Cottrell Report – Total Market Overview for Week Ending 9/14/07
Saint Louis MO Real Estate Market Update & Overview |
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Current WK |
4 Weeks Prior |
Trend |
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Active Listings |
5,978 |
6157 |
+ |
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Pending Ratio |
12.8% |
14.5% |
- |
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Price Reductions |
9.8% |
9.1% |
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Days on Market* |
70.5 |
72.0 |
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List/Selling Price(%)** |
96.6% |
95.8% |
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Cottrell Index (07/07) |
85 |
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Cottrell Index (06/07) |
95 |
- |
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Cottrell Index (05/07) |
93 |
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*Weighted Average Days on Market for Listings Sold |
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**Average List/Sell% for all listings sold in past 6 months |
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Source: MARIS Data Deemed Reliable but not Guaranteed |
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Cottrell Index based on year over year analysis of ratio of new listings/listings sold |
© Cottrell Realty Group/Keller Williams Realty 2006,2007 ALL RIGHTS RESERVED |
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Download TMO_9-12-07.pdf |
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“The Mortgage Market Meltdown in August has removed close to 30% of the buyers that previously existed…Saint Louis MO home sellers can not ignore this fact!”
Pending Ratio Stabilizes week or week - Lowest Level in 2007!
The pending ratio stabilized at 12.8% down only slightly from last weeks 12.9%. This is the lowest level seen in 2007. The decline to 766 pending transactions is a much larger decline than the % decline in the pending ratio – the fact hidden by slight decline in available inventory (down under 6,000 active listings in Saint Louis MO to 5,978).
Inventory has stabilized at a level of 7.8 months. Things have slowed down in Saint Louis MO’s real estate market, however, sales have definitely not stopped. As we mentioned last week, our professional buyer’s specialists on the Cottrell Realty Group are busier than ever. What buyers are realizing is the 
fact that now more than ever they need the services of a top notch real estate agent to evaluate the larger inventory and ensure they are seeing not only homes that meet their criteria and provide the best Values in the St. Louis MO real estate market. For home sellers in Saint Louis MO, the challenge is even with an awesome tool such as the Home Buyer Scouting Report, there are still too many homes for buyers to choose from. Price and condition as we’ve previously discussed are the two significant levers for home sellers in St. Louis MO.
Showings on available listings continue to show malaise and remain well below normal again this week. We believe this is a continued sign of weakness from the fallout in the mortgage marketplace. Even normally strong areas such as Webster Groves, Kirkwood MO, Clayton MO, Ladue and University City MO are unseasonably low and off from where they were a few weeks ago. Some listings are getting no showings at all.
As we’ve mentioned over the past few weeks, NOW is the time for home sellers in St. Louis MO to lower their price (some may have to make major adjustments) in order to have the best chance at a significantly smaller (when compared to just 12 months ago) pool of buyers. The bottom line is that for many submarkets in St. Louis MO, there are more active listings available than buyers who will purchase in a reasonable timeframe. In other words, the relative pending ratio for these submarkets is well below 10%. In these specific areas, even significant price reductions have been met with limited to no new showings. These areas are definitely targets for sellers to consider Lease/Purchases – something we’ve developed as a successful aggressive strategy to re-position a listing to compete with a large number of available properties. The bottom line is this - Seller’s in some Saint Louis MO areas may get one and only one shot at selling their house or condo. A seller of a condo in Clayton MO or a house in Fenton MO who receives an offer – however structured – should carefully weigh whether this is the only and best offer they will receive. Smart sellers in Saint Louis MO are seeking the experienced counsel of a professional listing agent to market, generate and assist with the evaluation of these offers.
Huge Opportunity for Saint Louis MO for homebuyers!
The shift in the real estate market in Saint Louis MO real provides a huge opportunity for home buyers. With the recent decline in mortgage rates this week for conforming loan products, now more than ever is the time to move for St. Louis home buyers. As we discussed last week, as a home buyer looking in St. Louis MO, you need a market expert buyer agent who can assist with the selection of homes that represent the best value and when you find the best home in Saint Louis MO, provide the critical analysis for potential purchases (is the home priced in such a manner where it represents a significant value, has it had price a price reduction(s) – when, by how much? What do the comparable sales indicate? These are all key things that a Cottrell Realty Group professional buyer specialist can provide – they are market experts!
"Significant opportunities exist for Saint Louis MO Home Buyers, however, these buyers (who are well qualified for financing) are realizing that now more than ever they need the services of a top notch real estate agent to evaluate the larger inventory and ensure they are seeing not only homes that meet their criteria and provide the best Values in the St. Louis MO real estate market"
Readers of this weekly report will recall that for most price ranges, the months inventory showing in the Cottrell Report for most price ranges does not reconcile with the average days on market (close to 60 to 70 days on average). This is due to the fact that many homes on the market are overpriced and not ‘priced to sell.’ We are continuing to see many homes sell at or below the market averages for days on the market for more than 97.6% of list price. Homes that are not within a competitive price range typically experience low to no showing activity (as noted above - some sub-markets have experienced very limited buyer activity regardless of listing price).
Pre-Approval from a Reputable Lender becomes a strategic weapon for St. Louis homebuyers.
St. Louis MO homebuyers should realize that getting pre-approved from a recognized and respected lender (especially in light of the fall out of the August mortgage melt down) is a strategic opportunity. Smart listing agents are wisely counseling their sellers to require that offers received from buyers who are using unknown lenders be re-qualified with a reputable lender. In our case, any and all offers received from lenders we have concerns about – or no previous experience or track record – are being re-qualified by Jerry Vitale at Gorman & Gorman. In a difficult market, a listing agent’s can’t let their guard down and dance around to celebrate when an offer is received. Only the true fiduciary for a seller realizes that even in tough times, offers need to be re-qualified.
