The Swamplot reader who’s been focusing on Greenwood King Properties’ monthly market reports has spotted some problems in the latest sales data. The latest report, for the first time, provides separate totals for new homes and resales:
If dollars fall by more than units, then price has fallen.
If you add together 2 significant segments and one is lower and one is flat then the total is lower.
The quick math doesn’t work!!!
How can Flat+Down=Flat??
How can -38% dollars and -33% transactions = Flat??? It implies lower prices…
So now I have a report that raises more questions than answers. Total sales prices are flat? Resale prices are flat? ALL of the pain is in new construction?
Price has always followed volume in every market around the country. So are the price drops for resales ahead of us now? The average resale high end home in Houston is now $585,000??? Isn’t that LOT VALUE in most of these neighborhoods? We never got the news on what happened over the past 3 or 4 years on resale only. Were prices actually flat on the way up?
A few more comments on looming problems in the market for high-priced homes:
For years, the real estate market has benefitted from ever larger and nicer homes getting built inside the loop. The average price on a 1930s-1940s traditional can only climb so much. But developers buy a lot and build 5/6/even 10+ thousand square foot monsters that sell for 2-3x multiples of the homes surrounding them. Perhaps they buy two lots and double up. This has pulled up the average price in the best neighborhoods year after year. 15% increases in the average were common over the past decade and were skewed by this.
The Chronicle captures some of this by using price/SF in its annual price survey.
So what’s the big deal?
Today, driving around the nicest neighborhoods reveals many new build homes just sitting on the market. They are all priced well above the traditional housing stock and many are only 95% complete. This is because contractors cannot get permanent financing on the same generous terms of their construction loans. So builders try to keep the house under its construction loan by keeping the home “under construction” and on the market. Hell, it seems like half of the listings on HAR over $2 million are drawings in most neighborhoods!
Now that the music has stopped, the GK report separates out the new construction from the resales. It is a good idea for them because the market for these new homes is going to get profoundly ugly over the coming months. And, there is a steadier market for an $800,000 2 story traditional home in West U than some big double lot $2.5 million monster.
- March Houston Market Report (PDF) [Greenwood King Properties]
- Latest Greenwood King Report: On the Double! [Swamplot]
- Crumbling from the Outside In: The Poop on 2008 Houston Home Sales [Swamplot]
Chart: Swamplot inbox