the new market realities that eventually developed.

Look, I’m not an economist, I’m using math learned in public schools, and all this is simply my interpretation from an “on the ground” perspective. But, I think we may finally be getting our arms around the inventory issues.  There WILL likely be another (smaller) wave of short-sales and foreclosures, and that will continue to work negatively on values.  Pricing depreciation may continue – albeit much more slowly – for a while, but the bottom in values will follow the bottom in inventory and then we can get back to some semblance of normalcy in the real estate market. Not rocketing appreciating nor plummeting values… a simple, equitable, manageable, sustainable and therefore healthy market.

If this doesn’t come to pass, look for my crystal ball for sale on eBay soon.

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While Months of Inventory (of houses for sale) was down January to February, it was up year-over-year/February. There’s enough real estate data points, ratios and percentages to give anybody wiggle room to spin this report. Really, with enough paint, you can paint this report any color you’d like… as for me, my favorite color has always been transparent.  I know lots of folks can simply throw out the numbers. And while that is the easiest way to get information into the public’s eye, I prefer to dig a little deeper and look at those same numbers from multiple, transparent, perspectives.

Most importantly, where will the Vancouver Clark County real estate market go from here? As a reminder, Months of Inventory (MOI) is defined by dividing the Active Listings at the end of that month by the Number of Closed Sales during that month [Active/Closed]. In my humble opinion, MOI is a key indicator of where we are at and where we are going.  Says something about supply and demand.  I guess that’s important economic mumbo-jumbo.

With MOI in the Vancouver Clark County real estate market standing at 18.6 months in February, it was a 11.4% decrease in MOI from January (yay!), sounds good right?  Sure, but February historically has a decrease in MOI from January.  Problem being that when you consider the average MOI decrease over the past two years from January to February was more than 17%, it doesn’t smell as pretty. Basically, while we decreased MOI January to February, we did it at a slower than historical rate.  In technical jargon, that’s called a bummer.  Still with me?

OK. So we get that the reduction in MOI was slower January to February this year than in the past, that’s just one number.  While I agree, lets continue digging.  Unless you’ve been living under a rock (whereby you’d have little concern about the time it takes to sell a house) you know that MOI has been increasing year over year for the past three years.  More importantly to me is the rate of increase.  For the last four months of 2008, the average year-over-year increase in MOI was 21.2% – that by itself is a BIG number.  Problem is that in January, that number grew to 23.5% and in February, it was 27.4% – Yikes!  While the Law of Large Numbers says it can’t go on this way forever, the year-over-year MOI number is still expanding. Not a good thing.

Back to my question… where do we need to go from here?  Please understand, I bought my crystal ball off of eBay, so I’m not saying its perfect.  But here’s what I’d look for in the March report.  I’d like to see the MOI for Vancouver Clark County in the 14.6-14.9 range (or less, of course!).  One, that would gain some positive traction for decreasing the historical February to March MOI reductions; and two, that would reverse the trend of expanding year-over-year percentage increases back below the number from the past three months. Now really, while I’d like to see that number at about 7.5, I’d simply take movement in the right direction for  now.

I know, them there’s a lot of numbers. And while I may come across as the boogie-man on a scary Friday, I really do think we are searching for a bottom. I talked before about not buying the rah-rah hype.  But, I believe we are finally closer to the bottom than we are the top. The last three offers I’ve written for clients all had multiple offers on the house. Pricing numbers are well on their way to returning to the historical trendline. We’ll likely continue to have an influx of short-sale and repo/REO inventory that will keep a lid on an explosive bounce from the bottom, but if trading stocks for six years in a previous life taught me anything, I know that no one rings a bell when it’s time to buy.

So while it may be scary out there, it’s always darkest before the dawn.

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Not if you are a seller in today’s Clark County real estate market.

No matter how many ways I’ve looked at the recent statistics from the local MLS, well, they ain’t purdy (with apologies to all my English teachers). Average “Months of Inventory” (MOI) now stands at 17 months. OK, so that’s a tad bit different than the 1.7 Months of Inventory (MOI) in the Portland market in the summer of 2005. Amazing the difference a decimal point can make!

