Are sales really “failing” to sell?

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(From near the end of this post: “Looks like of the 1,081 combined pendings since 6/1/09, at least 21% are short sales. But of the 1,379 closed in 30 days, less than 2% were closed short sales.”) Read full post for more info. That indicates a HUGE failure rate on Short Sales, though some of the variance could be attributed to other factors.

It seems that since the mls removed STI (subject to inspection) as a status, more pendings are failing.  Is this partly because we are now counting the same property twice, and so only 1 closing for 2 pendings in many cases?

1) IF it is first “Pending Inspection” or “Pending Feasibility” study – Every house that is put into “pending subject to inspection” will “fall out” into “pending”, before it goes to “Closed”.

2) Likewise a large number of bank-owned sales are previous listings that may have been pending as short sales.  They DO sell, but by the bank seller vs the owner occupant seller. The house IS sold at the end of the day. We are just showing two pendings for that one sale, with one closing and the other one “failing”, due to the change of seller name from owner to bank.

The only way for us to know this is to track them differently going forward. There is no way to get prior stats of the switch out from Pending Inspection to Pending or failed short sale = closed bank-owned sale, without looking inside each transaction by hand.  Too cumbersome.  But in recent history I believe these are clearly marked and can be identified for individual study, so if we begin now, we should have some really good data as time moves forward.

Today is the first day of the rest of our…research. Let’s begin on the “right foot”.

I’m going to go to the beginning of June, assuming anything that “went Pending” on June 1 hasn’t closed yet.  We can turn it into graphs after several weeks of raw data are obtained. Sticking to “Residential Only” (which in Seattle includes townhomes and on the Eastside does not, by and large). Most stats available are for SFH, such as on Seattle Bubble, so I will exclude “condo” and other types of property. I will also exclude manufactured/mobile homes and houseboats, which may have different #fail as to finance issues.  There is also a status called “Pending BU Requested” which indicates the agent is thinking the buyer in escrow may not close and is looking for BU offers.  I am going to show them separately as they don’t “fall out” into another Pending status before going to Closed…but should indicate a higher expectancy that the sale will fail.

In future posts containing these Pending stats, I will link to this post and not repeat the parameters each time. If anyone disagrees with the parameters, speak up so we can make the changes at the beginning together.

King County: Went Pending since June 1:

Pending = 456  (PI – 499, PF – 6, PBU – 120)

Note: a property can’t have two statuses at the same time.  So the 456 “true” pendings, are not also contained in the other categories.  PI used to be STI-subject to inspection. PBU is generally reserved for properties expected not to close with the current buyer who is in escrow. PF always had a high fail rate as the buyer is saying I only want to buy it IF…”. PI and PF should eventually move to “Pending” and only counted there. PBU we will try to break down further:

89 of the 120 PBU (Pending BackUps) are noted as “Short Sales”

7 more appear to be short sales, but some with prior lienholder approval

Many of the remaining properties in PBU are also short sales, but the field is new and some are not yet using it properly, especially if the property went pending since 6/1/09 BUT was listed long before the SS field was implemented. This data should improve over time. For now note that MOST of the 120 PBUs are Short Sales.

In addition, at least 135 of the 499 Pending Inspections are Short Sales.

Closed in the last 30 days – 1,379

Best I can tell, given pendings are closing in longer and undertermined timeframes, we can’t study a relationship between recent pendings and closed sales. Unless someone has some ideas here.

But at least we can track and see if the “true and full” Pendings are increasing or decreasing, if the short sales are increasing or decreasing.

Let me check for one more thing.  How many of those closed sales were noted as Short Sales. WOW! only about 24.  There you go…as I’ve said before, A Short Sale is not necessarily for sale!

Looks like of the 1,081 of combined pendings since 6/1/09, at least 21% are short sales. But of the 1,379 closed in 30 days, less than 2% were closed short sales. I’m going to leave this here, but also bring it up to the first paragraph.

Now that you can see how we will be able to break down the stats into the future, your thoughts on meaningful arrangement of data much appreciated.

