Believe it or not, another year has come and gone. To the left is a link to my year-end Farmington Inventory Summary which highlights real estate activity in Farmington (and Davis County) over the course of the past year. It’s been an interesting year in the local real estate industry. There was the first-time homebuyer tax credit (still available for some military families), increases in foreclosure and short sale activity, historically low interest rates and continued elevated unemployment levels.
Let's start with the overall numbers: There were 554 new listings in Farmington during the year of which 39% either sold or were under contract at year-end. For the 237 properties which closed escrow during 2010 (up from 183 in 2009), the average sale price was $288,157 (down just under 6% from 2009). 2010 represents the third consecutive calendar year in which average sale prices were lower than the year before. Overall average sale prices in Farmington at the end of 2010 were 20% below the peak average sale prices which occurred during the summer of 2006.
The cause of the drop in overall average sale prices was very apparent in the data. While the percentage of homes selling in the $200,000 to $300,000 price range in 2010 was identical to the 2009 percentage (46%), the decline in average and median sale prices can be attributed to nearly double the number of properties selling below $200,000 from the previous year. Nearly two-thirds of those sales were for townhomes with most of those sales occurring in the Farmington Crossing and Village at Old Farm complexes. This isn’t surprising given the economic conditions during 2010.
Farmington’s 29% increase in sales in 2010 (only two other cities in Davis County reported higher property sales in 2010 versus 2009) demonstrates the value to a community of a diversified housing inventory. Several cities in Davis County experienced decreases of 25% or more due in large part to their lack of housing stock diversity. This diversity also provides a long term advantage: creating local "built in" buyers for move up purchases (or those looking to downsize). It allows current residents to remain in Farmington as their housing needs adjust over time. Farmington’s diverse housing stock, coupled with it’s upcoming retail capacity (Station Park) and transit hub status, should bode well over time.
Overall, inventory levels in Farmington remain elevated with seven months of inventory currently available (six months is generally considered a neutral market). However, in several price ranges we are beginning to see much more balanced inventory levels. This is a good sign indicating a slow but steady stabilization of buyer demand and seller supply. The first few months of 2011 will provide additional indications of market direction.
Another data metric I track is "under contract" activity (not in this particular summary). This is simply a count of the properties which go under contract in any given time period. A property goes under contract when a buyer and seller agree to the terms of a sale but the transaction has yet to close escrow (that process can take anywhere from two weeks to two months to complete – and sometimes even longer for short sales). I like this data point as it more accurately depicts when buyers are actually making offers on properties and therefore is a good indicator of actual buyer demand at a specific point in time.
As an example, the first four months of the year (when the buyer tax credit was in effect) 98 homes went under contract in 2010 compared to just 51 in 2009. Then again, we see a large disparity at the end of the year when during the last three months of the year (typically the slowest time period) 57 properties went under contract in 2010 versus just 43 in 2009. Much of the activity at the end of 2010 can be attributed to exceptionally low interest rates significantly increasing buyer purchasing power. Many buyers (including investors) who were waiting to make a purchase are now taking advantage of the lower prices coupled with low financing costs.
Does 2010 mark the bottom of the market? I doubt anyone can call a market bottom accurately until after the fact, however, there are numerous data metrics suggesting a continued stabilization of market inventory and pricing levels. I will be doing another blog post in the near future on what the long-term may look like (dusting off the old crystal ball).
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