Weighted Average Days on Market falls for 8th week in a row! Days on Market remains slightly above 70 for 33rd week.
Weighted Average Days on Market declined again below 75 at a level of 70.5, only slightly above 70 days for the thirty-third consecutive week. We believe this is a significant sign that homes were selling quicker in the early part of the year; especially as sellers reduced prices and/or new homes are coming on the market much more competitively priced to sell.. Again, this measure which applies a weighting by relative activity per price range and is the aggregate measure of six whole months sales activity had been rising steadily since late fall.
We will continue to watch this measure carefully along with the overall list to sell ratio for pricing which has remained below 97% since mid-December 2006. It is important to note that the list to sales ratio at 96.6% is considerably lower than the 97.4% seen a year ago in St. Louis. Both indicators show activity as well as aggressive offers being accepted from the relatively smaller pool of buyers who are active in the marketplace.
Readers should note that both the List to Sale Ratio and the Weighted Average Days on Market are lagging indicators of market condition – they contain a rolling 6 months of data – and as such will not be the first indicator of market correction. The pending ratio (see above) is the leading indicator and as such will show the first and strongest sign of a shift in the market. Unfortunately, the local and national 
press focus on other indicators that are either plainly inaccurate or lag (imagine days on market declining for 30 weeks – when pending ratio reversed trend for more than 6 of those weeks) the market in terms of shifts.
Based on this fact, the press and most real estate agents and brokers normally watching the days on market would believe that the market is improving (days on market have been declining). However, the number of buyers under contract (pending ratio) has declined significantly (by over 24%) in the past month. We’ll be watching this carefully for any continued degradation in the pending ratio.
Cottrell Index Falls in July to 85
The Cottrell Index continued to improve from the spring low of 86 in March from dramatically higher numbers for the months of January and February. This trend continued until the end of June. Based on a number of factors (excess inventory and the mortgage market upheaval) the Index retracted dramatically in July. Year of year declines for the same month are close to 10% down vs. the previous year for the same month in terms of sales.
This index shows the year over year relationship of (#listings sold/#new listings) for a similar month. 
The Cottrell Index hit a low of 80 twice in 2006. For reference, the average for the Index for the past 36 months is 92. The average for the past 6 months is 89. Note: In previous years including 2006, the relative ratios have risen in the Spring peak selling season. Aside from a strong February, the spring selling season has been ‘unseasonably slow’ for the Saint Louis real estate market. We will continue to watch this closely as this is our best indicator – along with the pending ratio shifts – that the market is shifting.
Note: Complete definitions of all terms for the Cottrell Report are found below.
Please let us know if you have any questions on the above analysis or attached Cottrell Report for Saint Louis County.
TOTAL MARKET OVERVIEW DEFINITIONS:
Active Listings: Active listings in MARIS (MLS) for Saint Louis County
Pendings: Listings which have received and acceptable offer from a buyer and are on the way to closing
Pending Ratio: Pendings / Active Listings (by price range)
Expired Listings: Listings which have been 'rejected by the market' in the past six months. This is a rolling six-month (we calculate by going back 180 days from the date of the report) set of listings which were listed for sale and 'rejected' by the market and the sellers decided to pull or withdraw them and take them off of the market.
Closings: These are homes which were listed for sale, received and offer and closed with a new buyer. This is a six-month rolling total (180 days back) of all homes sold.
Sold/Mo: Number of houses sold over six month (180 day period) / 6
Months Inventory: Active Listings divided by Sold/Month. Note: Although many months of listings show for any price range, the average days on market is normally significantly lower. This is due to the fact that there are normally a substantial amount of homes that are mis-priced or grossly overpriced. Days on Market is driven by the homes that actually sell vs. Mos. Inventory.
Price Reductions (Past 7 days) The number of price reductions on active listings in the past 7 days.
Average List / Sold Price : These are the Weighted averages for all homes that have sold in the past 180 days. MLS data calculated for the average list and sales price for every home sold in the respective price range and then the overall average is calculated for the market as a whole using the relative percentage volume for each price range.
List to Sales Ratio: Average List Price/Average Sales Price. This average shows that for all price ranges only well-priced homes are typically selling; and for close to 2 or 3% of list price. Note that each additional column shows that this ratio declines as the Days on Market (DOM) increases with the number generally lower for each successive 30 day period of time. Special Note: The ratio in some price ranges jumps back up for the 120+ days on market due to a larger number of new construction or builder listings where they are entered into the MLS well before they are completed.
As such, the days on market start early yet they sell for very close to list as the builder is not seen as a resale with a large number of days on the market (generally buyer agents and their buyers look at very high days on market- (more than 120 days on the market) and feel that something must be wrong with a home- unless they can see price adjustments during the marketing period). That said, buyers drive activity and which homes are shown with over 80% of buyers searching for homes on the Internet today. The number of days on the market is NOT visible to buyers from Realtor.com, STLToday and other websites.
The Cottrell Index
This index is designed to provide a single reference number, when reviewed monthly, that will quickly allow a user to determine market direction as well as the amount of the direction year over year. The index is determined by first taking the number of new listings in any given month (e.g. November) and dividing by the number of sold listings in that same month. That % is then compared to the same calculation from the year before with the index value set at 100 when the % change year over year is equal to zero. A value of 90, for example would imply that the market is down by 10% while a value of 105 would imply a year over year change in direction of up 5%. A rate of 100 would imply a flat market with no relative change over the same month in the previous year.
We believe that the Cottrell Index will become a reference standard as it provides the same relevant data that a wall-street investor or professional analyst would want to know when looking at same store sales for a given month year over year for a company such as Wall Mart, Dell or Macy's.
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