Seems to me we need to note closed since 6/1 here (451) as Pendings will drop as they are Closed.

The primary purpose of this post is to show you what data is available, so that you can request a customized format in the comments below this post. (I am going to tag this “Sunday Night Stats”, just so that tag will pull up the full year and a half of my data related posts. You can get more data in this link of Tracking the Market.)

Required disclosure Stats are not compiled, verified or posted by NWMLS

UPDATE: I am compiling median prices and price per square foot of “normal” sales vs. short sales and bank owned.  I just found a drop down vs. check box for identifying bank owned properties.  … link HERE to the additional data . Breaking it down to North King vs. South King. There is a huge variance in pricing and the distressed sales are not dragging down other property sales “to their level”. Though I do think as time goes forward, identification of distressed sales will be more and more accurate as the new required field is used often and properly from here forward.

The Buyers are out, and trying to buy, but…

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Buyers are out, and trying to buy, but they don’t seem to be quite as successful as some of the more breathless news reports would lead you to believe.  I have always liked the Pending Sales statistics from NWMLS because they represent the most recent monthly snapshot of new contracts on listed properties – i.e. a Buyer and a Seller have made a deal.  But recently a lot of those ‘deals’ have not closed, the Seller has not gotten his or her money, and the Buyer has not gotten possession of the property. It appears that a lot of these current transactions, which are indicating a high level of Buyer’s intent to purchase, are falling out or being delayed for long periods.

Here is a chart built from NWMLS published statistics of Pending vs Sold data – the chart is built by taking a two-month moving average of Pending (previous month) vs Sold (current month) data. Note that this post expands on an earlier post by Ardell in her Sunday Night Stats.

Let’s call this chart the Fall-Out Ratio – we may want to keep an eye on it.

(Required disclaimer: Statistics not compiled or published by the Northwest Multiple Listing Service)reilingteamcom-fall-out-ratio-0906

Historically the fall-out rate has been well under 10%, but then in early 2008 the fall-out rate started climbing like a rocket. Recall that we had the mortgage market meltdown in late 2007, and lenders started dramatically tightening their lending practices. Then we had the larger financial and business crash in late 2008, and more people started losing their jobs – and the other 90% got nervous. It was also in late 2008 that we started seeing a lot more short sales in our Seattle/Bellevue area. Recall that in a short sale, the insolvent seller is trying to avoid foreclosure by selling the property and getting the lender to accept less than is owed on it. That lender approval process is often slow and uncertain, and it certainly is contributing to this rise in the Fall-Out Ratio. Short sales may be 20% or more of our current sales activity, and those delays may also be a major contributor to why the average Days-on-Market measure isn’t dropping in concert with Months Supply. Other contributors to the fall-out rate would include failure to reach agreement on inspection, and failure of financing. I’m sure we’ll get a lot more insight on causes from the comments by our great RCG contributors.

Thoughts on a new theme for RCG?

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4realz screenshotI’ve wanted to update the Rain City Guide theme for a while now, and took some time this week to play around with some different ideas.  I *think*I’ve come up with something that will work well for me, but wanted to run it by the RCG community for feedback first…  If you head over to 4realz.net, you can see the theme (in action) that I’m thinking of launching here.

Here’s what I like about this theme:

  • Magazine-style so more articles are featured “above-the-fold” . This “teaser” style of posts is a bit controversial, and I won’t really know if it’s better until after I have some data with RCG-level traffic. My hope is that the bounce-rate for people that land on the homepage will go down.
  • The pages and categories are featured just below the header which, for a site like RCG, will help show off the breadth of content.
  • I noticed that the existing RCG theme played funny with a couple of new features of WordPress (in ways I didn’t like), and this one plays much better. Just one example is that when I linked out to RCG with a Facebook status update the existing theme is doing something funny so that the title and photos are not being pulled… That problem is solved with this new theme.
  • Threaded comments… @ARDELLd and I have been having an interesting conversation about this on twitter, but my opinion is that the threaded conversations will actually help improve the flow of the conversation. It will be interesting to see and would love your feedback on this feature.
  • By pushing the “pages” to the header, I’ll free up some space for bringing recent comments in a more prominent place (I’ll probably put them where the “connect” widget currently exists).
  • And finally, my wife, Anna, says the theme is easier on the eyes (and I trust her “design” sense over mine any day!). When/if I launch this theme on RCG, I’m going to use “RCG” colors instead of “4realz” colors (i.e. maroon instead of blue) and “Seattle” photos instead of “Dustin” photos, but the idea is that the new theme will be very similar