(A quick reminder, MOI is defined as the time it would take to sell all the houses currently up for sale, based on the number of actual sales, if no new inventory came on the market. Opinions vary, but a market with healthy balance and equilibrium will have between 6.0 and 8.5 MOI. )

As always, we see different areas of town vary in their market performance. If you are looking to sell your home in Fisher’s Landing (7.3 MOI) or Salmon Creek (10.5 MOI) you likely stand a better shot than say, Washougal (33.6 MOI). Yipes!

With the amount of competition throughout the Clark County real estate market, it behooves a seller to be properly positioned. I have talked before about the fact that only the best deals are getting done. And remember, “best” does NOT simply mean just cheapest price, but a well thought out strategy, combining price and condition that creates an unbeatable market presence compared to competing inventory.

We have recently started doing a complete staging analysis as part of some of our home-selling packages. We bring in someone to add another set of eyeballs to the evaluation of property condition and what needs to be done to facilitate a timely sale. While these detailed reports tend to be very, shall we say, well, detailed, I’ve made my sellers promise not to beat the messenger, because in this market, a smart seller will take all the help they can get.

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As the wonder of the Christmas season comes upon us, we are reminded of the simple gifts we look for.

Peace on Earth, Goodwill toward Man (and Woman, of course) and maybe a buyer for this wonderful Greenbelt home in Lakeshore. OK, that last part might be a little selfish for the season, but you get the point.

Anyway, with 4,470 homes on the market and, lets see, count ‘em, one, two, uh, three… um, six buyers, its a far cry from the go-go days of 2004. Of course, a majority of the agents in the business here locally weren’t even licensed in 2004, but that’s a rant for another day. Nonetheless, my exaggeration(s) notwithstanding, there are Buyers out there. I know, I am fortunate enough to have a couple of them (and I am NOT telling anyone where I have them hidden).

In a recent moment of nostalgia for those gory glory days of 2004-05, I recently had a Buyer (yes, Virginia, there is a Santa Claus) sit down to write an offer on this adorable ranch home over on the east side. We are discussing comps and price points and timing and negotiation and strategy and, well, stuff. The house has been on the market a whopping 50 days or so, a proverbial New-York second in this selling season of this year. It did recently have a price reduction (now there’s something different, NOTE: sarcasm alert!), which brought it in line with my Buyers starting point for negotiation.

In an effort to extract some additional concessions clarify some basic pre-offer information, I call the listing agent. At this point. it all starts to get a little fuzzy, but here’s my take on it. First, we must have had a horrible phone connection, because I could swear he said that they had just finalized a signed-around offer. Certain that it was the call quality, not my hearing, or -gasp- the truth, I did what anybody would do in that situation… I hung up and called back. Unfortunately, the technology was fine, the house had…wait for it…patience…here it comes… an “accepted offer”. Wow.

Now I remember the multiple-offer days of lore… remember historically 71.4% of my business is on the Listing side, so I know what it’s like to be part of the “sorry, we have another offer (or two)” conversation. Many of those, in the day. Ahhh. Oh. Sorry, was getting all misty-eyed there. Must be the dust.

I actually have a point (enough with the Bronx cheer, already). Point is, there are Buyers out there. Really. I know there are sellers who doubt the validity of this theory about now, but even with the number of transactions down sharply, this house sold and had other potential buyers, because it was A) priced reasonably, (although it did need one reduction to get there), and 2) was impeccably staged. Really. The house was relatively small for the price, but the statistical analysis of those comps were ignored (at least by my Buyer) relative to the staging, the creation of the atmosphere of home, that this house had. I have talked before about pricing and staging and the fact that only the best deals are getting done. “Best” in this case, and many others, is defined in subjective terms.

I give kudos to this seller and their agent for positioning the house to sell. However, I am certain that Santa would have preferred the transaction to have included my Buyer. Now I have to figure out how to explain this to Virginia.

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