The number of homes sold shows improvement over the last year but not back to the level of 2008 sales. For the period of March 1 through May 31, of this year, unit sales are up from 615 in 2009 to 740 units. Although this is an improvement it is not at the 798 level of 2008.
Homes that sold for more than $300,000 also showed improvement from 34 units in 2009 to 41 units. This is still well under the 59 homes sold in 2008.
June sales should also show much improvement as Tax Incentives have motivated a lot of buyers to purchase prior to April 30th and close prior to June 30th. But with these incentives no longer available to buyers you should expect the buyer pool to drop dramatically which could result in homes sales (by units) lower than 2008. We will give you an update next month.
Higher priced homes have bigger piece of pie!
New construction of homes over $300,000 is virtually at a halt. Of the 365 homes available only 47 are new construction. New construction homes in this price range are down about 50% from 2006-2007 levels.
This is the good news for those who are selling their home in this price range. The bad news is there is more than a two year supply of homes in this price range available to potential purchasers, so don't expect your home to sell quickly. Purchasers still have a lot of homes to choose from and if you truly want to get your home sold in a reasonable amount of time you must price it right and it must win the "Beauty Contest".
Three Major Factors that Impact Home Sales and Values.
There are three major factors that impact home sales and the price the homes are selling for. The good news first!
Mortgage Interest Rates:
Purchasing Power is strongly influenced by the interest rates of mortgages. With today's rates as low as 4.25%, a buyers purchasing power is perhaps the best it has ever been. A buyer of a $400K home would be required to put $80K down and have a $320K mortgage (to get the best possible rate). In today's mortgage market the principal and interest payment at 4.25% would be $1575/mo. The same loan at 6.25% would have a payment of $1970/mo.
If the buyer can only afford payments of $1575/mo (principal and interest) they could only purchase a $320,000 home at the 6.25% vs. the 4.25% rates with 20% down.
As you can see, this has a major impact for home owners in the higher price range.
Available Homes for Sale:
It's still a buyer's market with large inventories of homes available. However, with new construction down dramatically the major impact on supply will be foreclosures. It is estimated that the number of foreclosures will increase by as much as 300% over the next year nationally. The impact in the Upstate should be considerably less, but it will have an impact on inventories.
Many banks are holding their foreclosure inventory in what is called "Shadow Inventory". These are foreclosure homes that are Bank Owned but not being sold (held in bank inventory). Like the Home Owners, Banks will suffer from excessive inventories which will result in lower sales prices and longer days on the market. However, as inventories grow they may be more inclined to reduce their inventories in order to meet profit margins and satisfy stock holders.
The Buyer Pool:
"They are there in the good times, but unlike good friends, they disappear in the bad times." With great interest rates and lots of homes to choose from, one might expect home sales and values to be increasing. However, potential buyers disappear in a bad economy. We believe this pool of potential home buyers are staying away from the table due to fears that we have not seen the bottom yet or that their job may be the next to go.
Others are not purchasing because they cannot meet the more stringent requirements for obtaining a mortgage.
Whatever the specific reasons, the buyer pool is smaller and therefore less opportunity for sellers to get their home sold in a reasonable amount of time and at fair market value.
News from Washington tells us that things are improving and that's their "Spin" on the state of the economy. However, most of us have to see it to believe it and until we see noticeable improvement in our area we don't expect the buyer pool to increase to 2005 or 2006 levels.
To end on a happier note, we believe there could be another dip in sales and home values in the future, but the drop will not be as deep or last as long as the previous dip. For sellers, there are opportunities to sell your home so don't give up. For buyers, more affordability, more to choose from! What more could you ask for.