Here’s a screenshot with the colors/graphics I’m thinking I’ll use when (if?) I launch it on RCG:

RCG-idea

One of the main things I’ll be looking at with the new theme is if our bounce rate for people who arrive on the homepage for the first time drops… I don’t know if a magazine-style theme is the solution to our high bounce rate, but the easiest way to find out if to actually launch it on the site.

By the way, the theme I’m using is a slightly modified version of the theme by c.bavota called Magazine Basic. The only changes I made were to:

  • Add some color and graphics (like the 4realz/Raindrop logo in the header)
  • Add an “author” box below each post (much more important for RCG than 4realz!)
  • Add some code so that the “comment preview” shows up with a box around it…

As you can see, really minor stuff… and that’s only because the theme rocks the boat right out of the box!

As always, I’d love your feedback!

Is “fiduciary” level of care “old school”?

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I would not respect a doctor who would hand me three phone numbers of his/her patients, who just had a recent surgery, as “references”.

While it’s true that highest degree of confidentiality is a fiduciary duty, and WA has statutory vs. fiduciary duties, I just can’t honor the request of people who want me to “use” my past clients as “references”.  Using your client for your own benefit is such an anti-fiduciary concept.

Some time ago I received an email from a total stranger seeking to hire me as his buyer’s agent.  He asked for a complete list of all of my client’s names, addresses, email addresses and phone numbers prior to our meeting. I responded that he should think very hard about hiring anyone to represent him in a client relationship, who would acquiesce to that request. The issue has come up again, and while I fully appreciate a person’s need to “check references”, I still won’t give out personal info of my past or present clients.

Once I connected two of my clients by asking a former client to have lunch with a current client.  The former client was a whiz at hunting down the absolute best loan available. They worked for the same Company.  They were about the same age and neither had extensive local contacts, both having relocated here and away from their family and friends. I was careful to not give out any info of either party until they both agreed to the lunch, which I did not attend so as to be absolutely certain I would not reveal anything about one to the other. Asking one client to help another client is not the same as asking my clients to help me GET new clients.  I just cannot get my brain around that concept.

I turned 55 the other day and Craig Blackmon’s recent remark that I am “an old war horse” is reverberating in my ears at high volume. I became “a fiduciary” for the first time back in 1974. We were constantly warned about never going out to lunch with a colleague and discussing a client by name in a restaurant. It was the blackest of mortal sins to use a client’s last name in public, and if they had an unusual first name like mine, no first names either.  To this day even when my partner Kim and I speak of clients, we never use last names even to one another. Clearly my age is having an impact, as we seem to be treating all of our clients as if they are our children. “Honey, the kids are coming over to sign the papers in an hour!” [I yell up the stairs]

In many ways, people reveal more about their personal lives to me, than they do their doctor or lawyer. Regardless of whether or not the State views me as a “salesperson” or holds me to a fiduciary standard, I’ve just been a fiduciary for way too long to erase that concept from Who I Am.  Fiduciary = “without regard to self interest”.  So while it is perfectly acceptable and understandable for someone to “want references”, it is just not possible for me to accommodate that request. Many agents have argued with me that I am wrong, old school, old fashioned, etc… Well, maybe turning 55 comes with the convenience of being allowed to be “an old war horse”.

