Here’s a visual I intended to whip up last week but ran out of time for. I noticed in the pending sales chart that 2011′s pending sales were trending fairly closely with the pre-bubble trend from 2000-2002, but when I looked over to the closed sales chart, the lines where nowhere near each other.
I thought it would be informative to plot pending and closed sales for those years on the same chart side by side, so here it is:
Average number of pending sales, January-April 2000-2002: 1,969
Average number of closed sales, February-May 2000-2002: 1,887
Difference: 4.1%
Average number of pending sales, January-April 2011: 2,091
Average number of closed sales, February-May 2011: 1,429
Difference: 31.7%
Just a public service reminder to take any reference to “pending sales” with a giant grain of salt as it clearly does not mean what it used to.
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Again, it’s mainly due to short sales not closing, IMHO, although it now including P-I also has an effect.
Somewhat related, because of some short sale agents, Active listings are overstated if they don’t take the listing Pending when the buyer and seller agree to terms, but instead wait for the bank to agree. That’s likely a much smaller problem, but it’s somewhat hard to tell.
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Kary, the short sales are probably part of the reason for the disparity, but I also recall that the NWMLS tweaked their criteria for counting a home as a ‘pending’ sale (to include more houses). Someone can correct me if I am wrong, but I believe that this change by the NWMLS occurred sometime in the Summer of 2008.
I can’t help but believe that the NWMLS essentially changing the way that they collect the data has just as much to do with this discrepancy as the short sales.
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RE: masaba @ 2 – That’s the P-I (Pending Inspection) change I added after noticing that Tim was using two very old years for the graph. I don’t recall exactly when that change occurred, but I think it was about two years ago as you suggest.
And I agree about the comment on the change affecting the data. I would say the same thing about the NWMLS allowing agents to leave some short sales active even though the buyer and seller have agreed to terms. Not cracking down on that affects the year to prior year comparisons. Maybe the DOL would take that on, the way they took on Hellicksons?
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RE: Kary L. Krismer @ 3 –
Ref: http://o.seattletimes.nwsource.com/html/businesstechnology/2015045497_hellickson14.html
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RE: kfhoz @ 4 – Thanks, but I already covered that. ;-)
http://www.trulia.com/blog/kary_l_krismer/2011/05/yes_agents_can_lose_their_license_by_pricing_a_short_sale_too_low
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Correct Me if I’m Wrong
Aren’t all pending sales reviewed by the lenders for acceptance?
If they don’t go through, the lenders rejected the offers?
IMO, if the above statements are true, it sounds logical that lenders are becoming FAR more tight fisted and aren’t giving loans to anyone that could breath, like before. I agree with Kary, cheap short sale offers really add to their past loan losses that were once at absurdly high valuations….but it still sounds like a bear trap to me.
Stalling around for the units to deteriorate the neighborhood’s prices isn’t savvy banking either. Maybe we should just annex repo stock out as homeless/vagrant parks with no electricty or water….its turning to junk anyway.
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The main point of Tim’s post being that “Pending Sales” doesn’t mean what it used to, that point is absolutely true and the illustration of it quite vivid.
The advice to take any reference to pending sales “with a giant grain of salt” isn’t the best advice, in my opinion. Better advice would be to assess what comparisons or implications are being made by such references, and interpret the real meaning. A month over month change in pending sales (in either direction) is pretty meaningful, while a year over decade-old-year change is convoluted by all sorts of factors and worthy of the grain of salt treatment unless/until the convolutions can reasonably be accounted for.
I agree with Kary, that the NWMLS (and perhaps DOL) ought to be enforcing timely status change rules. For example, I had a transaction close 10 days ago, and not only has the status never been changed to “Sold” by the listing broker, but it also was never changed from “Pending Backup” to “Active” to “Pending Backup” to “Pending” as a prior deal fell through, my buyer’s deal was negotiated and progressed through bank approval through closing. Short sale and REO listings are littered liberally with inaccurate and untimely status information.
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Two more thoughts on Pendings.
1. When you’re dealing with national pendings stats they can be filled with issues like the ones we’re discussing locally, but ones we don’t have any understanding of at all. A sole is a sold, but what is a pending?
2. Not that I do absorption rate calculations much, when when I have I have always used solds and not pendings for the calculations. Before I think that was viewed as being optional, and not really necessary. This change in the nature of pendings makes the use of pendings for absorption rates rather useless.
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This might seem somewhat off-topic
However I have just noticed the Zillow Valuations are taking quit a Plunge Lately– not that Zillow is 100% accurate.
However physiologically is has a great effect, to both buyers and sellers and those people deciding wether or not to just leave the Bank the Keys.
anyone here also just have taken NOTICE WITH ZILLOW?
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Seems like Zillow is in many areas hitting the 2004 Valuation Range…
Now if we get down to 2001/2002 Valuation Range, now we affectively erased most/or about all of the Worst of the Easy Credit years.
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Valuations are probably safe to say in the 2004/2005 range for most of King County and Snohomish..
