Well believe it or not, we've already reached the half way point for 2010 (seems like it was just snowing a few weeks ago -- oh, that's right, IT WAS). 
As I do at the end of each calendar quarter, I completed the current review of market activity in Farmington through the second quarter of this year.
Now that the first time home buyer tax credit has expired (although the June 30 deadline to close was extended recently by Congress to September 30 for properties put under contract by April 30), we can see the actual impact the tax credit had on market activity.
Year to date closed sales are up over 42% from the same period a year ago (thanks again, tax credit) but average and median sales prices declined nearly 11% and 8% respectively year to date. So, although unit sales increased, the majority of the increase is occurring in the lower price ranges thereby driving down average sale prices. This isn't surprising given the current economic conditions we face in Davis County. Now, that said, average sale prices for the month of June did increase slightly over the June average from 2009. It will be interesting to see if this is an aberration or a potential signal of possible price stabilization. It is important, however, not to read too much into a single month's activity but it was nice to see nonetheless (it should be noted median sale prices did show a small decline in June year over year).
Overall, inventory levels remain elevated with nine months of inventory currently available (six months inventory on hand is generally considered a neutral market). So, the buyer's market continues. Farmington is not unique in this regard as we see similar trend lines throughout Davis County. There will likely not be significant change in these trend lines until the macro economic factors impacting our market (e.g. unemployment, declining household income levels, restrictive credit markets, etc) begin to show signs of improvement.
Another data metric I track is "under contract"activity. 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). I like this data point because it more accurately depicts when buyers are actually making offers on properties and therefore is a good indicator of actual buyer demand at a point in time. This is where you can really see the impact of the tax credit on buyer behavior this year. In March and April, 830 properties went under contract (before the tax credit expired on April 30). In May and June only 471 properties went under contract: more than a 43% decrease in buyer activity immediately following the expiration of the tax credit (who says government programs don't spur activity?). Even with the significant impact of the tax credit on housing sales early in the year, overall under contract activity is only up 5% year over year (and last year under contract activity was down 41% from the peak in 2006).
Returning briefly to the topic of interest rates (and understanding I am not a mortgage professional, I do not play one on TV and I haven't stayed at a Holiday Inn Express recently). I have clients who are waiting for rates to drop even further. I try to explain that it will be difficult for rates to decline further given the current Federal Reserve discount rate at 0.75% (it reached a low point of 0.50% a few months ago) and a Fed Funds rate in the 0% - 0.25% range. You can't get much closer to zero. As the economy improves, the Federal Reserve may well use its interest rate policy to keep inflationary pressures under control. Given the housing market is a lagging indicator of economic recovery, it is likely interest rates will begin adjusting before housing prices begin to reflect the recovery (even then most analysts project relative flat housing prices for the foreseeable future). Interest rates, more so than home prices themselves, have a significant impact on buyers' purchasing power. This is because most home purchasers utilize significant leverage (borrowing 85%, 90% or even 100% of the purchase price) and interest rates impact highly leveraged transactions. I did a blog post on this very topic just a short time ago.
Overall, it appears the market has begun the stabilization process. Time will tell if this is the proverbial "bottom" everyone keeps talking about.
If you have any questions on any of this information, please don't hesitate to contact me by phone, text, email, blog comment, or carrier pigeon.
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