Below are the numbers for September 07. Before getting into the numbers, I would just like to mention again that I will now be working to post numbers right at the beginning of each month for the month that ended 30-35 day prior. I would love to be able to post up the October numbers at the beginning of November, but what I am seeing is changes are happening through-out the following month.
At this time I will be updating the September report.
September prices are pointing down for the first time since February when compared to the same month a year ago. September looks to be down 3% from September 06 (For comparison, Feb 07 was down 0.2% from Feb 06). I have been saying that I think we need to see a drop in prices to spur buyers into action. I still feel we need to see this price drop for a couple of months before buyers start to get excited. Let’s see what October, November and December hold. Currently we are up 2.6% vs. last year as a twelve month average. Last month, we were up 2.9% for the same period. This might also be partly a function of some of the new home sales on the higher end of the market. I would really like to see this flatten a little, as I think it would spur a little more buying.
Time on the market is also still trending up vs. last year. We are up to 90 days in September. That is 3 weeks (21 days) more than this time last year. Last month was 88 days on market, but that was also 18 days more than August 2006. May sales were the lowest this year at 76 days on the market. In fact, May was the lowest since last October (2006) when the DoM was 72 days. May and June of 2006 were in the mid sixties.
The one "bright spot" that I see is a 6% reduction in new listings compared to last year. Of course, to offset that, there is a 61% decrease in closed sales and a 34% decrease in pending sales (homes under contract). I really need to see another month to sort that out.
I think we are in the midst of two serious phenomena. First is the Sub-prime Mortgage Meltdown. I’ve been talking about it for a few months, but I think that in September, we saw the full effects for the first time. Buyers that were marginal even six months ago are out of the market now. Buyers that are solid are still solid. If anything, those buyers are in a stronger position. Since there are fewer buyers, they have increased strength with sellers. Furthermore, I’m starting to see lenders trying to court those strong buyers. Face it, mortgage lenders make money by loaning money. They can only stop writing for so long before they need to look at making money again. Obviously the marginal buyers aren’t popular with the secondary market, so getting “A paper” mortgages back into the stream will become more of an imperative… and so I still expect to see rates slide a little for the best buyers. I am also seeing creative options creeping back in to the market. If Washington can keep its grubby fingers out of the market, and not try to “fix” it, we should be seeing a balance and recovery in that segment next spring. The second issue we are facing is the seasonal slowdown we see each fall. I will step out on a limb and say that there is an amplification this year because of the overall market health… or lack thereof.
I think it is getting to be time to say that smart investors need to get back in the market. Buy & Hold strategies will be heavily rewarded in the long run. Prices are good, rates are kicking for those with good credit. There might be a slight easing of prices in the coming months, but I wouldn’t count on it, and we won’t know that we’ve hit bottom until we are off of it.
Finally, remember that we can only get an accurate look in the rear-view mirror. We will only KNOW there has been a change in the market when we see it has already changed. We’ll know that change has taken place when we see all of the best deals are already gone. Currently, I can’t get an accurate picture of overall market activity for at least 30 days after the end of the month. That means that the market could be well into a turn before the numbers will bear it out. And, while I don’t know that we should expect increasing values terribly soon, I don’t think prices will drop much either.
When the market turns, I believe it will turn with force. I am basing this on the fact that we are seeing rising rents and a lot of hold-out buyers. That means that when we hit the tipping point, there will be a ready source of buyers. They won’t trickle in as much as rush back in to the market. The bigger question is when we have a market turn, once the pent-up demand is released, how long will the strength last. I think that the market will be more balanced after the initial surge.
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