The First Time Home Buyer Tax Credit Advance May NOT Be Used Towards the 3.5% Down Payment…UNLESS…

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Update 6/10/2009 11:20 am:  Please read the comments 1-21 (especially Aubrey Cohen’s comments).   Apparently according to a HUD representative, the tax credit can be used for down payment if it’s received through State Housing Finance Agencies.   (I called the FHA help line twice this morning and both FHA representatives say this is not the case).  The representative from HUD apologizes for the confusion and will make sure the Homeownership Centers understand… I apologize for the confusion too!

I feel like shouting “THE TAX CREDIT ADVANCE IS NOT DOWN PAYMENT ASSISTANCE!” up and down the streets of Seattle.  Home buyers utilizing FHA loans still need to come up with a minimum of 3.5% for their downpayment (see the update above).   Per HUD’s Mortgagee Letter 2009-15 dated May 29, 2009:

“The proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity tha tis reimbursed, directly or indirectly…may not be used to meet the 3.5% minimum down payment, but may be used as additional downpayment, buying down the interest rate, or other closing costs.”

Jane and John are buying a home using FHA for financing with a sales price of $300,000.   FHA requires they invest a minimum of 3.5% of the sales price into the transaction.   Jane and John need to have $10,500 of their own funds (which can be gifted or loaned from a family member) invested into this transaction.   Assuming they qualify for the First Time Home Buyer Tax Credit and the IRS figures out how to resolve the issues of how to pay the FTHB Tax Credit Advances, they could use the $8000 towards closing costs, prepaids and any extra funds (after paying closing costs and prepaids AND after they invest $10,500) could go towards downpayment.  (Unless…see the update above).

This is not a zero down program and this is not like the ol’ DPAs (Nehemiah, etc.).   This is (if the details are ever worked out in time) an advance or loan against your tax credit.

Haaa… I feel a little better now.  🙂  One of the benefits of blogging… venting!

More Upcoming Changes to Underwriting

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Fannie Mae issued Announcement 09-19 amending some very basic underwriting guidelines that will not only impact conventional financing; it will apply to FHA insured loans that are underwriting using Fannie Mae’s DU.   You can read the entire announcement by clicking  here.

Here are some of the changes:

  • Credit documents will be valid for 90 days instead of the current 120 for existing construction.   The age of the document is measured from the date of the document to the date the Note is signed.
  • IRS Forms 4506 or 4506-T is required at application and at closing.  This is due to fraud (misrepresentation of income).
  • Age of appraisal is reduced from 6 months to 4 months.
  • Trailing Secondary Wage Earner Income is eliminated.   Now with a relocation, only the income of the spouse with actual employment may be considered.  Previously, it was possible to use the relocating spouse’s income from their employment prior to the relo without having an actual job.
  • Verbal Verification of Employment required within 10 days of signing the Note for employment income and within 30 days for self-employed income.  (Our company has always performed a verbal VOE prior to funding).
  • Stocks, bonds and mutual funds now valued at 70% instead of 100% to be used as reserves.   Due to market volatility, Fannie Mae is devaluing your portfolio.   This means that if you provide your mortgage originator with a stock, bond or mutual fund statement showing an ending balance of $10,000; the figure used for qualifying and on the application will be $7,000 (70% of the value).   Stock options and non-vested restricted stocks are no longer eligible to use as reserves.
  • Retirement accounts valued at 60% instead of 70% to be used as reserves.  

Fannie Mae’s effective dates are to follow…if the loan is manually underwritten, this applies to applications dated on or after September 1, 2009.   However, expect to see lenders and banks to adopt these guidelines early.

The Dream Home You May Never Own

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newtown-borough1Blythe Lawrence over at The Seattle Times asked me to write a little something about “people who fall in love with a particular house or houses and eagerly wait (sometimes for years) for them to go on the market.”

Have you ever “stalked” a home? Blythe’s request reminded of a time when I lived and worked in the little town of Newtown Borough, Pennsylvania, which was laid out by William Penn in 1682.. The town was chock full of historic and unique homes of varying styles, shapes and sizes. It was not uncommon for people to schedule their daily walks past their favorite houses and dream of some day owning “The big yellow house” or “the Grand Home near the Buck Hotel”.

