The pace of sales is slowly but steadily absorbing the excess inventory of homes on the market. We are now at 6.7 months supply of homes for sale, which is still a buyer’s market but the lowest level since this time last year. The return to better balance will bring back longer-term sustainability in our market.
Demand is Building for Well-Priced Homes
Prior to the recent boom market, the number of sales grew by an average of 5.9% per year. Applying that rate of growth to our market from 2002 (the year before the boom started) onward, we’d expect to have 3,516 sales by the end of the third quarter 2009. Instead, our market has produced 2,103 sales. That seems like quite a big drop.
However, during the boom years, sales far exceeded the number historicaly seen. Since 2003, we have had 20,433 sales. The
numbers of sales we’d project for that time would have been 20,861 (See Chart 1).
So even with a huge drop off in sales the last two years, our market is still pacing longer-term projections. The numbers mean that our market is finally absorbing the excess sales bitten off during the peak.
What this means going forward is that we are returning to more sustainable times in our market. While it is too optimistic to think we’ll get back to our trend line for sales next year, nearly 4,600 sales, we should see more sales as demand is now becoming pent up.
However, demand will not be robust enough to overcome still overpriced properties. Prices are off 12% from the peak, but they are still above our historic trend line (See Chart 2).
As prices have moderated, we have seen more buyers enter the market. In fact, buyers are active today, jumping quickly on well priced homes. According to our latest market study, homes that did not require a price reduction before receiving an offer are going under contract in just 28 days. That is 17 days faster than the peak of our seller’s market (See Chart 3).
The first-time homebuyer tax credit expires at the end of November. Congress is considering an extension of the credit until the middle of next year and an expansion of its coverage to all buyers of a primary residence. The credit amount would remain the lesser of $8,000 or 10% of the home’s purchase price.
An extension of the credit is not certain. As other economic news shows positive signs (the stock market is up more than 45% since March), some question whether the credit is now needed. Extending the credit comes with an estimated price tag of $16.7 billion.
Nearly 1.8 million homebuyers will take advantage of the credit this year. By some estimates, the presence of the credit caused 350,000 additional buyers to enter the market (which is about 6% of the total homebuyer pool this year).
Market Updates
Check out my blog for the latest information on the local housing market at www.sandrajolson.com (click on News From Sandra).
One way we are helping is by sharing our knowledge on our enhanced real
estate blog. It has more market news than ever before. We hope it provides
a better understanding of the local real estate market. If you have a
moment, please visit the site at: www.coldwellbankerolympia.blogspot.com.
We look forward to your thoughts. And as always, thanks for your
referrals. We genuinely appreciate your trust and confidence.
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