First quarter statistics show market slow down.
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Median home prices in Windham County reported in the Realtors' Multiple Listing Service (MLS) rose by an anemic 1.8% in 2007, but 10% fewer homes were sold in the county than in the previous year. Statewide prices in 2007 were off by 5% from 2006 with the number of sales down by 13.5%. Realtors are still putting granola on the table, but thinking twice about buying that new pair of shoes.
Although the figures give credence to the contention that Vermont has dodged the tsunami, a dramatic increase in the number of new listings may be our early alarm. Near the end of the last local real estate boom, prices and number of sales in our county actually climbed in 1989; but no one seemed to notice that a flood of new listings were tilting the balance from demand to supply, thus setting the stage for the 1990 crash which began a decade of flat prices and even depreciation for certain properties.
The Vermont Real Estate Information Network (VREIN) which is the dominant MLS in Vermont, shows that in 2005, the number homes listed statewide was 5,871 and the number sold that year was 5,465. That is a "batting average" of .93. The following year, 2006, the number of listings taken was 8,672 and the number sold was 5,181 for a batting average of .67. In a single year the ratio of homes selling had gone from more than nine out of ten, to two-thirds.
By 2007, statewide a whopping 11,078 properties were listed in VREIN, of which 4,484 sold. Although the absolute number of home sales was significantly off, what was really dramatic is that the ratio of number of listings sold as compared with number of listings taken had tumbled from 93% to 40%. The market was no longer characterized by multiple offers from competing buyers trying to outbid one another: Seller could no longer be confident that their home would automatically sell.
During these past three calendar years figures for the median price of a home in Vermont went from $210,000 in 2005, to $219,900 in 2006, and back down to $209,000 last year, 2007. Although there were no dramatic shifts in home prices -- only a worrisome wobble -- in two short years the rate at which homes were being listed for sale more than doubled, causing the "batting average" to slide from .93 to .68, and then down to .40 which is about where it was in 1989 just before the crash.
Parallel with the state as a whole, Windham County has gone from a ratio of sales to listing taken ("batting average") of .95 in 2005, to .58 in 2006, and down to .42 in 2007. In our county, median home prices have risen moderately during those three years from $212,500 in 2005, to $216,500 in 2006, and $220,000 in 2007.
This article is using median prices in order to avoid undue influence from a few homes at the high end. For whatever value it may have, the average (mean) home prices in Windham County during the recent three year period were $258,621 in 2005, $260,413 in 2006, and it was $258,268 in 2007. Last year the most expensive home sold in Windham County went for a mere $2,495,000 while the lowest priced home was a 1967 singlewide in a park on Route 5, Dummerston, which was listed at $12,900 and sold for $10,000. Strictly speaking a mobile home on a rented lot is personal property, not real estate, but since it is a home which someone bought, it is included in this report. Timeshares are not.
FIRST QUARTER: A PEEK AT THE UPCOMING SEASON
First quarter figures are not highly reliable for several reasons. First, because there is strikingly less activity in our local real estate market during the winter which means that a few transactions -- not necessarily indicative of a trend -- can skew the picture. Second, a severe winter, such as we have just had, can delay activity so that low figure may not be a true portent. An example of an unrepresentative figure is the first quarter of 2005, which showed a median home price in Windham County of $230,000. That number was out of whack, and not part of any discernible pattern.
That said, the first quarter in Windham County this year, was very much like the first quarter of the previous year except that number of sales were down slightly. The batting average, at .33 was virtually the same (it was .32 for the first quarter of 2007). A batting average for the first quarter (or the first half for that matter) will almost always be lower than for the whole year because in the early part of the year the major activity tends to be listing property, with sales dominating the second half. The median home price in Windham County for the first quarter of 2008 was exactly the same as for the first quarter of 2007: $215,000.
A TALE OF TWO TOWNS
It is always interesting to compare the real estate markets in Brattleboro and Dover because Brattleboro residential real estate tends to be owner-occupied primary homes, whereas in Dover there is a significantly higher proportion of investment properties and vacation homes. Approximately 60% of the homes sold in Dover are condos compared with about 10% in Brattleboro.
