Seasonal Adjustments

Originally Posted December 19, 2008

I suppose that this isn’t really an early Christmas Present, but it is a special issue of my Wrap Up, and it is coming right before Christmas, so Merry Christmas!

I have been looking for the last month or so at our sales numbers at CAAR. As most of my readers are well aware, in the Spring, the sales numbers go up (hence the “Spring Selling Season” term) and in the Winter, sales go down. This is all good and well, but the problem arises when we look at the Months of Inventory that CAAR publishes each month. It’s not very accurate due to the market fluctuations.

First a little method to my madness: The correct way to calculate seasonal adjustments is an X-11 Variant calculation. To do this correctly, would require years and years of data. I have only 4 years with which to work, so I have adjusted the calculations slightly. I pulled the sales numbers for 2005 – 2008 for Charlottesville, Albemarle, Fluvanna, Orange, Nelson, and Greene by month. Along with actual number of closed transactions, I pulled the end of the month inventory as well.
I then looked at every month and calculated out the percentage of sales for the year that occurred in that month, adjusting as if that month were always the sixth month of the year. So, September’s percentage was calculated on an April thru March calendar.

I then determined the average of each month’s percentage to determine the season adjustment ratios. This ratio was then multiplied against the actual number of sales to determine a “Annual Projected Sales” number. I then divided this number by the Actual Inventory to come up with the Seasonally Adjusted Months of Inventory and have plotted this for the 4 year period.

The end result are two graphs that follow. The first graphs the CAAR numbers to my numbers. You will note that the seasonally adjusted numbers take into account the regular ebbs and flows of the market and provides for a more even curve.
The second graph is the one that really matters. This is the curve of current inventory against months of inventory. Note that in October and November, we had very few closings. I’ll address December in just a moment.


November was the first really horrendous month we have seen. And horrendous it was. There is now a 20+ month supply on the market.

The Days on Market is now up to 120 days, up from 92 in November of 2007. Part of this is due to the fact that we are finally keeping good records of Days On Market and part of it is that is the slow down of the market.

I think what should most concern investors is that we have the highest Months of Inventory… well, ever… and our inventory has been going down six months in a row. I have talked with my good friend Jim Duncan at and he is working on Shadow Inventory so I won’t touch on it here.

What does 2009 and on hold for us… Well. December first. Sales in 2007 for December so far have been 68. Assuming nothing else closes (which is absolutely not the case) then we are projecting a drop of over 60% from the year prior. In fact, seasonally adjusted, this would account for a 21% drop from November. However, even if there are ten closes between now and New Year’s Day that have not been recorded, that is still more than 10% drop over the last month, and a 55% drop in Volume since a year prior.

So, what does 2009 hold. Everything for buyers and not a bunch for sellers. Prices will continue to fall (projections after I get more data) and volume will be down. Projections are showing volume down as much as 37.5% from 2008. This is not a great picture of the new year, but I think it is pretty realistic for where things stand right now.

All we can ask for right now is a little bit of a leveling off of the panic. With mortgage rates at 5%, buyers with a long term perspective are in a good position. Any buyer with a horizon of less than three years should be sitting tight.
See you in the new year.

City Beats County by 20 Days

Originally Published April 14, 2008
Most people buy a home because they love where it is: convenient to shopping, or work. Perhaps because of the school system in which it is located. I also hear time and time again, “We won’t have any problem selling a home located in xxxx neighborhood.” Sometimes this statement is true, sometimes not. Well, here is the breakdown on city versus county sales going back five years and how well they have sold.

If someone offered you a tip to reduce the marketing time of your home by 20 days, you’d want to know it. Right? Well, the answer may well be as simple as : “The City.” In a recent study of Days on Market, we analyzed every quarter of sales since 2003. Of the 21 calendar quarters, homes sold faster in the City in all but four periods. The average difference between the city and Albemarle county sales was over 20 days. In the four quarters where homes in the county sold faster, the average difference was less than 4 days.

The old adage of Location, Location, Location has never been truer. I will not speculate as to whether the driving force is the availability of older homes; the convenience to work, shopping, transportation, schools; a lowered need for automotive transportation; the outstanding neighborhoods of the city; an excellent school system; or some other driving force in addition to these items. But no matter what the reason is, the fact remains that when it comes time to sell your home, you’ll be happy you live in the City.

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