Sunday Night Stats on Monday Morning

I’m repeating this graph because it’s all about the last quarter now.  If you are watching the stock market today, (and who isn’t) you know that yesterday doesn’t matter anymore.  Right now we’re waiting to see if a “Black Friday” or a “Black Monday” or both as we experienced many years ago, can turn into a Black Monday, Tuesday, Wednesday, Thursday and Friday.

The reason I started Sunday Night Stats back in early January of 2008 was to help people pinpoint a trend.  Well if you haven’t gotten the picture as to the trend by now, Sunday Night Stats isn’t going to help you.

To buyers and sellers of real estate, and agents advising buyers and sellers of real estate, all you need to know today is that September performed as expected.  If you take the brown line as to median price above  and draw it equidistant from the 2006 or 2007 line, you will be exactly at where we are, $377,000.  Who cares.  What we care about is which way that line is going from here. 

Look up at that chart and what happened to median prices from October through year end in all the previous years shown.  Now look at the stock market.  If the stock market is an indicator of consumer confidence, and I believe it is, then we will not see a repeat performance in the last quarter of 2008 as to median home values.  Instead we will see the brown line trending down toward 2005 prices.  In fact, if you have a house on market that you bought in 2005, and you can break even today, consider yourself to be very lucky indeed and DO IT! 

Going back to my Prediction post “My price predictions are: $429,000 for the 2nd quarter of 2008 $400,000 for the 4th quarter of 2008”, I am right on target with the September median at $413,000 and the 3rd quarter at $425,000.  The graph above is the median on a combined basis for Single Family and Condos, hence the variance between $377,000 this month as to the graph and $413,000 in the sentence before this one.  At this point, and hitting my refresh button on the Dow as I write this post, I think we’ll be damned lucky to see the median fall to only $400,000 by year end, per my April prediction.

Usually I talk to buyers and sellers of real estate and to real estate agents.  But the handwriting on the wall today is to the people who are planning to spend 2009 real estate taxes.  DON’T EVEN THINK ABOUT IT!  The market crisis is all about who didn’t see the handwriting on the wall, and who needed to see it.  Today that message goes out to anyone who thinks the new assessment values are a means of increased revenue.  The appeals are going to hit you so fast your heads are going to spin.  In fact, save yourselves the expense of receiving and evaluating those appeals and revise your numbers before you solidify the 2009 real estate tax increases.  If you come up with a budget for spending 2009 real estate taxes based on the valuations everyone received in the mail, you will have no one to blame but yourselves for doing that when the scream and shout hits the fan.

It’s too early to talk about YOY volume, we’ll do that next week.  Today it’s all about expectations as to value, and I expect the 4th quarter to slide down toward that green line of 2005 vs. the trend of the last three years.  I don’t think it will hit the green line by year end…but it’s going to get pretty darned close.

(Required disclosure: Stats in this post are not compiled, verified or posted by NWMLS…never are; never will be.  I do my own stats and no one is responsible for them but me personally.  Sorry to have to repeat this disclosure every freakin’ week…but unfortunately it’s required.)

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

48 thoughts on “Sunday Night Stats on Monday Morning

  1. Can someone tell me why technology stocks are getting pummeled? I don’t see the relationship between financial crisis and technology, unless monies spent on technology are still considered to be “a luxury” item.

    ” Property valuations do not determine the amount of overall property tax obligations. Property tax obligations are determined by 160 taxing districts in King County as they create their respective budgets for 2009. Simply put, the “amount

  3. Everyone is putting their money into cash or treasuries as the safest investment. This might be a great buying opportunity for tech stocks.

    It might be even better next week (meaning prices can fall further).

    Or maybe they will rebound next week.

    Who knows?

  4. I love the story about Cramer causing today’s mid-day crash with this statement:

    “Whatever money you may need for the next five years, please take it out of the stock market right now, this week,” he said. “I do not believe that you should risk those assets in the stock market right now.

  5. Wait, wasn’t he just telling people to BUY stock a couple of days ago? I’m not so sure he has that kind of power but you never know. I’m in stocks for the long haul. I survived the dip in stock values during the tech bust and I’ll just keep my money in there and wait it out.

    I feel sorry for the folks on limited/fixed income who count on this kind of money. MAYBE it’s these folks who sold today. ?

