The Buyer Seller Gap

OMG! It's been sooo long since my last post. Where did the time go? I've been busy; office consolidations, increased number of sales meetings, recruiting, coaching...the list goes on. Well, time to get back on the horse, so to speak. I've initiated a project based on similar metrics introduced to me by Steve Harney( http://www.steveharney.com/). Steve is working with Allen Tate, Realtors exclusively for now to develop and train a better understanding for the numbers that comprise the present economic scenario. Hi message is richly facilitated via the use of graphs and charts. It's amazing how clear muddy water becomes when viewed analytically through the lens of a chart or graph. I've gained a whole new level of appreciation for this powerful means of communication. One of my favorite Harney graphs is a gap analysis comparing national median listing price to median under contract price. The theory being that as long as there exists too great a gap between listing price, what a seller wants and under contract price, the price at which a buyer will buy, the market is dysfunctional. This makes perfect sense. Until prices fall enough to entice buyers to buy inventories will continue to climb as will days on market. In a buyer's market, the buyer drives the car. I've taken this simple concept and applied it to Triad MLS, Forsyth County, average List Price for residential listings and average Under Contract Price for the period February 2007 thru February 2008 (I would have run the results through March but Tempo has not posted March as of this writing). Here's the result:

Clearly there exists a gap between the two datasets. Further it would appear based on these findings that average sales price has a ways to fall in order to reach buyer expectations for what they are willing to pay. Too, sellers are not adjusting their asking price quickly enough to keep pace with those buyer expectations, which continue to drop. Admittedly, this is not the most accurate means to measure the two criteria. Average prices can be skewed by abnormal highs and lows thrown into the mix. But, given the size of the data sampled (Forsyth County accounts for over 80% of the 4 county Winston-Salem market) the gap evidenced in this presentation represents an undeniable trend. Looking closer at the indications of the graph, it is evident that the Forsyth market, buyers and sellers, has been in alignment on two occasions in the past year. Note the intersection of the two lines in the months of March and June of last year. However, since last June the two lines have diverged and indeed since December of 2008 the gap has widened as Sellers stand their ground even in the face of declining buyer interest. Inventories have risen for this same period due to what can only be described as a standoff. Buyer interest and confidence was rising through February 2008 and no doubt could swing upward once again to meet Seller expectations with improvements in employment and the economy in general. No one is going to buy a house while uncertainly looms large on the economic horizon. I'll keep you posted as I update this graph monthly going forward. Until the next posting, keep your eye on the prize, Mike