The way the two towns have reacted to changing market conditions is an amazing contrast. In the strong market of 2005, Brattleboro had a median home price of $189,500 and a an incredible .97 batting average. (It is logically possible for the batting average to be greater than 1.00 because more homes could sell in a given year than listings taken if some of the homes which sell that year had been listed the previous year.) The same year (2005) Dover's batting average was .96 and the median home price was $220,000. In 2006, the median home price in Dover shot to $299,000, then slid to $266,000 in 2007.
Brattleboro's price changes during that time paralleled the State as a whole, slowly shrinking from a median of $189,500 in 2005, to $184,500 in 2006, and then $180,000 in 2007 for a total percentage drop of 5%. Apparently the modest increase in Windham County median home prices during the past 3 years was fueled by the hyperventilating ski market.
Traditionally the ski market is considered volatile. This was shown not only by the dizzying fluctuations of median home prices in Dover, but also by a batting average for real estate sales in that town which plunged from .96 in 2005 to .44 in 2006, and .30 in 2007. This precipitous drop was propelled by both a significant drop in the number of listing sold and a huge increase in the number of listings taken. MLS figures show that in 2005, 158 homes were listed in Dover and 152 sold. But in 2007 302 properties were listed (twice as much as two years earlier) and 92 sold.
In just two years this key indicator -- which in 2005 had been the same in both towns -- was now twice as high in Brattleboro as in Dover.
While Dover's ratio of listings taken to listings sold had dropped to .30, the batting average was .62 for Brattleboro in 2007. Brattleboro also compared favorably to the state as a whole. The town's performance was half again higher than the state as a whole (.62 batting average as compared with.40 for the state). The figures indicate that the real estate market in Bratteboro is significantly more stable, not only than Dover, but than the County and the State as a whole.
LAND
Although this analysis is primarily about homes, people considering purchasing a home often want to know whether it is a practical alternative to buy land and put up a modular, or build a strawbale house, a yurt, a tepee, a cabin, or a McMansion.
For the past few years, it has been tough for people in search of land. Prices have risen precipitously and choices have become more limited. The price of a nice piece of land in many cases is as much as the cost of a modest home.
Personally I am aware of a number of potential land buyers who have cash but cannot find what they want to spend it on. Land sellers seem, for the most part, to be holding out for their price while buyers say: At that price, I'll wait." The standoff between buyers and sellers seems to be more pronounced with land than with homes.
MLS figures show that 249 Windham County land parcels were listed in 2005 and 206 sold that year for a "batting average" of .83. The following year, 2006, the batting average was down to .51 with 316 listings taken and 160 sold, and in 2007 the batting average was .37 with 343 parcels listed in the county and 127 sales.
Interestingly, while homes generally continue to sell at about 5% below current asking prices, the amount that gets bargained off land parcels in Windham County has changed from about 6% in 2005 to 10% in 2006, and 15% in 2007. For some reason (could it be that land sellers do not heed their agents' advice?) sellers of land seem to be tending to hold out for an unrealistic price to their own detriment, more often than do home owners.
Typically in an extreme marketplace standoff, we would expect that a point will be reached where some deals are made simply because people are no longer able or willing to put their plans on hold, and then new pricing precedents are set.
A CAUTIONARY ADVISEMENT
This article is meant as a general update on local market conditions, but no one should attempt to use it as the basis of evaluating a particular property. Statistics can show trends, but since real estate is unique, individual properties do not always follow aggregate numbers.
In order for buyers and sellers to put transactions together so that they can get what they need and move forward, it is necessary to give up wishful thinking and to proceed on the best possible, real-world information. A qualified real estate professional can be consulted for assistance in buying or selling property, or just to ask questions and learn more about the real estate market.
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Steven K-Brooks - Owner/Broker
Brattleboro Buyer Brokerage Real Estate
www.buyer-brokerage.com