By The Numbers
Inventory (supply) down: For the fifth straight month, total inventory has dropped. We are still in the 50,000s and although this is still high, the trend is down.
Sales (demand) up: Closed sales for June are above 6,000 and are double what they were per month during the slump in 2007.
Forecast: Pending sales for August are still around 7,000, so it is safe to conclude that the downward trend will continue.
The absorption rate (time to clear out the current inventory) has dropped to 9 months from over 20 months in 2007.
The last time we saw a similar rate was in the Spring of 2007. We are approaching normalcy.
Conclusion: The Market Continues to Gain Momentum.
Two Factors that could Jump Start Sales in the next 45-60 days:
On October 1, FHA down payment requirements will increase from 3% to 3.5% and the grant money that helps first-time home buyers with their down payment goes away. Please keep in mind that some mortgage companies are already eliminating down payment assistance: One of our preferred mortgage brokers has indicated that borrowers need to seek down payment assistance by no later than the end of August.
We can expect to see a rush of new buyers jumping into the market at the lower end prior to the October 1 deadline.... Stay tuned as we will be watching the numbers for August and September very closely.
Foreclosures:
Foreclosures spiked dramatically in June indicating that there will be a flood of bank-owned properties coming on the market. But, even more dramatic is the number of pre-foreclosures:
According to Realty Trac, the number of pre-foreclosures is 12 in the entire Valley (down from 48 in June and several thousand in May). If this trend continues there is no question that the foreclosure market is about to slow down dramatically.
As soon as the last batch of foreclosures is snapped up by investors and bargain hunters, the window will truly be closing and all those fence-sitters will jump in (possibly too late to take advantage of the real bargains) and start driving prices up again.
Prices and Market Recovery:
If home prices had risen at a normal, steady rate since 2000, the average home will be valued at about that price in September. The market has corrected back to normal levels.
35% of sales in July were foreclosures and averaged a mere $150,000 apiece. While foreclosures may have brought the "average price" down, by the time these averages go up, the market will have already turned three or four months earlier. The supply and demand numbers are driving the activity.
Pre-foreclosures have been drying up for the past two months. The FHA down payment increase and buyer assistance programs will be disappearing by October 1.
These three major factors could be the catalyst to ignite a dramatic and rapid market recovery: Not a matter of "if" but rather a matter of "when".
Comments(0)