Thursday, February 5, 2009

Where do they go?

Those that follow the stats released by their local real estate boards may have noticed that their inventories don't seem to add up.

For example, at the end of December in Edmonton there were 6,316 units in inventory. Then in January there were 2,443 new listings, and 730 sales. Doing the quick math, 6,316 + 2,443 - 730 = 8,029, one would expect they'd have 8,029 units in inventory at the end of the month... but they only had 6,573.

So where did those 1,456 units go? Well, simple answer is they most likely expired, or were otherwise cancelled or withdrawn. When people sign on with a realtor to list their place, it can be for any term, many are for three or six months, but some can be for years. If that time passes without the property being sold, the listing expires and it's up to the prospective sellers whether they want to re-list or not.

And getting back to the January totals, the truth is that in all likelihood there weren't even 8,029 properties involved. As many would be counted twice in that figure if they expired and re-listed in the same month.

While the exact numbers aren't included in the EREB stat packs, they are not hard to calculate since we have all the other relevant information. On another site ran by a local realtor they include such figures in their weekly updates. As you can see from charting out their figures there is always a big flood of expired listings at the end of every month.

Weekly Expired ListingsSo obviously most people sign on to list until the last day, or last business day of any given month. We can also see that come calendar year end there is an even bigger spike, probably just cause its a more significant date. While the spikes during the spring are a bit lower... probably a combination of the increased sales as well as people wanting to make sure they're listed through the traditionally hotter sales season.

While that graph nicely shows the monthly cycle, it doesn't really do anything to show a historical context of our current position. For that I'll graph out the monthly totals for the last eight years.

Monthly Expired ListingsIf you've been following this blog, you may have noticed that the pattern followed by the Expired/Cancelled Listings is actually quite similar to that of inventory over this period. Which shouldn't be surprising though, since obviously with increased inventory, you're going to have more listings expiring, or corresponding decreases.

As you can see, during the boom sales rose and very few listings expired. Then as soon the market cooled, the number of expired listings quickly escalated, and much like inventory, reached record levels. Now the troughs remain at levels that the peaks didn't even reach while the market was balanced. We now average over twice as many listings reaching their expirations as we traditionally did.

Another somewhat related stat is that of Days on Market, which is a measure of the average days a listing stays on the market before selling. I've charted that out here.

Monthly Expired Listings and Days on MarketA correlation between D.O.M. and Expired Listing appears quite positive. Not surprising, during the boom D.O.M. were at record lows. A couple months in the first half of '06 they reached their absolute low of 19. Now it has rebounded and is setting records at the opposite end of the spectrum, hitting 68 just last month.

Trouble is that with the number of expired listings being as high as they are, they may be further skewing the D.O.M. stat. Many units that expire get immediately re-listed, new MLS numbers and the clock starts over, so when/if they finally do sell the number is much lower then it actually should be. Thus the average D.O.M. may actually be significantly higher then they already are.

In any case, we can see from the elevated numbers of expired listings that there are still a whole lot more people looking to sell then are listed in active inventory. Whether they immediately re-list, or hold off for a few months, they're out there and we're a long way from supply and demand coming into balance.