Trouble ahead. . . ?
Here on the Chris & Caleb team, it is our goal to be be the most honest and truthful real estate business you know. To that effect, we want to let you know about some stats that are scary, not just for home sales or real estate, but for everyone and the overall economy. We also want to say that we know local real estate – we are NOT financial experts. But the charts we are about to share are very clear indications of what’s coming. The charts displayed below are from a recent article posted on CalculatedRiskBlog.com. Please visit this site, it is excellent. The specific article can be read here. Of course none of this is a surprise to us or to the regular visitors on this site, as we have been predicting this for over a year.
Existing Home Sales
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They are back on track to be on pace with the trend, which hit it’s high in the middle of 2005. While the Tax Credit did increase sales, it also artificially inflated prices. It’s not healthy.
Existing Homes: Months of supply
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At their highest levels in more than 10 years. The same goes for the stats locally. Another “not good” sign.
A Distressing Gap
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The reason for the gap, as explained by CalculatedRiskBlog.com is because of the huge amounts of inventory in resale homes and distressed properties. Once that inventory is reduced, that gap will close. My question is – when will that happen? At this rate, with the real rate of unemployment close to 17%, not for at least several years.
A few more thoughts on the current state of affairs. . .
- Sales – The National Association of REALTORS had been projecting over the last year a sharp decline for the period immediately following the expiration of the home buyer tax credit, since many buyers rushed to take advantage before the deadline expired. This coupled with continued employment concerns was a major reason for the decline in sales.
- Prices – There is a silver lining for current homeowners. Their value has firmed across the region, with numerous gains reported (Year-over-year for July, prices were up 1% in Delaware County, 7.6% in Chester County and 9.6% Montgomery County). All year, we’ve been seeing a flattening price trend, which is the greatest benefit of the home buyer tax credit. Looking ahead, prices are likely to hold fairly event – in part from very low new construction, and prices are coming back in line relative to family income.
- Market Conditions – There are great opportunities now for buyers who weren’t able to take advantage of the tax credit. Mortgage interest rates are at record lows, home prices have firmed and there is a good selection of property in most areas. Thus, buyers with good jobs and favorable credit ratings find themselves in a fortunate position.
- Outlook – Near-term home sales will be soft – the real question is what happens in the 4th Quarter. Job creation so far this year has been less than forecast, but with rock-bottom mortgage interest rates and historically-high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy can consistently add jobs.
