Official numbers were released last week, and as expected single family home sales dropped. As you can see from the attached chart, there is some seasonality to this, but there are more reasons as well.
Sales are still well above 2006-2008 levels, but they are down against 2009 levels which was a record setting year. Last year the market was filled with bank owned bargain inventory, and the trend this year has been less foreclosures coming to the market so we’ve been steadily selling off that bargain inventory. Actually the market never filled, but as foreclosure properties entered the market they were scooped up just as fast. The pipeline has slowed this year.
Combined with the expiration of homebuyer tax credits and high unemployment it’s quite predictable our market would slow. Median home prices even began rising as less bargain sales were occurring. In the last 3 months we’ve seen median prices decline from $101,500 in April down to $93,500 in July.
So if less bargain homes are selling, it must be true that less regular sales are selling as well, or else the median wouldn’t drop. This is also true, as distressed sales percentages in Lee County reached 64.18% in July vs. 54.66% in April. Now that season is no longer here, it seems mainly the bargain homes are selling, and there are less bargains, so home sales are down, and non-distressed homes aren’t picking up the slack.
Last year we predicted we’d see a No-Mans Land market when the foreclosure bargains dried up, and we’re seeing the beginning of this phenomenon now. There is no major upward pricing pressure due to the economic times.
Without rising prices, we won’t see increased builder activity, which means less tax dollars to the county government. With fewer sales, we’ll see less doc stamps revenue to the state. It’s a vicious cycle, so government better be prepared to make cuts because property tax values are also down which also cuts into county budgets.
Real estate agents are out interviewing now because they’ve noticed their leads are down and they’re looking to go where there are some leads. When the deals are gone, so is the investor interest, and we’re left with fewer residents looking to purchase. We’re not seeing move-up buyers because people are uneasy about the economy and many can’t afford to sell because they owe more than their home is worth, so they can’t take advantage of moving up even if they do have solid employment. The same goes with buyers looking to move-down. You cannot move down to save money if you can’t afford to sell at today’s prices.
This is Labor Day weekend and our market may be laboring, but it will be fine in the end. There are still good buys entering the market, and while we don’t see a lot of immediate upside pressure, we don’t see downward pressure either. Even with slowing sales, we’re still the 2nd highest year on record. Buyers looking to take advantage will have to be both quick and patient. The early bird gets the worm when it comes to fewer foreclosure bargains, and the patient buyer gets the short sale, which can be a bargain if the buyer is prepared to wait. And because 64.18% of current sales are distressed in some fashion, it pays to be both quick and patient. The educated buyer with resolve is the real winner in this market. The fearful buyer is missing opportunities and will kick themselves later.
Perhaps when the government gets its act together and figures out which way is the road to recovery, we’ll see increased sales and prices. Look for another homebuyer tax credit soon, or some other vehicle to spur the market, because real estate is traditionally 32% of GDP, and if we can kick start real estate, the economy may follow.
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