Fairly often people would come to me and say “if the yellow house ever goes up for sale, can you let me know?” The yellow house was just about everyone’s favorite. More often people would come to my office wondering if any of their favorite homes, of which there were many, might be coming up for sale.  Being a rather bold person myself, I would say, “Well, why don’t we take a walk around town and you can point to all of the homes you like, and I’ll write down the addresses.  Then we’ll just knock on the door and ask the people if they are thinking about moving.  Or you can write them a letter complimenting their home and ask them to please let you know if they are ever thinking about selling. It always surprised me when they didn’t want to do that.

As Blythe pointed out in her email, more often people become “Real Estalkers” walking by the house almost every day. Dreaming that one of their favorites would one day have a “For Sale” sign out front and they would buy it. I thought it was pretty simple to just write them all and find out…but I realized that people didn’t want to know that NONE of their favorite houses would be coming on market. They didn’t want to shatter their dream that someday soon it would. They didn’t want to spoil their morning walks fantasizing about the possibility.

Do you have any stories for Blythe?  Have you ever stalked a home hoping it would someday be for sale, and then eventually buy it? Seems to me Rhonda Porter may have stalked and found her dream home. Blythe is planning to write a little something on this on Thursday, so if you have any stories for her, please post them here in the comments.

Thank you.

5 Reasons Guys Dump(on) Houses They Like

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Why Guys Dump Girls They Dig is one of the featured articles on msn homepage this morning. I couldn’t help but notice that the 5 reasons noted in the article had a striking resemblance to how men react when home shopping with their wife or fiance.

For agents who ask “why won’t buyers get off the fence” or “why doesn’t the buyer want to see homes with an agent”, my slight modification of the msn article might offer some insight.

1. The Timing Is Off  – “I ended it because I didn’t want to commit…right then.”

Often agents will scratch their heads saying “if they weren’t ready to buy a house, why are they looking at houses?”  When a single guy or single girl is buying a property on their own, they often don’t start looking until they are ready to buy. BUT when there is a couple involved, often the man is going along…and enjoying the looking process…but not ready to make a commitment.

Generally speaking, a man doesn’t like to say “no” during the day to the woman he plans to sleep with that night. So he says yes…let’s go look at houses, and then he continues to gather information, sometimes for years.  Looking and actually buying are not one in the same, and sometimes not even related one to another, in the man’s thinking and acting process. Just like dating and marrying are clearly NOT part of the same thinking process.

Looking, researching and actually buying one, are not one in the same for a man. Fear of commitment doesn’t enter into the picture until the woman wants to actually BUY one of the properties.  That is why it is important that an agent NOT just fax an offer to the couple for signatures.  Watching how the people react to signing the contract is very important to protecting your client’s best interests.  If the man (or the woman) seems to be signing reluctantly and “going along” to please the spouse or girlfriend/boyfriend, it is the agent’s job to help them take a step back, until they are fully ready to purchase.

2. We’re Not Finished Playing the Field (Looking)- “The moral of the story: Until we mark everything off our checklists, or have too many friends convince us that we can’t do better, the flight risk is real.”

A man is less likely to stop and buy early in the process than a woman.  A woman will often want to make an offer on one of the first properties they like. Women enjoy the buying and getting into it part, more than the “looking at” and “gathering information” part.  At the onset the men and women are evenly excited about looking, but the woman usually gets to “let’s buy this one” earlier.

 If the man is not finished “playing the field”, looking, researching, consulting with friends, etc…he is more likely to find a defect in the property pointing to why he can’t buy it, than admit that he is just not ready to leave the “looking” stage yet.

3. We’re Fixated on the Worst-Case Scenario – “Blame our friends who took the plunge (bought homes) before us, but many guys are hyperaware of what could go wrong down the road.”

