June 2009 Market Statistics Interpretation
Well, at first glance the June 2009 market statistics appear to be telling a story that we have dreamed of hearing for the past 2 years! But, hold the presses, the market may not be what it seems. True, sellers are selling their homes at closer to list price than last year (Fredericksburg area – 89.89% in 2008 compared to 90.27% in 2009). But, prices are also down, median and average. This year’s median sold price in June (for the Fredericksburg area) was $205,000 compared to $276,500 in 2008. We also have less inventory this year than we did in 2008. In June 2008 (Fredericksburg area) there were 3673 listings compared to 2465 in June 2009. This all leads us back to one of my favorite real estate topics, the law of supply and demand. When supply and demand concepts are coupled with the incentives that first time home buyers are receiving this year, you get what looks to be an improving market. Many of the buyers who were sitting the fence last year have decided that the time to buy is now. Prices are low, interest rates are volatile but low, and there is still a good selection of homes on the market. However, this selection is dwindling and no one can say what will happen to the amount if inventory in the next few months. I can also say with confidence that more homes are selling, and selling quicker, because more homes are priced appropriately from the beginning of the listing. Sellers, REALTORS(R) and banks, are evaluating the market overall before deciding list price. More attractive list prices increase a seller’s chance for multiple showings and multiple offers, and possibly even escalation clauses (gasp!). All of this looks to be steering us back in the direction of a healthy market and even a seller’s market.
But again, looks can be deceiving. The foreclosure and short sale market are not going away any time soon. In fact, REALTORS(R) have been waiting for months for the next wave of foreclosures to flood the market. No one can give a straight answer as to why banks are holding these homes back, but they are. If the banks do not release these REOs in a sensible manner then we are in for another round of dropping prices. Brace yourself now. The last predatory lending loans were issued in 2007. Let’s say the average loan was for a 5 year ARM. We still have at least 3 more years, more like 5, before the real estate industry can start to clear out some of the fog that has been draped over us the last 2 years. The first-time home buyer incentives have been a driving force behind many markets, but they are due to expire in December. Eliminating the incentives will be devastating to many markets. Many industry professionals feel that Congress will continue the incentives, but we shouldn’t count our chickens before they hatch. Oh, while we are on the subject of Congress, has anyone read the American Clean Energy and Security Act of 2009? Yeah, could Congress possibly pass any other law that would single-handily prevent the sale of most homes in America? (We’ll return to this topic in a future post). And last, but definitely not least, the new HVCC appraisal rules that are wreaking havoc with real estate deals across the country. (Again, we’ll revisit this delightful topic in a future post. I need to calm down before I write it).
So, have we recovered yet? Ummm… no. A resounding no. We still have a long road ahead of us. The truth is, no one can say for sure where this market is headed. If they say they can, they are lying. There are so many variables that go into creating a stable and/or strong market. The market will eventually cycle again; it always does. The length of time it takes for the cycle to occur depends on how many “experts” are poking at it. Right now there are thousands of “experts” running around with very sharp sticks. Lord help us all!
