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.