  6. What a day! On the way to school, my son asked me to pull his funds from his 529 college account. We’ve lost 25% of it’s value since the beginning of this year. UGH. We have two years until he’s in college (if all goes well).

    And on tax assessments, we got our notice showing a 10% increase. Your advice, Ardell, is sage. People should never use their “assessed value” to be true value. Your home is only worth (in a lenders eyes anyhow) as much as homes like yours have recently sold for. If you and your neighbor have similar homes, and you feel your home is worth $400k but your neighbor can only sell for $350k, your home is probably worth $350k (regardless of assessed value).

  7. Ardell –

    Its because we are in a recession which is becoming more severe by the week, with lasting consequences, but many (most?) non-financials are just now being priced accordingly. EPS is/was still based on projections for a fall 2008 “recovery”. The indexes will probably correct another 20-30% over the next year because of this.

  8. Jillayne –

    Better to pull out, sit at 3-5% in safe vehicles and get back in later after you think most of the downside is over. Even if you are wrong, you still lose less money. Most people averaging for the long haul like that make out poorly compared to the risk associated with it. Nobody ever makes great returns buying high, having prices crash and then waiting a decade to get them back up to par. Just look at Japan 1990’s to see whats probably coming…

  9. Is anyone else singing “Monday, Monday can’t trust that day..”?

    Jillayne, old people on fixed incomes are rarely heavily weighted in stocks. Hope that helps you sleep better. My 78 year old Mom is happy, happy watching her staggered bond portfolio. People on fixed incomes are rarely “fixed” on stock dividends. No, I don’t think fixed income people are the “folks who sold today”. They were more likely not “in” in the first place, not by more than 40%, some not at all and many at 80/20 with only 20% in stocks.

  10. Well “some” is not “lots” 🙂

    Let’s review for the benefit of those who may never have seen this.

    College fund started when someone is born – all stock with 60% in blue chips and 40% in higher risk with 5% to 10% in Venture Capital funds.

    Adults – zero in stock until 6 months of expenses is separately put away in liquid fixed savings.

    Young Adults – monies in excess of 6 months worth of expenses balanced 40% in bonds and 60% in stocks

    Middle Age – monies in excess of 6 months worth of expenses balanced 60% in bonds and 40% in stocks.

    As you near retirement age, the stock position reduces to 80% in bonds and 20% in stocks.

    KEY is to REBALANCE. If you invested 40% in bonds and 60% in stocks in 1990 and rebalanced by converting stocks to bonds every time the portfolio overweighted to 70% in stock due to growth, you would not be worried when the market drops back. If you rebalanced in 2000 when the market reached 11,700 or so, you would have dropped down to 7,200 and rebalanced again when the market hit 13,000. If you were 45 in the year 2000, you would have rebalanced down to 40% stock when the market hit 13,000.

    True, you would have missed the gain from 13,000 to 14,000 on those last dollars shifted to bonds, but using the 10% overweighted rebalancing technique will always keep you from “gambling” away your profits.

    That’s a rough guide from memory. If you can, use stock funds for the stock position but always hold individual bonds rather than bond funds, as long as you have enough for a staggered maturity portfolio of bonds.

    You’d think that age old advices that fit into a blog comment could be emlazened in everyone’s memory for life.

  11. P.S. Monies put away for specific purpose should be pulled when they achieve the level to fulfill the purpose. The college funds started for a baby should be moved to fixed securities when they are enough to pay for college especially at the beginning of high school. If they are not enough, then you pull the first year of college monies when the child starts high school. You pull the second year of college monies when the child enters the second year of high school. Remove all monies at any time during high school that the fund achieves the required amount to pay for college.

    No portion of monies set aside for downpayment on a house should remain in stock from the time that you have a signed around offer.

  12. A friend just noted that over the 10 yr period Oct 07,1998 to Oct 07, 2008, the S&P returned a -20%, after inflation is factored in.

    And here I thought it was just dumb old me that couldn’t manage investments…

    Good point about cashing in stock to be used for a down payment. Especially after these past few days.

    Also, any comments on the Times article today speculating that the market has improved (maybe at the bottom)?

    Seemed like they were stretching for good news to me, comparing a perfectly awful Sep 07 to Sep 08.

    Finally, the chart seems to indicate that the median price increased slightly from the December of 2007 to June of 2008: Can that be right?

