Full year 2008 real estate sales data should be available any day now ..

so I can provide an update on how second half 2008 sales went to go along with the first half Garrett County real estate data I gave in the middle of last year. Then we will see if there really were "plenty of buyers" as a local real estate agent suggested in May 2008. Stay tuned.

Updated 1/15/09: I guess Mike Kennedy saw my post this morning and decided to give his own update which you can see over at the Railey Realty Blog. Mike shows that the number of properties sold and the total dollar volume of sales in the immediate Deep Creek market in 2008 were both less than half of what they were in 2005. He also shows that the average selling price (neglecting any seller incentives for closing costs, etc.) of the properties sold last year was greater than the year before and then concluded that this means values are still rising. I suppose if next year only the 75 most expensive properties sold but at a significant discount to this year he would also conclude values are still rising. Afterall, the average selling price would be higher. Or if the average house sold in 2009 doubled in size and only sold for 10% more than the average selling price from 2008 by the logic he has laid out he would again conclude that vales are still rising.

Don't be fooled by bad statistics and slight of hand in interchanging price and value. Price is what you pay, value is what you get. It is actually possible values are rising, as they generally do with time, but it is just as possible the prices people have paid in 2006 and 2007 and even 2008 are significantly greater than the true value of the underlying assets. So prices can fall even while values rise believe it or not. As it turns out average selling price is just a really bad valuation metric. Don't believe me? Ask someone who bought stock in a tech company in early 2000 when people like Mike Kennedy said they were worth (valued at) whatever price someone would pay for them. Just because those companies were selling at astronomically high prices didn't mean their values based on metrics such as future cash flow were keeping pace (as we all found out).

Looking at apples to apples comparisons of individual properties sold in 2005 and 2006 to the same properties resold in 2008 I'm having a hard time finding any that are selling for more now than they did 2-3 years ago. As I have said before, I believe for average selling prices that Mike is reporting to keep rising he has to rely on bigger new construction sales (or a different weighting of the mix of sales) to skew his data. He has shown nothing to convince me or anyone else otherwise.

I wonder if Mike honestly thinks that he sold the Cedar Creek townhouse for more in 2008 than he could have in 2006? I have my doubts. Agents are discounting their own properties and in some cases selling at a loss yet they say values are rising. If so they must be the dumbest people on the planet for lowering their prices or selling for less than they previously paid. Or, like me, they understand that prices got far ahead of values.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

After a real estate agent commented on my posting yesterday ..

I thought I should look up some numbers and see how the Garrett County real estate market in the first half of 2008 compared to same market in previous years. I've compiled the data from the Maryland Association of Realtors and posted it below. Also see the original comments on the blog here.


As you can see, total dollar volume of sales in Garrett County in the first half of 2008 was essentially the same as it was five years earlier in 2003 and about half of what it was at the peak of the market in 2005. Calling this market strong or well and improving daily is simply ignoring the truth. Furthermore, one can see that the first half average sales price in 2008 is only marginally higher than it was in 2005 and this metric (as poor as it may be statistically) has actually grown at a pace slower than inflation since 2005. Simple conclusion, the market is weak right now for a variety of reasons and anyone trying to tell you otherwise may not be telling you the truth. Buyer beware.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Puzzling real estate listing ..

Not long ago we heard a lot about how the Deep Creek market was "well and improving daily" and then it was that lakefront sales continue to be "strong." Well given those two statements I am somewhat puzzled by this real estate listing from a local real estate agency. Here you have an approximately $1.3million lakefront listing divided into six fractions. But what is really puzzling to me, however, is that if the market is so strong and was really well and improving daily why are the sellers offering to pay $10k in closing costs and contribute another approximately $10k towards homeowners association fees (although I should add that the listed condo fee over two years comes to about $8.6k not more than $10k but we'll take their word for it)? Could it be that one of the co-owners of this property being one and the same as one of the co-owners of this real estate company does not feel the market is as strong as his staff is leading you to believe?

These type of seller incentives also show that real estate sales data must be taken with a grain of salt. Assuming each fraction sells at full list price it will be listed in the MLS sales data as selling for $219,500 but according to the listing the sellers are giving over $20,000 of that back to the buyers (again taking their word for it), meaning the purchase price which will show up in the data could be inflated by more than 10% over the true purchase price. Using data of such poor quality to make broad, generalized statements about the health of the market can be very dicey and judging by what a co-owner of a local real estate company does to sell his own property could also give one a false sense of security about the health of the market. In this case, I believe what they are telling you via their market updates and what they are doing in their own dealings are not one in the same.

Collectively the real estate agents of Garrett County own a substantial amount of investment real estate so this could be a case of trying to talk up their own investments or what some on Wall St. would call a "pump and dump" scheme. When you see so many agent-owned listings on the market combined with questionable market updates that, during 2008, have declared the market "strong" and "well and improving daily" and declared the credit crisis to be "over" months ago it does raise a few red flags in my opinion. As always, buyer beware.

Where are the market updates that say the market is weak, inventories are exploding, countless agents are trying to sell properties (if it's such a great investment shouldn't they want to hold on to them?) and agents are discounting their own properties? Unless something changes, for more of those type of Deep Creek real estate updates you'll just have to keep reading this blog.

Don't forget to check back to Dan's Deep Creek Blog for future updates.