About once per week I update the listings from Metrolist to my web site database.  This database serves several web site features such as my foreclosure listings, condo listings, and investment properties listings.

As time goes on, I’ve also started to write a number of proprietary reports to this database that help me publish my market updates periodically.

I write these reports month to month, but whenever I update the database I can’t help but wonder how we’re doing now.  This morning when I took my usual sneak peak, some of the numbers surprised me.

Prices Are Up, Non-Distressed Sales Are Up

First of all, average sold price per square foot rose slightly (1.7%) between July and August.  In July it was $140.48 per square foot, and so far in August it’s $142.98 per square foot.  We may see it dip again later in August (for some reason I’ve noticed the entries posted later in the month sometimes do this), but so far, so good.

The other interesting fact about August so far is that the number of non-distressed homes (as a percentage of all sales) was 22.2% in July, but rose to 26.6% in August.  Of course, if you know about the price increase, a shift away from foreclosures makes sense, because non-distressed homes are listed and sell higher.  The more interesting question is:  why is this happening?

Yes, I Do Feign Hypotheses (But I’ll Let You Pick Your Own)

I don’t really know why the data did what it did in August, but here are some possible explanations:

1. It’s a Fluke
   All the data’s not in for August, and by the end of August the data won’t look like it does now.  Much as I’d like to see prices turn around soon, this wouldn’t surprise me too much, since I’ve often seen the end-of-month data surprise me.  Most real estate bears will probably want to opt for this one more wholeheartedly.
2. The Market Recovery is Well Underway, and Prices Will Rise Steadily From Now On
   I don’t really believe this, but I do believe the next one.
3. The Market Is Close To Reaching Price Equilibrium
   I don’t expect the market to suddenly start rising after falling for so long.  What I do expect is several months where the market just sort of sits there and behaves ambiguously — rising in one month and falling in the next.  So, for example, declining foreclosure sales in August means more foreclosure inventory available in September, so we may see prices fall again in September.Moreover, we’ll probably also see some more seasonal drops in the winter months even if we have already entered a more or less steady increase in prices.
4. Foreclosure Inventory Got Low After the huge sell-off in March to July.
   I think this partially accounts for the increase in sales of non-distressed homes, but only when coupled with the next point.
5. The Most Motivated Non-Distressed Home Sellers Are Starting to “Get It”
   The market has now been down enough, long enough, that more and more sellers are starting to understand that they need to get pretty competitive on their prices or their home is just going to sit there.

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