Real Estate Matters

Pending single family home sales in October were 549 compared to 446 for the same month last year according the Sarasota Association of Realtors. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Nationally, pending home sales remained in a stable range against a deteriorating economic backdrop according to the National Association of Realtors. Lawrence Yun, NAR chief economist, said a review of the past year is instructive. “Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding a generally narrow range,” he said. NAR went on to say that, although conditions remain uneven around the country, some areas including Florida and California are showing healthy gains in pending home sales from a year ago.

More sales will stabilize home prices by bringing down inventory and will also lessen foreclosure pressure. In Sarasota the absorption rate of properties on the market is lower than last year at this time and has been steadily declining with decreasing inventories since May. Absorption rate is the number of months it takes to sell the entire remaining listed inventory in a particular category, based upon the sales for that particular month. In Sarasota, the absorption rate for single family homes stood at 18.2 months in October, compared to 31.7 months in October 2007.

The current local market continues to demonstrate statistically that we have a great selection of affordably priced housing for buyers to purchase. And in addition, declining inventory levels normally indicate the market is returning to a more historical balance, which will eventually lead to normal, long term price appreciation.

Cheers,

Bill

In spite of the deteriorating conditions in the job market, stock market, consumer confidence and decline in home sales nationally and locally, there is at least one market indicator getting better here in Sarasota – the percentage of the total number of listings that sell each month. This is called the absorption rate. According to the Sarasota Association of Realtors, in November, 4.16 percent of listed houses sold, as opposed to just 2.5 percent in November 2007. The average days on market (DOM) fell from 158 in November 2007 to 149 this November. And the supply of inventory decreased to 24 months from 39.4.

Also, the pending sales number is improving, indicating that people are coming back into the market. We are also seeing a big decline in the number of listings on the market (from 9,897 to 6,747 houses).

However, with home sales weakening against a backdrop of an eroding economy, improvement of the housing market will depend on how effectively Congress and the new administration can provide incentives to homebuyers. According to Lawrence Yun, chief economist for the National Association of Realtors, (NAR), “It is imperative to provide incentives for homebuyers to get back into the market. It also depends on how effectively Congress and the new administration can help facilitate the short sales process and unclog the mortgage pipeline – impediments remain for some buyers with good credit,” Yun said. Charles McMillian, 2990 NAR president said “We need more than low interest rates to encourage enough buyers to enter the market and meaningfully draw down inventory, which would stabilize home prices – that, in turn, would help the economy to recover,” he said. “We should extend the first-time buyer tax credit to all homebuyers and eliminate the repayment feature, and make permanent the higher loan limits that are vital in high-cost markets – faster we do this, the faster housing and the economy can recover,” McMillan said.

Yun cautioned that there will be negative consequences if housing stimulus is delayed. “Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets. More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages.”

Two weeks ago I was installed as 2009 president of the Sarasota Association of Realtors and heard many comments from our incoming leadership team that they are optimistic about the real estate market for 2009. The overriding feeling is that there are many challenges we are currently facing in the market, but with challenges, opportunities are created and 2009 will be the year of opportunities.  Best wishes for a Happy New Year!

Bill