Out on a Limb

As we go into May I expet changes to come to our market. those sellers that are in a "have to sell" situation will see the summer market looming as Memorial Day approaches and they will realize they're missing the spring market. I expect them to get more aggressive in their pricing. The activity level in May will dictate how early it starts and how aggressive they have to price to get out in front of the market. If the level of activity we saw in April continues then we should be fine; but; if that was the extent of the rlo bubble we typically see, then we will not be. My opinion is that as consumer confidence comes back a bit we will see those fence sitters get into the market. Our stats LOCALLY are great with good employment numbers, good wage numbers and a slow but steady improvement in housing prices. Relocation may be a bit stagnant as they are held back by the real estate market in their part of the country as well as being incluenced by that area's market. It takes a bit of time for them to realize that they are not in Kansas anymore and our market is safer and more dynamic than "back home". The short sale market is very active and we are seeing the bank processes improve...finally! Each bank is different but we took one from contract to close in just 63 days already this year. Negotiation on these short sales represent about 15-20% of our business and, knock on wood, we have a 100% success rate! Ok, the short answer to what I see in the next 30-90 days, the upper end of the market will stay steady and it has been good so far this year. The below $400,000 market will also continue to go strong and should actually improve. The middle of the market place will see average activity and hopefully an increase as confidence comes back a bit. Homes that have been on the market 30+ days, homes that have an impacted lot or a condition issue with motivated sellers will adjust their pricing down. I do not expect to see rates move dramatically in the short term but we are continuing to see new requirements and restrictions coming out affecting affordability. As we head into the summer months we typically see inventory start to decline and we typically get a little bubble of activity as relocation procrastinators rush to get in before school starts. As the market continues to unfold I will, as usual, keep you informed.

Front Lines

The spring market thus far has certainly kept us guessing. January & February gave every indication that the market was poised to take off but then Mach fizzled. April's numbers picked up again but are still not where we hoped they would be. The number of available townhomes continued to drop from 72 in March to 58 in April. the bad news is that the number of properties coming under contract dropped as well from 81 to 64. (Compare that to the 123 we sold last April due to the stimulus incentives!) The average Days on the Market also continued to improve dropping to 29 in April from 39 in March and 48 in February! So, while the number of contracts dropped, the inventory and days on the market continued its decline which is positive overall. The single family sector actually went the other way with inventory continuing to increase substantially to 65 in April from 50 in March and 37 in February. The good news is that the number of contracts came back from March's dismal 27 to 39 in April. Given that, march and April are the big months of our spring market. This is not the best but it is an improvement. Our market could be languishing for many reasons; the turmoil in the Middle East, gas prices, uncertainty over the budget or just because we have not been able to string two days of nice weather together over a weekend. Any or all of the reasons or something I am not even aware of could be the issue but the root of the problem is consumer confidence. Buyers are scared to make a decision and they are plucking off the exceptional values or the exceptional properties and sometimes even those are sitting. Decisions can only be delayed for so long and those that are suffering from the paralysis of analysis will wind up missing the best our market has to offer. The number of foreclosures as a percentage of available inventory has continued to drop. The number of short sales has increased although overall the percentage of distressed properties has fallen. Hopefully in May we will see the increased activity of April at least continue. I will as usual keep you informed as our market continues to unfold.

Out on a Limb

March will be a busy month. I look for inventory levels to increase dramatically but I also expect to see the number of contracts written jump as well. Inventory will go up as sellers try and time their move to the end of school. Relocating buyers will start to enter the market and some already have. They tend to come here on a house hunting trip, look at everything on the market, pick a house, write an offer, negotiate and complete the inspection all in a 5-7 day time frame. Once the sold signs start popping up we will see those who have been watching suddenly go under contract. In addition relo buyers jump start the move up market as well. Rising gas prices and the new problems over seas have shaken consumer confidence just a bit but I expect that confidence to come back once you start seeing the old signs. I expect the number of new listings entering the market in March to be 50% higher than Jan & Feb. I believe our pricing will continue to climb slowly this spring and then level out during late summer and fall at worst. Buyers that have been in or watching the market for the last year or so will be disappointed if they expect to find the same prices this year that they passed on last year. Our market has moved in a positive direction already and when the smoke clears I am hoping that the number of contracts written in March will also increase by 40-50% as well maybe more depending upon the depth of the pent up demand. To see numbers comparable to last year's stimulus fueled spring would not surprise me at all. Rates should remain relatively stable and as long as there are no more surprises on the horizon we are poised for another year with continued improvement. As our market continues to unfold, I will as usual keep you informed.