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I interrupt this diatribe to let you know…Seattle is a ripoff:
What will $200,000 buy: Coral Springs
Price: $199,777
Area median price: $187,300 (down 6 percent from one year earlier)
Amenities
3 bedrooms/2.5 baths
Approximately 2,105 square feet
Features
Screened patio
Master suite with wet bar and garden tub
Garage converted to bonus room
http://www.bankrate.com/finance/real-estate/what-will-200k-buy-coral-springs.aspx#ixzz1PDtZKeQ8
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RE: Lo Ball Jones @ 12 – Ugh, why would I want to live in Coral Springs?
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Wow. Thanks.
I am so glad that the recession is over and everything is back to normal.
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RE: Ron @ 9 – I just noticed to today that one of the houses in my neighborhood is up about 20% per Zillow, because they undervalued it so much, and now it’s above what it recently sold for.
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Keeping the faith, baby:
http://www.wired.com/images_blogs/underwire/2011/06/LukeAllen1.jpg
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RE: Kary L. Krismer @ 15 –
HI-
Weird. I noticed two things here in Houston. First, the zillow value of our house went up by 85k in a few days (not that there’s anything wrong with that, or that I believe it). Second, they retroactively changed the previous values on their graphs. Must’ve changed their algorithm…
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Zillow reported estimates yesterday for the first time in two weeks — about longest breather I can recall. At least for the houses I follow, the company abruptly changed many estimates by large amounts (10% or so), others little or not at all. I think they altered their valuation algorithm during the break. What bothers me is that whatever they did also changed all their historical value graphs; suddenly presto there’s no record of the values they gave for property only the day before. Very 1984.
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RE: m-s @ 17 – I posted this in another thread, but that house today is down about 15% and the graph is not updated.
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RE: m-s @ 17, JoeM @ 18, Kary L. Krismer @ 19 – I asked Zillow about this on Twitter & they pointed me toward this update they posted on their blog this morning: http://www.zillow.com/blog/2011-06-14/zillow-expands-and-improves-database-of-homes/
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RE: The Tim @ 20 – Interesting, but on my sample of one house it seems to have had the opposite effect. Also I’d note that on that house their range of about 170k is broader than Corelogic’s, which is about 120k. Both seem sort of wide for a house that recently sold on a marketed listing.
Also interesting that they didn’t list Seattle as being one of the areas they were most accurate. Didn’t that used to be the case?
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I agree that tracking pendings is absolutely meaningless. In today’s market, pending short sale data is unreliable. Now if you take short sales out of the data, you would definately get a more accurate picture.
Looking at today’s King County Pending Shortsales we have a total of 1,354.
270 went pending in April.
378 went pending in May.
On average about 150 close per month.
I do absorption rate graphs: here is the one for King County:
http://bit.ly/j5Unbs
Statistics not compiled nor published by NWMLS.
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Thanks for the link, Tim. Zillow could’ve rolled this out more cleanly.
Anyway, Zillow says, “Over the past five years, Zillow users have submitted information on more than 28 million homes, adding updates about remodels or home facts. . . Our new Zestimate algorithm better takes advantage of this database . . . incorporating more data points and new modeling approaches.”
Obviously I can’t argue with improved accuracy, if it’s true. But since few owners will bother reporting remodeling or other issues unless the property is for sale or sold recently, it seems to me that this part of the new data approach distorts the picture of a neighborhood. You get houses with improvements looking more valuable than their neighbors, even though some of those neighbors have also upgraded (but just haven’t bothered to report it). I think there may be some other undesirable effects from this new approach too.
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What good is Zillow anyway? I mean their estimates are usually a $100k range on a $400k house. That’s like saying my average height is 6 feet — but I could be 4’6″ on up to 7’6″. If it goes up or down a little, that will be well within that 25% margin of error… so you don’t want to get too excited or depressed as the case may be.
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On Zillow the two homes I own went from spot on accurate to off by 40%. My investment property jumped in value over my make-me-move price. Which the algorithm unlisted, so as to avoid any real world valuation cap in their wild new speculation. It’s rental value also jumped quite a bit, the minimum is 25% higher than its actual rents. Which are publicly available.
My other home, a fixer upper which was JUST appraised managed to lose 1/2 its value in a month(huh?), in their fixed up graph even. Like they are picking random numbers each month. It’s now 1/3rd under the couple day old appraisal. I could sell the house in cash in less than 12 hours at this price. At the old valuation it would have been gone in less than a day, but wow. Its got to have something to do with a bug in the weighting of the foreclosure and auction price data.
The price history of both homes seems to have forgotten about the current recession. Both house graphs now have month to month fluctuations that make the entire recession a minor signal in the noise. I don’t know how they could make it worst.
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[...] course, keep in mind that a good number of these homes that go pending will end up back on the market or in some perpetual state of pending limbo. Nonetheless, I thought this was an interesting visual [...]
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[...] just a result of sales falling off a cliff post-tax-credit last year. Also, don’t forget that “pending” doesn’t mean what it used to. Back to the press release… “It feels like we have hit the bottom of the market,” [...]
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