Very often, once a potential home to buy is identified, the man comes back many times, emails many questions, calls 4 times a day, and the woman seems to disappear from the equation until the property closes escrow. The woman is often done once the decision to make an offer has been made.  She is thinking about buying towels that match the bathroom.  She is mostly concerned with the seller accepting the offer, so she can start planning the move. 

A man on the other hand is just getting started once the home they want to buy is indentified.  Actually getting it is the least of his concerns (except in #5 below).  The weight of the consequence of actually buying vs. looking is ENORMOUS at this point.  The decision to make an offer is a beginning point of the new “worst case scenario” cycle. What will the payment actually be? (unknown until you can lock the rate AFTER you are in escrow.) What major expenses can I expect that are currently unforseen? (unknown until after in escrow when you do the home inspection.)

The process of buying a home places some of the pertinent facts out of the man’s reach and during the escrow phase.  This is VERY uncomfortable for most men who like all the details to be pinned down before he makes a real commitment. Knowing he has a legal out if he doesn’t like the inspection is little comfort. Knowing he can lock his rate before he loses his legal out on the inspection clause is little comfort.

Panic ensues because the process will automatically back him into a corner of having a near term drop dead date to cancel, or be obligated to buy the house, or lose his Earnest Money. Having only five to ten days to consider all previously unknown factors, and cancel or not during that time, seems absurd to most men. It produces sleepless nights and profuse sweating  in many cases. Rightly so…I say. As an agent, helping him to predict all worst case scenarios prior to offer, makes the client’s life a LOT easier when the actual info comes in better than the anticipated worst case scenarios identified in advance of the offer.

4. We’re in Like, Not in Love – “It’s harsh but true. In fact, it’s probably the most common reason we bolt.”

This one is self explanatory and most men do not want to be in LOVE with a property…EVER!  They want a purchase decision to be free of emotional influence.  They want it to be a sound financial move and not an impulse buy. The problems arise when their woman is in LOVE with the house, and the man is trying to hold on to being unemotional about the purchase and the process.

5. We’re Too into You (it) – “Guys are protective of their emotions. Translation: We’re scared spitless of being hurt. So, if we start to feel like we’re getting into a situation where we’ll be destroyed…we might launch a preemptive strike and yank the plug first.”

Multiple Offers about says it all.  Men rarely like to get involved in an offer if they know there are other offers. They are equally afraid of getting it, as they are of not getting it. They are equally afraid of houses without other offers (why hasn’t anyone else made an offer on this house?)  In many ways men are more likely to get through the process on a property they don’t LOVE, than one they do love.

This last one is very important for agents to understand. When a man really wants the house, you usually don’t know it until about 4 days before it closes.  Sometimes it’s the first time you seem him smile and get excited. He doesn’t emotionally connect with the home until all potential obstacles are behind him.  Sometimes that doesn’t happen until he has the keys in his hand 🙂

I just bought a new high-end condo! Nothin’ but air!

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There’s been a lot of buzz lately about buyers of high end new condos looking to get out of a deal they signed at the height of the bubble. My firm has been lucky enough to be able to help out some of these buyers (my next post will focus on whether small buyers are entitled to use any legal leverage necessary to extricate themselves from a bad business deal — like any big developer would — or whether buyers should “accept the consequences” of their actions and just write off the earnest money).

In handling these cases, we’ve come to appreciate the “new” model for high rise condo development. First, though, some background about the “old” model for condos (and you condo experts please forgive me for a general discussion of the issue that does not apply to all condos — there are many variations — but which provides background for my larger point). When you purchase a condominium, you are buying the exclusive right to use a particular unit. You typically own this unit exclusively from “the paint in” — i.e. the unit and all its fixtures are yours to use as you please.

However, the walls, the structure, and even the land itself is owned by ALL of the owners as a common element. In other words, if your unit constitutes 1% of the total building, then you also own 1% of the whole common building (i.e. excluding other units) AND the dirt on which the building sits. The remaining owners own the remaining 99%, with each ownership share correlating to the size of each individual unit. So, even though you bought a condo and not a house, you still own — with others — real property, dirt, your own very small piece of planet earth. Because every piece of real property is unique — there is no other one exactly like it anywhere — and because humans are earth-bound (generally speaking, at least in terms of everyday living) real property has always been considered a good long term investment.

