The Real Story …
News and commentary about the real estate market and related topics. Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth
It’s rare that a day goes by that someone doesn’t ask me the question “So, how’s the market?” So it seems appropriate to occasionally take some time here to review the condition of the market.
Above all, my answer always begins with “Well that depends on which market you’re referring to?” You’ve heard it many times: all markets are local and local can be as specific as a single street or neighborhood. While this is still true and a rule that must be followed when trying to evaluate market values for a specific home or your specific circumstance, there are occasions, such as this one, when a wider look at the market does provide some useful information.
So let’s look at some recent national news.
July was the 4th month in a row for home sales to increase and new home inventories to fall.
New Home Sales
•New Home Sales increased 5.2% in the second quarter of 2009 (in July 2009 New Homes Sales increased 9.6%) and the NAHB expects to see a steady increase back to pre-boom levels by the end of 2011.
•Sales of newly built U.S. single-family homes rose for a fourth straight month in July to set their fastest pace since last September, while the inventory of unsold (new) homes fell to a 16-year low.
•Single Family Housing Starts——–There is a sign of recovery here, with starts perceived as “bottoming out” in the first quarter of 2009.
Existing Home Sales
•July 24, 2009 – Existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June, according to the National Association of Realtors®.
•Existing-home sales-including single-family, town homes, condominiums and co-ops-increased 3.6% to a seasonally adjusted annual rate of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2% lower than the 4.90 million-unit level in June 2008.
•(CNNMoney.com) — Sales of existing homes rose in July for the fourth consecutive month, lending support to economists who argue a recovery is near.
•Sales of previously owned single-family homes were up 7.2% compared with June and 5% from July 2008. The monthly gain was the largest on record for existing-home sales, which NAR has tracked since 1999.
Overall Sales & Inventory Improvements
•”The housing market has decisively turned for the better,” said Lawrence Yun, NAR’s chief economist. “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”
•July home sales hit an annualized rate of 5.24 million proprieties, marking the first breach of the 5 million annualized rate mark since last September, when they hit 5.1 million. Since then, they have stayed in a very narrow range, bouncing between January’s low of 4.49 million and October’s high of 4.94 million.
•The July performance far exceeded expectations: A consensus of real estate experts had forecast sales of 5 million.
•Low prices – Of course, homes should be selling. Prices have fallen more than 32% from their peaks, set in the summer of 2006. Plus, mortgage rates near historic lows makes the cost of purchasing a home lower than they’ve been in nearly 20 years.
•”In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun said.
•Overall though, the national inventory rose by more than 7% to 4.09 million units. That will continue to keep prices low, according to Mike Larson, a housing analyst with Weiss Research.
•”There’s a bifurcation of the market,” he said. “There’s excess supply putting downward pressure on prices and people respond to the lower prices by buying homes.”
•Housing is its most affordable in many years, he pointed out. “Falling prices is not part of the problem, they’re part of the solution,” he said.
•Hurting home sales have been stubborn increases in job losses. More than 6.7 million jobs have been lost since the beginning of 2008. That’s one reason why Robert Dye, a senior economist for PNC Financial Services (PNC, Fortune 500), is keeping his optimism in check.
•”I wouldn’t go overboard on this number,” he said. “The economy is still healing and will continue to run into some bumps. But it does bode very well for the future and shows buyer confidence is increasing.”
•There is one potential bump, however: The looming end of the first-time homebuyers credit. The credit gave first-time homebuyers an up to $8,000 refund on their taxes if they close on a deal before Dec. 1. That credit has been motivating buyers, and when it expires, demand could dry up.
•Where homes are selling Regionally, the strongest market was the Northeast, where sales soared by 13.4% to an annualized rate of 930,000. That was 3.3% higher than last July. The median price of homes sold during the month was $236,700, off 15% from last year.
•Midwest sales rose 10.9% to a 1.22 million rate, 8% higher year-over-year. Prices there have sunk 5.9% over the past 12 months to a median of $157,200.
•In the South, sales were up 7.1% from June and 5.4% from last July to a rate of 1.95 million. Price have dropped 7.1% to $164,500 over the past 12 months.
•The only region reporting a slip in sales was the West, where they fell 1.7% to a rate of 1.13 million. That was ahead of last July, however, by 1.8%. The median price there was $202,300, a whopping 28% below what is was a year ago.
Local Market Conditions
The Birmingham Metro Market remains a comparatively strong market. Most housing forecasts predict Birmingham to be in the top 10 recovery markets due in large part to our community’s relative economic stability and the fact that this market never experienced the lows experienced in much of the nation.
Locally, inventory levels are dropping. There are currently 13139 homes on the market representing an 11.4 month inventory. Average sales price as a percentage of final list price has increased from the November low of 92.23% to 95.27%. While still a strong Buyer’s Market, the Birmingham market is inching its way back to normalcy. With shrinking inventories especially in the New Home category, prices have stabilized considerably with signs that this sector may well see rising prices by next spring.
With the First-Time Home Buyer’s Tax Credit set to expire this December 1st, some buyer incentive may be removed from the market. However, with rising interest rates combined with the current low prices and a strengthening housing market, there remain strong incentives to act now.
Now back to my standard opening line … How is the market? “Well that depends on which market you’re referring to?” Every market is different. Generally, the market is improving … The American Dream lives. As always, get the advice of a trusted Realtor about your specific market and circumstance.
