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.