Looking Out From the Garage

The market is in a state of change.  And things are in a state of flux for the next few months... and depending on what happens with the First Time Home Buyer Tax Credit, maybe longer. 

Inventories are dropping and sales are rising... September numbers:

• New listings - 1272, down 36% from Sept. 2008.
• Pending sales - 840, up 13% from Sept. 2008.
• Solds - 675, flat from Sept. 2008. (674 solds in Gwinnett County in Sept. 2008)
• Average Price - $176,937, down 11.3% from Sept. 2008.
• Total Listings on the Market - 6081 (10/1/09) vs 9187 (10/1/08)

Absorption rates are a good way to gauge market direction in both short and long terms.  It measures the number of months it would take to absorb all of the current inventory if sales remained constant and no more homes came on the market.  In general, maintaining about 6 months of home inventory is considered balanced. 

Averaging the last three months of sales, there is about 8.5 months of inventory.  Last year at this time we had 13.4 months of inventory using the three month average.

Using the last six months of sales, there is about 9.0 months of inventory.  Last year we were looking at 13.2 months under the six month average. 

The long term measure utilizes an average of twelve months of sales.  With the long term look-back, I see 10.6 months of inventory.  Last year was 14.6 month of inventory averaged over the past year's sales. 

What does that mean?

From the Absorption Rates, I can tell several things.  The market has been improving over the last few months.  Each shorter time frame lowers the inventory lag.  The market is MUCH better than last year at the same time, and last year the market had started a turn... but also started a seasonal downturn that we don't seem to be seeing yet this year.  Finally, the market still has a distance to go before it is really balanced. 

Combining this with the above data tells me that Gwinnett County has seen most of its improvements because of a lower supply, not an increased demand.  Despite incredibly low rates and reasonable prices, buyers aren't jumping in to the market in higher numbers... 

But...

There is an anomaly.  When we start breaking the sales up by price, we see that entry level homes ARE selling at increased rates, while being offset by continued slackness in the higher end homes.  This would be due to the $8000 First Time Home Buyer Tax Credit.  It IS pushing sales of entry level homes, typically in the "under $150,000" price arena.  But there are very few first time buyers looking in the $500,000 range. 

The problem is that most of the sales to first timers are sales that would have likely happened next year anyway... which means that the tax credit, if continued, would lose effectiveness.  But, if the credit isn't continued, the drop in sales will be more precipitous in December. 

If you are an entry level buyer, and haven't found your house yet, the chances of getting closed before November 30th are pretty slim.  But don't despair, you might be able to find the house you want for less money in December or January. 

If you are a seller with an entry level home, things might start looking ugly... now.  If the property isn't under contract, don't hold your breath.  Right now it is taking 30 days to close buyers with excellent credit and perfect properties.  Most first time buyers have some sort of issue that needs correction prior to closing. 

The real test...

Will be the December numbers.  I expect to see November come in with a HEALTHY increase.  Nov. 2008 saw 376 sales, and I think that will be in the range of double for Nov. 2009.  December 2008 had 503 sales... I'm looking for half of that if the tax credit goes away. 

If sales come in higher in December and/or approach 370 (which was the number for January, 2009) in January, 2010, then we are on the road to recovery...  I'm not expecting that.

Following the lead of last months market report, here is the report for July, 2008. 

| View | Visit GarageHomesUSA

I'm actually a bit surprised at how much stronger the numbers for May turned out v. the preliminary figures.  They ended up blowing past my predictions.  I'm hopeful for June's final numbers.  Those won't be available until a few days into August. 

I hope that the new format brings out more information in a more digestible format.

I have it posted as of now to GarageHomesUSA.com.  Here is a direct link.  

Of course, I'm not going to spill all of the secrets here, but it isn't pretty.  I was expecting to see the beginnings of a recovery.  And, while the numbers are stronger than the last few months, they aren't as strong as I'd like them to be.  Of course, the April numbers are probably not even close to reality yet.  

Each month, the report changes from the first part of the month to the end of the month.  Many of the sales for the previous month don't seem to get posted until a few weeks in to the following month.  

One little bright spot I am seeing that the 3 month and 6 month absorption rates are tightening up.   

I finally had a moment to put together the Market Report for GWinnett County covering February, with the preliminary numbers for March.  As always, the March numbers need a big ol' grain of salt... they WILL change over the course of the month. 

The news is mixed, which isn't too bad.  There are a couple of signs of life in the numbers, and a few hints that some of the good deals are starting to get picked off.  Of course, there are still a lot of dogs in the market, and excess inventory to work through.  

Skip on over to my website, GarageHomesUSA to see the latest report.   

As always, I try not to put on the rose colored glasses... but give a dose of reality for both buyers and sellers.   

Gwinnett County sales comparison for residential real estate. 7/07

It time for me to make my prognostications for the coming market, while recapping that which has happened. Please keep in mind that even on the 10^th of August, the numbers for July WILL change.  I will come back and correct them before posting the September results.  I originally posted the June number on July 10^th, and they had changed pretty significantly by August 6^th when I reviewed and corrected them. 

I see a solidification of some of the trends that I pointed out last month.  Listings are up vs. last year by 13%, same as last month.  This is actually trending down slightly when trended over a three month average.  However, I still think we are going to see an increase in troubled properties in the next few months, and continuing for the next 9-12 months.  Sold listings and pending listings are still dropping as a percentage of new listings and vs. last year.  The trendlines are also pointing solidly down.  Not good news…

Prices are pointing up, but I don’t think that will continue.  I think we need to see a drop in prices to spur buyers into action.  I don’t expect that to be much, but a modest decrease of maybe 2%.  Currently we are up 5% vs. last year.  June was up 4%.  This might also be partly a function of some of the new home sales on the higher end of the market.

Time on the market is also trending up vs. last year.  We are up to 82 days.  That is almost 2 weeks more than this time last year.  Last month was 79 days on market, but that was also 15 days more than June 2006.  May sales were the lowest this year at 76 days on the market. 

Those outside influences are still at work, and there aren’t a lot of changes from last month… but there is one that is huge.  Last month I mentioned an increase in foreclosures as a result of poor financing decisions by buyers over the last couple of years.  But, that has almost become a side story.  It is still quite true that there is a veritable flood of foreclosures that could be looming on the horizon.  However, I think the biggest influence on the market is the current mortgage climate.  Feel free to look at last month’s report to see everything I said about foreclosures.

The current mortgage climate is tough.  For buyers with weak credit history, the market is almost closed.  Alt A loans (stated income, no documentation) will be away from the market for the foreseeable future, except for the rarest of good credit buyers.  And expect that 0% down and even 3% down loans will be reserved for those with better credit.

Overall, this is decreasing the pool of buyers in the market.  But, the quality of serious buyers will be improved.  This is going to tighten the buyer’s market even more for at least the next few months.  As we move toward fall and winter, when fewer homes are traditionally on the market, there might be some easing for sellers, but not much.  We’ll have to wait to see how this credit crunch shapes up over the next few months to see how it will affect sales next spring.  For more on this, take a look at my posts on the housing bubble, and interest rate predictions.  I stand by my opinions regarding flip opportunities from last month.  I have also gone a little deeper into flipping here and a bit of an investing primer here.

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.