Lancaster County Association of Realtors came out yesterday with their review of January's sales. While I agree in general with the commentary offered in the press release, my thoughts go more to the national real estate market and how Lancaster County needs to see the way forward to an improving local market. Here's how:
My take on the market situation is easy - list prices need to come down. The average new listing price isn't reported so you wouldn't know this, but Lancaster County continues to resist a price correction, although January's data is encouraging.
It's all about the gap between what homes are listed for vs. what they actually sell for. That gap was growing through last fall and winter, and peaked in Feb 07 at over $58,000! (that's the blue arrow between the lines on the left). We're talking averages, of course, for residential/farm properties in the County. That's when Realtors started getting the message that they had to be less "enthusiastic" about willy-nilly pricing over the last comparable sale. 2007 saw a steady narrowing of the gap, meaning that sellers were coming around to more realistic prices for buyers. The gap reached a low of about $14,000 in August (small blue arrow).
But what happened in August?
The subprime mess hit the airwaves. Right away the average sale price started falling, but the average list price...did it correct? No, in fact the price climbed for 2 months and then the holidays hit. Sales prices have been falling since November, but list prices have bounced between $220,000 and $230,000. January's data is encouraging because we see the list price correcting downwards. My opinion is that sellers and most agents are confused about how to price their homes right now, and who can blame them?
Now the "so what?"...when the two lines meet, the Lancaster Real Estate market takes off again - that's what! Buyers have the ability to buy and are just waiting for the flash in the pan, the "bottom" of the market they've been hearing about.
Nationally, the banks have done their part by holding the mortgage rates down, the goverment has done it's part by passing a stimulus that includes aggressive improvements to FHA programs. Now it's our part - the real estate community has to intelligently asses these price trends and advise their clients from a position of expertise. Lancaster County is already in a great spot nationally - a stable economy and low unemployment with many immigrants feeding the housing market.
No seller wants to stay on the market for 3-4 months in Lancaster, but without expert price advice (among other things) that's what's going to happen. If the gap can be narrowed this spring in Lancaster County, I believe we'll see the market move forward.
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For Lancaster PA homes for sale click here. Jeff Geoghan is a top real estate expert in Lancaster County, PA, and an involved community member. Jeff's work has been featured in the Lancaster Newspapers, WGAL Channel 8, PA Business Journal and Wall Street Journal. Jeff's blog on Lancaster County and its homes is nationally-featured. Contact Jeff for more help with your Lancaster PA Real Estate needs. Jeff is also a photographer - view some of his portfolio. Comments are welcome!
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Excellent chart and analysis, Jeff. It's hard to convince sellers of this phenomenon, but the motivated sellers should take heed.