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Real Estate Market Really Unchanged Over Last Three Years

By
Real Estate Broker/Owner with ReMax River's Edge

Predicting the future of the real estate market has never been easy but it seems like even describing the current market has become a challenge for most pundits.  This is probably a result of the 24 hour news cycle and its impact on writers and columnists who are under pressure to produce material.  For this reason, it seems all we get these days is a "slide-by-slide" description of the real estate market without ever really understanding the big picture. So this is my "big-picture" opinion of the market in an effort to explain where we've been, where we are, and where we may be heading. 

Recent reports in the national media highlighted the rather impressive 27% drop-off in unit sales for the month of July.  In my home state of Rhode Island that number was closer to 34%, although our trade group was quick to point out that prices went up 6%.  As I indicated in a previous post, given the expiration of the tax credit, this should have been no surprise to any seasoned real estate practitioner.  But what does the long view tell us about the market? 

In conducting a ten year history of the market it shows that nothing has really changed over the last three years.  In studying the market statistics in my home town of East Providence RI, which represents a very good sample of the region, it showed that the unit sales for the first eight months of 2008, 2009 and 2010 were largely unchanged.  The median sale in 2009 and 2010 only reflected a difference of 1.2%.  So in essence, all this does is confirm the fact that the market really took the plunge three to four years ago and has been bouncing along the bottom ever since.  (See stats below.) 

It also indicates that the effect of the much vaunted federal tax credit was negligible in stimulating any new activity and probably delayed the inevitable; the continued decline in the market.  Now that the tax credit incentive has been washed out of the system, what can we expect over the next six to twelve months? 

Current pending sale figures in the subject market look like this:

Active Listings - 191

Pending Sales - 38

Average LIST price of pending sales $171,000

 Most of you will immediately notice that the pending to active unit ratio represents an exorbitant inventory as it relates to current demand.  But the $171,000 average LIST price of those pending sales is 12% below the average SALE price of homes sold in the subject market this year.  This indicates that at best 2010 will finish approximately the same as 2009 in all categories and will be 10% below 2008 in terms of price.

 As we roll into 2011, we can expect much of the same as long as interest rates remain unchanged and the job picture is at least stable, which makes it a great time to buy....if you are employed.