Everything Comes Full Circle: Lessons from my time with “The Band”
My senior year of high school, I played in the jazz band. I played piano, which is why I never opted for the marching band (lugging a piano around a football field is just impractical). I don’t mention this so you’ll know how cool I was back then. I bring it up because there’s one song in particular that I believe was written specifically for high school jazz (and marching) bands. If you’ve ever served time in either, you know the song I’m referencing: “Spinning Wheel” by Blood, Sweat & Tears.
It’s a slow, plodding melody, with a brass accompaniment just within reach of a 15-year-old saxophone player’s abilities. While most of the song is pretty nonsensical—“Ride a painted pony, let the spinning wheel turn”—it starts off with the lyric, “What goes up, must come down.” And here’s where this all ties into the real estate market and the numbers I’m about to share.
As I looked over the past 10 years of real estate activity in Lynchburg, I focused on the number of homes listed during each of those years. You can see that, as the market heated up, the number of homes that were put on the market rose incredibly (almost 33 percent) in just five years.
Number of homes listed:
- 2003: 3,851
- 2004: 3,909
- 2005: 4,110
- 2006: 4,732
- 2007: 5,155
As you can see, our inventory was increasing rapidly. One might even say unsustainably. Take a look at the following five years:
Number of homes listed:
- 2008: 5,009
- 2009: 4,581
- 2010: 4,645
- 2011: 4,107
- 2012: 4,143
“Spinning Wheel” was right—the numbers started to come down—and this is a good thing. This is healthy. Now let’s look at another figure: the number of homes sold during each of the past 10 years and compare that to the number of homes listed.
2003: 3,851 Listed - 2,554 Sold = 1,297 ‘Net’ inventory
2004: 3,909 Listed - 2,748 Sold = 1,161 ‘Net’ inventory
2005: 4,110 Listed - 3,064 Sold = 1,046 ‘Net’ inventory
2006: 4,732 Listed - 2,998 Sold = 1,734 ‘Net’ inventory
2007: 5,115 Listed - 2,758 Sold = 2,357 ‘Net’ inventory
2008: 5,009 Listed - 2,114 Sold = 2,895 ‘Net’ inventory
2009: 4,581 Listed - 1,911 Sold = 2,670 ‘Net’ inventory
2010: 4,645 Listed - 1,713 Sold = 2,932 ‘Net’ inventory**
2011: 4,107 Listed - 1,785 Sold = 2,322 ‘Net’ inventory
2012: 4,143 Listed - 1,958 Sold = 2,185 ‘Net’ inventory
Did you catch what happened there? The number of homes sold capped out in 2005, but an increasing number of homes kept coming on the market for another two years! Hence, the widening disparity between new listings and sales, and the skyrocketing surplus (or ‘net’ inventory), which nearly tripled in five years. Note that the “Spinning Wheel” axiom is still in full effect.
**Note that I’ve added an asterisk for the figures in 2010 due to the fact that the first-time home buyer tax credit was in effect through September of that year. That tax credit’s impending deadline, last-minute extension and then ultimate expiration created an unusually strong wave of buyers, which crested … and then left a receding tide in its wake.
Allow me to pull one more set of numbers into the equation. Let’s see how the average sale price tracked with the number of homes listed and sold since 2003.
2003: Listed: 3,851 Sold: 2,554 Average sales price: $137,992
2004: Listed: 3,909 Sold: 2,748 Average sales price: $144,036
2005: Listed: 4,110 Sold: 3,064 Average sales price: $163,004
2006: Listed: 4,732 Sold: 2,998 Average sales price: $175,090
2007: Listed: 5,155 Sold: 2,758 Average sales price: $179,452
2008: Listed: 5,009 Sold: 2,114 Average sales price: $177,727
2009: Listed: 4,581 Sold: 1,911 Average sales price: $169,890
2010: Listed: 4,645 Sold: 1,713 Average sales price: $175,396
2011: Listed: 4,107 Sold: 1,785 Average sales price: $161,394
2012: Listed: 4,143 Sold: 1,958 Average sales price: $169,341
Scanning through the past 10 years, the peaks and valleys become clear. New listings continued to rise, peaking in 2007 and falling significantly since. The number of homes sold hit a peak—and net inventory hit a valley—all in 2005. Those two stats exactly reversed in 2010, with the valley in home sales and peak in net inventory. More importantly, both are trending back toward a more balanced position.
And the one figure most folks are concerned with—the average sales price—peaked in 2007, dropped off in the ensuing four years (again, with the exception of 2010), and appears to be moving back up once again. One year’s data may not seem like a cause for celebration, but taken into account with these other important figures, I believe this indicates a market heading in the right direction.
There are a number of signs that point to a good 2013. Not a record-breaking year by any means, but one which builds on the strength of 2012. I do have one bit of bad news, however: “Spinning Wheel” is insidious. And monotonous. Once it’s in your head, it’s in there. And for that, I apologize.
*All figures are sourced from the Lynchburg Multiple Listing Service