Front Lines

So far the year has started off much as we expected Townhome inventory has continued to rise and is up 56% over last year at the same time. (79 om 2-11 vs 51 om 2010) This dropped in February to 79 available from 85 in January which is something that I would like to see continue. The average list price for a townhome is currently $293,018 which is up noticeably from $267,749 in 2010. So while inventory has grown so has pricing which means (hopefully) that we will see the move up market keep traction and continue as more sellers finally have enough equity to be able to sell and buy again. The single family market has remained consistent and inventory has remained relatively unchanged (37 vs 36) since the same time last year. This is good as inventory had crept up to noticeably higher levels in fall of last year. I do expect that to change significantly in March and many of those homes that came off the market for the holidays will come back on. The number of contracts written dipped to 37 in February from January's 44 but it is still consistent with February of last year's 36 sales. That is significant in that last year we had the stimulus in place and this year we do not. So if demand stays consistent with last year them are seeing the turnaround sustain itself under its own power. We have already run into one low appraisal on a property and while we have worked that out it gives us pause. It does indicate that demand is strong enough to support some increase in pricing but we need the appraisal industry to share the main level of confidence. Mos t of the sellers that weathered the winter months and cane into the year with lower pricing are now gone and the new wave of sellers are more optimistic with the best selling months in front of them. Those homes with great lots in great condition are gone quickly but buyers are passing on those homes that require them to compromise in any way. They are waiting for "something better" to come on the market this spring. At some point, and I expect that to come in March, they will realize that a little compromise is part of the purchase process. Once we start seeing old signs we will see some of these fence-sitters enter the market although they will most likely have missed the best values. Those that keep waiting thinking they will find a value comparable to last fall will miss the boat entirely. It is an exciting year for real estate and as our market continues to unfold I will, as usual, keep you informed.

Out on a Limb

I call this column Out on a Limb because that is exactly what I am doing, going out on a limb by putting my opinions in writing as to where the market is going. I am pretty confident in my opinion because I have been doing this for years and I study our market daily. This year, though, is the first time that my "gut" feeling and the numbers are conflicted. On one hand I see our inventory rising and our contracts slowing. In simple terms of supply and demand, this is not a good thing. If we get too many homes on the market and not enough people buying them then pricing has to drop and as that is all people can compete on. That being said, my gut feeling is that the market is poised to jump forward. The phone is ringing, sellers are excited, buyers are actively looking and the general feeling is very positive. he stock market is up, unemployment overall is down and in our area we area actually very strong with jobs being created. Heck, once the builders crank up I think you will see an even bigger dip in those numbers as construction related jobs represented a big part of the unemployment numbers. Our area has been blessed in that while we lost jobs in the market overall, what actually happened was a shift and we gained jobs in the higher paying end of the spectrum. All that being said I feel that 2011 will be slightly better than 2010 and we ill see continued improvement as the year progresses. Consumer confidence lagged after the stimulus ended. Everyone thought that the market would fall apart after it ended and it became a self-fulfilling prophecy. Everyone waited to see where the market would go. Rates bumped up and that also put people on the fence and in a "wait and see" mode. I believe there is pent up demand to buy and as the year unfolds there will be a spike in demand as those that opted to "wait and see" realize that they have missed the bottom in both price and rates. The "have to sell" pricing from those that had to sell in the last quarter of 2010 will be gone and the sellers coming on the market in the new year with Spring in front of them will price higher. Interest rates having bumped up will affect us a little but they are still in the 4's. I look for that to increase as the year goes on. Wee keep hearing about the "shadow inventory" out there which is referring to a backlog of foreclosures but I do not see that having an affect in our market and I think the distressed inventory will stay at the same levels as last year. Relocation buyers start coming in March and once the sold signs start popping up there will be a flurry of activity. With nothing to further damage consumer confidence our market should be more consistent that last year's. I look for pricing to bump up in the first couple of quarters and to level out for the remaining part of the year. While I may be going "out on a limb" forecasting where the year will be going I am confident that it will be a good year overall and an improvement over last year. I would encourage everyone that is reading this to focus on our local market. The news tends to focus on National news and frankly what is happening in Florida, Ohio, Nevada, etc. is not what is happening here. We live in one of the most dynamic markets in the country and our underlying numbers are good. Even those articles you read about locally are usually a reflection of what happened 3-6 months ago as that is the information they have at their disposal. Every month (except January) I post a column entitled Front Lines and we call it that because it focuses on what is happening today in our real estate market. If you have questions shoot us an email or give me a call and you will get a straight, honest answer based on years of experience and current local statistics. We will as usual keep you informed.

