The peaks and valleys of my first year as a full-time Realtor…

by Cathleen Collins

Realtor, Staging Consultant

Author website

Want to know when the real estate market will get back to normal? I have a crystal ball. Well, a really good spreadsheet analysis, anyway…

I’ve been a real estate licensee for three years, but I’ve been a full-time Realtor for only a little over a year. This means that when I joined the National Association of Realtors and local affiliates, I entered the industry at the height of Metropolitan Phoenix’s market correction — or irrational exuberance, depending on your point of view. On average, houses were appreciating between 35% and 65% a year. Homes were selling within days, sometimes within hours, and neither Realtors nor appraisers could keep up with what price a house should sell at. So, Realtors were running comps, pricing above all the recent sales, above last week’s sales, then waiting for the fax to churn out multiple offers to buy the house for even more than that! Representing buyers, helping them get the homes they wanted for a price they could afford, was hard work. But representing sellers was “easy,” so that was the preferred side of the transaction. I walked into the business with a winner — a seller — a dear friend who was leaving the company we worked for at the same time I was. I left to become a Realtor and she left to move to Tucson.

Because I was so new — and afraid of making any mistake that would result in Juanita getting less than she should — I asked Greg to take the listing so I could assist and learn. That was my last chance at my own listing during last year’s wild ride.

Then, sometime during the winter, the market became stable. It was no longer a seller’s market. My buyers were able to buy the homes they wanted without having to outbid other would-be buyers. This was a great market. Then the whispers came and the news media shouted: We were headed toward a “bubble burst.” What a silly metaphor for our housing market, comparing it to the technology industry of the ’90s, when venture capital camouflaged foolish business plans long enough to take their companies public, and eventually created a stock market bust of technology stocks. Though these are two incomparable markets, the media’s was such a colorful story that it made home buyers wary, and homeowners who didn’t have to sell put their houses on the market anyway. Some thought they could cash in at the top of the market, even thought the boom was already over. The other half were afraid their houses would lose value like some poorly managed technology company.

So now I have listings, as does every other working Realtor. Bloodhound’s sellers are in a better position than most sellers of real estate… Greg and I are great Marketers, and unlike many in our industry, we understand the role marketing has in selling our clients’ homes. And like true Marketers, we are never satisfied with what worked yesterday; we are constantly studying and testing what works in today’s marketplace.

Notwithstanding, I do have clients who want to or need to sell their houses now, in a market where the inventory of houses for sale is about three times what it was before the market correction of 2004/2005. And the sellers know this, going into the market. But still they’re anxious, because no one has come to see their home lately, or if their house did show, no one has made an offer. The average days on market of houses that sold in June 2006 was 69, the same average days on market of houses that sold in June 2004. But that was two years ago, and people can only remember last year, when everyone’s favorite topic of conversation was real estate. And frankly, that’s all I can remember, because two years ago I was employed in technology, and grateful to be with a company that hadn’t been managed badly… I know my clients’ houses are priced right, I know they show well, and I know they’re being marketed well. I also know that they are not lingering too long on market in today’s marketplace, because I’m hearing the same story from all the Realtors I know: Anyone entering today’s market should not expect a fast sale unless they price their house dramatically below market. Still, I want to ease my clients’ concerns. So today I decided to trend the numbers of cancelled listings month by month to see whether I could find any indication that the glut of inventory is or will soon be easing off. There’s no way to go back in time to compare the number of active listings month by month, but, just for fun, I also tracked the number of closed (sold) transactions for each of the same months, and compared the numbers of days on market. The population I used was every type of single family resale residence in Maricopa County including condos, but I excluded mobile homes because they are such a different type of market.

How green was my valley? In my first year as a Realtor, I saw a precipitous drop in inventory, then a sickening surge. To everyone’s relief, the market seems to be settling down. Click on the chart to see a larger version. Or treat yourself to a spreadsheet of the full numerical analysis.

The good news from this comparison is the market looks like it’s beginning to clear. In June 2006, 12,816 of these homes came off market, either because they closed escrow or the owners cancelled the listings or let them expire. This is the greatest number of houses to leave the market of any month from January 2003, which is as far back as I went. Last month 12,352 left the market. Only in June 2004, when 9,426 houses sold, did more residences go off market. The average during the 42-month period I analyzed was 10,235 houses leaving market per month. I also thought it was interesting to see that the average days on market of houses that are taken off the market without having sold corresponds — lagging a month or two — to the average number of days on market before a sold home goes under contract. To a nerdy person like myself, the numbers are comforting. I hear war stories and read about experts’ gut reactions, but I trust numbers. I trust my clients will be comforted, too, knowing that the market looks like it’s getting back to normal…

Now if we can just keep the newpaper reporters from panicking…