I have now been tracking the Distressed Sellers Index for a full year, and since I haven’t mentioned it on here since way back in October, I thought it now would be a good time for another update.
Please keep in mind that I do not claim the DSI to be in any way scientific or statistically rigorous, but rather I provide it as a point of general interest. It uses an original and proprietary algorithm to measure the ratio of listings using “distressed language” compared to the total number of listings.
Here’s a graph of one full year of the DSI:
Last May the DSI was in the upper 20s. This May it has bounced up to over 100, with the latest update coming in at 103. You can also see above that February and March had a series of particularly high points on the index, and it appeared to be heading back down to the upper 70s until the last few updates.
Again: I’m not attempting to apply any sort of predictive meaning to these values. They’re provided as a curiosity, nothing more.
For the sake of comparison, here are the current DSI values for select additional cities:
- Boston: 77
- Detroit: 96
- Las Vegas: 222
- Sacramento: 150
- Miami: 212
- San Diego: 209
- Los Angeles: 168
- Phoenix: 162
Most of the other cities fall more or less in line with where you would expect based on the condition of their respective housing markets, with the notable exceptions of Boston and Detroit (down 12% and 23% from their respective peaks). My guess as to what’s going on there would be that most sellers in those cities have managed to make it all the way through the five stages of grief and since they’re now accepting the falling prices situation, they don’t tend to use distressed language in their listings.
Anyway, there you go. If this index is interesting to enough people, I can make it into a regular monthly post. Otherwise it will remain just an occasional curiosity.
Jump to the bottom to add your comment. ↓
7 responses so far ↓
1
TheHulk
// May 21, 2008 at 11:25 am
Hey Tim,
Is the distressed seller index by county?
Also, I call dibs on the five stages of grief, since I mentioned them to RAL a couple of days ago :)
2
vboring
// May 21, 2008 at 11:55 am
who is looking forward to this summer? if people think they are distressed now….
also, there was an interesting post about how pricing forces can be incredibly local on calculated risk this morning:
http://calculatedrisk.blogspot.com/2008/05/house-price-mosaic.html
foreclosures pull down neighborhood prices first (and presumably region-wide prices later).
moral of the story: if you’re looking for a deal, look near the foreclosures.
3
TJ_98370
// May 21, 2008 at 2:38 pm
Speaking of distressed owners:
A coworker of mine had a house built in Sequim as an investment in 2004. It’s been on the market ever since he had it built. He started with an asking price of $435K and he just sold it for $330K. He says he is glad to have gotten out from under it and that he is just going to break even (excluding his own time and effort). MLS 27120615.
4
patient
// May 21, 2008 at 3:00 pm
I think there are also a fair share of distressed potential buyers out there. The price of energy impacts more or less every piece of goods or service. Either from a material, transportation or operational point of view or a mix of them. It’s no longer only a question of it being tougher to qualify for a loan, the living expenses are already raising quickly and could very well skyrocket within the next couple of months. My guess is that more people than already will need whatever cash flow they have and are not inclined to take on more expenses/debt.
5
softwarengineer
// May 21, 2008 at 3:49 pm
NO MORE RATE CUTS EITHER
Finding a qualified buyer [that wants to go in debt with this recession axe over all our jobs] is going to get worse and worse. I always felt a good loan amount is about 20-25% of your net pay left after other debt payments. That’s if you’re younger and anticipate wage increases too [wage increases for anyone in the future, especially factoring in hyper-inflation for food and energy?].
If you’re 50, I always felt that’s when you pay off your house loan off [or equivalent, like the principle owed is cash in the bank, not for spending], to prepare for retirement in 10-15 years.
My rules would make Seattle house prices decrease at least 50-75%, but what do I know….I just live my life out of debt. I guess I’m a dummy. Or am I?
6
TheHulk
// May 21, 2008 at 3:56 pm
Ha Patient!
“My guess is that more people than already will need whatever cash flow they have and are not inclined to take on more expenses/debt.”
If only people had thought about this on 06/07 when they were buying houses exceeding 6x annual income with 0% down. Granted, there will be some people who genuinely faced issues and now have serious problems keeping their house (divorce, job loss, medical problem etc.) I have genuine sympathy for them.
For all others who overextended themselves, I say lets brand the mark of foreclosure on their foreheads. Well maybe thats what people would do in medieval times, these days it comes on the credit report !
7
TJ_98370
// May 21, 2008 at 7:59 pm
A little additional info related to my previous post (#3). - My coworker said that the reason his original asking was $435K in late 2004 was because that was what a similar house in the neighborhood sold for back then. He also said that he had received an offer of $380K last fall that he rejected and now wishes that he hadn’t, and that he had been receiving alot of lo-ball offers lately. And finally he said the reason he accepted $330K was because he did not want to sell at $280K this fall. All this coming from a guy who used ARM financing and is admittedly a speculating investor who obviously sees the writing on the wall. Notice how the MLS description of his house indicates that it was “…..priced thousands under comparable homes….”
Sequim isn’t Seattle, but there is no reason to not believe this anecdotal example will not be duplicated in the urban areas also. My coworker is a smart guy. He made good money on other recent real estate transactions. He went into the “damage control” mode when he recognized the trend, ignored Realtor pricing suggestions, priced this house to sell and got out. Time will tell if he made a wise decision.
Jump to the top of the comments. ↑
Leave a Comment