2010 Year in Review

Overall 2010 was an improvement over the previous year. the townhome market continued to improve through the spring and the single family sector Saw a bump up in pricing for the first time since this whole mess started. The number of foreclosures and short sales in the market ebbed and flowed but overall the numbers were slightly lower than in 2009. Rates stayed pretty steady at rock bottom levels for most of the year but jumped rather significantly, almost a full percentage point in rate, in December. Overall lending requirements became more stringent and it is tougher to get a loan today without question. The new home market has cranked up again and some of the deals that once were are no longer. A pivotal point in the rear was April when the stimulus program ended. Sellers rushed to get on the market and buyers moved their buying decisions up to catch this benefit. In other words, we robbed Peter to pay Paul in some respects. The most noticeable was in the townhome sector where we saw the number of contracts written in May fall off dramatically going from 123 in April to just 53 in May. June was more of the same but this was to be expected. It was a little disturbing too when you compared May of '09 to May of 2010 in that in '09 we has 102 contracts written and in '10 just the 53. It is also disturbing to see that it has continued like this for the rest of the year, inventory growing and number of contracts written dropping form the previous year's levels. This is the reverse of what we had seen since mid 2008. The single family sector has been more stable and, as I mentioned earlier, for the first time since 2005 we saw a bump up in pricing. I attribute this directly to the activity in the townhome market and the appreciation that townhomes had enjoyed for the last year. The number of sales was substantially higher in March and April over the previous years because finally the move-up market was back. Following those months, though, demand(# of contracts written) dropped back to the same levels as the previous 4 years. he good news is that single family demand is very consistent month after month. The concern, though, is that the townhome market will slow as supply (# of listings) continues to grow and demand stays at the lower levels as this will affect both categories. Looking at the numbers overall though, 2010 was the turnaround year and 2009 was the bottom. First the townhome sector: Average Days on the Market dropped to 30 from 44 in '09 and 83 in '08, Average number available in any given month was 73; just one unit higher than 72 in '09 and down from 255 in '08! (Consistent with when we believe the TH's started their turnaround) If you took the first 6 months of '10 and the last 6 months of '09, the number would be much lower. The average list price of the townhomes that came under contract jumped up to 273,962 from 258,578 in '09 lower than the 288,239 in '08 but that is because the market was continuing its downhill slide from the high of 403,017 in '05. The disappointing number was the number of contracts written which was 814 down over 20% from 1,057 in '09. Again, the first half of the year was stronger than the last half. The overall high was 1503 in '04. The good news is that the number of new listings dropped slightly to 779 from 838 in '09 and 1,196 in '08. It has consistently dropped from the high of 1,672 in '05. The single family sector showed similar numbers. The average list price of the homes that came under contract was 506,175 up from 477,894 in '09, although a long way from the high of 669,321 in '05. Good news though is this the first year that number has risen since '05! The average days on the market was 47 down from last year's 69 and '08's 103. The number of contracts written increased slightly to 366 from 339 last year and 338 in '08. That again is consistent with the "move up" bump that we saw in Mar-Apr and shows how consistent the single family sector is. The average number of active listings did increase a bit from 55 last year to 60 this year but still much better than the 128 of '08. The number of new listings coming on the market jumped almost 25% from the low of 345 last year to 428 this year. While there has been a little increase each month the lion's share of them came in Mar-Apr as they tried to catch the stimulus. The good news is that in both categories most of the new inventory was regular, healthy sales and not foreclosures. As this year's market unfolds I will, as usual, keep you informed.