So what’s new? For various reasons (to allow for a hotel within the building, to allow the developer to retain an ownership interest in the property, etc.), large condo towers these days (such as Washingto Square Towers in Bellevue, Olive 8, and several others) are built “on” air, detached from the earth. If you bought one of those condos, you don’t own any dirt at all — only the building and airspace above the ground. Say WHAT?

Here’s how it works (again speaking generally — every project differs in the details, I am sure). The developer will create two parcels: a parcel on the ground, up to a certain height, and an “airspace” parcel above that. These are separate legal parcels, each with their own Parcel Number. The condo will be built in the “airspace” parcel. Owners will have an easement across the “land” parcel to guarantee access to their home in the “airspace” parcel above. I guess this could be described as a “man’s castle in the sky”.

I own a condo, and I take some comfort in knowing that I own dirt. The dirt will have value (unless/until we arrive at some “Mad Max” style future) regardless of what catastrophe strikes my condo. Presumably, my fellow owners and I will always have the option of selling that dirt to someone else (it would probably require 100% agreement and so its very unlikely, but it is at least theoretically conceivable). But what if you own only air detached from the dirt? Well, it seems to me you’ve got something much less valuable. And kinda weird too — who wants to live in an “airspace” home?

The Third Bubble …

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It has often been said that we have even more of a bubble in real estate agents than we have in real estate prices. In fact we have had three concurrent bubbles – house prices, number of purchases, and number of agents. Unfortunately for the members of the residential real estate sales profession, we are making a lot more ‘progress’ on reducing the first two bubbles than we are on the third bubble.

Last week I went through an exercise of trying to track the growth and reported decline of the number of licensed agents in King County, including metro Seattle and Bellevue, who are members of the Northwest Multiple Listing Service. I had heard that the NWMLS had expected about 25% fallout in 2008. As I got into it, it looked like taking the transaction volumes and median prices at the same time might produce some interesting insights into agent incomes and the desirability of the profession. ( I admit that I considered an alternate title for this post: ‘The Grass Is Not Always Greener…’)

So here’s what I found, using year-end data from published NWMLS statistical reports, but doing my own analysis (and making my own errors – please let me know if you find some or think I missed a point of interpretation).

First are three charts to show the Three Bubbles of King County Real Estate:
bubble-triptych

Second is to show how the growth in number of agents has affected the average number of transactions per agent. A couple of notes on methodology here. For transactions per agent, I split each transaction into two sides, and then just divided the total transaction sides by the number of agents. For the 2009 estimate, I took the business volume for the first four months, through April, and factored it up by the same ratio as the last 8 month of 2008 were to the first 4 months of that year. We’ll get another check on it shortly with the May 2009 data.

(Required disclaimer: Statistics not compiled or published by the Northwest multiple Listing Service)

agents-vs-transactions1

Note how the average number of transactions per agent have been dropping dramatically as the total number of agents rises and the total number of transactions falls. Total number of agents is only down about 10% so far. Some people expected a far faster fallout rate, including NWMLS in one talk I heard, but the inhibiting question is probably ‘Where would they go for an alternate job in this economy?’ A related article from Inman News appeared in the Times last Sunday – Less Experienced Hands Leaving the Business.

And third is to show how the combination of all three factors plays out in average agent earnings. For nominal earnings, I assumed 2.5% commission on each transaction side – we don’t always get 3%, and we often have to give up a bit here or there to keep everyone happy and on track. The data behind the charts is stored here.

agent-earnings1

So for the average agent (and I recognize that most clients would prefer to deal with an above average agent), earnings have dropped from a decent professional income to a pretty marginal income. Last year (2008) it was a little over $30,000 – about $15/hr if you work full time, and this year looks worse. How about $10/hr?

I guess the grass really isn’t always greener…