  13. Comparing December to June at any time is like stacking the deck. More investors buy in December and more “Dream Home” buyers buy in June. It’s a different market with different players and the median price reflects that moreso than being an indicator of where home values are going.

  14. If you guys are discussing the stock market I know we are close to a bottom. Seriously, a gap down tomorrow at the open (Wednesday) and i would expect a snapback rally to start. It should last a for a while, ie rest of month at least.

  15. I’m not sure what you’re trying to say on the real estate assessment thing, but the big problem there is that large properties will contest, but single family residential properties not so much. That will shift the tax burden from larger properties to SFR. I seem to recall that the legislature made a change in contesting assessments (maybe a lower burden of proof for the taxpayer), which will contribute further to that change.

    But let’s say someone paying $10,000 a year in taxes gets a 10% reduction in their assessment. Even if they were able to do the work themselves, that would hardly be worth their time to save $1,000.

  16. “Even if they were able to do the work themselves, that would hardly be worth their time to save $1,000.”

    How much time does it take to put three comps together? A whole neighborhood could walk in with the same three comps. What part of the process is “too cumbersome”?

    Is there a good site that details the process for homeowners?

  17. How about a post on old common sense advice for when to buy a house, similar to this article?

    There are a lot of tips in there I heard growing up, but few people have been repeating them in recent years.
    Things like have a stable job, be able to handle the worst case financing, have a budget and long term financial plan, consider maintenance costs, save some money, don’t spend more than 1/3 your income, consider whether you could handle if your spouse lost a job, got pregnant, or whatever.

  18. cautious buyer,

    It’s been very difficult for me to post during the last few weeks. It’s one thing for me to feel confident that this person should buy this house “all things considered”. It’s quite another for me to contribute to the idea that people I don’t know who read blogs should get out there and buy something today. The article says we don’t have a crystal ball, as if buying tomorrow for less is “of no nevermind” and we should just ignore that aspect. I can’t do that.

    On the street I am seeing resale homes that are “better than new” being offered at over $100,000 less than the builder is selling the same model new. The reality is that even if you have all of those common sense issues in place, that doesn’t mean it’s time ot pull the trigger on any given house that happens to be available.

    It’s nice to say “have a stable job”, but what does that mean in today’s environment? Does it mean that anyone who is self-employed shouild never own a house? Does it mean anyone who works for a bank should consider their jobs to be “unstable”?

    My thoughts today are quite different from that article and from your request. My thoughts are not in line with what the Presidential Candidates said in the debate as to stablilizing home values. My thoughts are where should prices be today? Is it really in everyone’s best interest for us to want home prices to stablize right here and right now.

    Seems the biggest reason to buy a home today would be out of patriotic duty to shore up the economy. Even though I have some buyer clients who can improve their quality of life and meet all the common sense advices for “when” to buy a house, there really are very few choices out there. My confidence for them lies in buying something at less than current market value, in addition to all of those other things. There are very few properties that fit that bill. There are some, but very few, regardless of price range.

    Being a “cautious buyer” has a whole lot more to do with what to buy, when to buy it and at what price you should buy it, than whether or not you might have the same job three years from now. Given the news that we may be on the verge of the big D word, who can honestly say that their job or income is “stable” for the bulk of a 30 year commitment?

    I’m leaning towards everyone refusing to buy property based on a two income household. What would home prices be if people only purchased based on qualifying on one income? That long ago rule was broken not so long ago…but where would prices be if everyone said NO MORE! We will not buy a house based on two incomes ever again? Personally, that would be my old fashioned advice for young people who have children today. Is the world ready for that old fashioned-common sense advice?

  19. Good response. I guess “when you absolutely positively shouldn’t buy” makes more sense. I just thought that in the last few years everyone had forgotten the guidelines I was taught in high school economics to keep from getting a loan you couldn’t afford. Now some people are being reminded really fast about the dangers of credit.

    I agree about what the candidate said, and pretty much the rest of your comment as well.

  20. Holy Caboli!!! Closed down 7.33% at 8,579.19. When I said it would get into the 7s before bottoming out, I was SO hoping to be wrong! As to Black Monday, Tuesday, Wednesday, Thursday and Friday…I was ready to declare Wednesday as Gray Wednesday…but Thursday is definitely BLACK. Paulson should just stop talking and go into hiding!!! Whatever he says it seems to make matters worse.

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