My February newsletter showed that even though the number of closings in January was the lowest in several years, the number of homes for sale declined. Obviously the reason for the decline was not that homes sold. It was, in fact, because prices have reached a level where discretionary sellers decided that they would not lower their asking price to the prevailing market. Instead, they took their homes off the market. In the supply and demand world of real estate, the reason for the decline in inventory is not nearly as important as the decline itself. By the end of February, the number of unsold MLS listed homes had dropped to 2,200, down about 10 percent in just two months.
Sales are registered when a contract closes, usually 30 - 60 days after the sale contract is signed. January's low number of closings reflected the low number of sale contracts signed in November (72) and December (57). 122 sale contracts were signed in January, about the same number as in January a year ago and the highest number since April '07. The February number of signed contracts stands at 139. This number will rise over the next few days as late February contracts are reported. Also, there will be some attrition in the number as some contracts may not complete (close). Regardless, February will compare very favorably to last February's 102 signed contracts.
The effects of foreclosures on the market
For at least a year, we have been bombarded with facts and rumors about the number of homes in foreclosure. Foreclosures take time to work through the process. All foreclosures do not end badly. Sometimes, the borrower is able to catch up with payments or refinance, either with their current lender or with another. Eventually many properties do come back to the banks. "Eventually" happened just a few months ago when an increased number of bank owned properties entered the market.
In February '07, only one of the MLS reported home sales in Flagler County was bank owned. Even as late as October '07, the number of bank owned homes sold was only 4. In both January and February this year, bank owned properties represented 20 percent of the homes sold. Banks do not want to own property. When they find themselves in possession of foreclosed property, they market it aggressively (low prices) to assure that they move quickly. This accounts for the drop in median selling price from $209,500 in October '07 to a low of $161,500 in January. It also is the reason so many sellers withdrew their homes from the market. The median selling price for Flagler homes in February actually rose slightly to $169,000.
Painful as it is, it's good for the market. Bank owned homes that sold in February were "on the market" an average of only 95 days before a sale contract was signed. This compares to 158 days for non-bank owned properties sold that month. The median selling price for bank owned homes in February was $160,000, slightly below the overall median of $169,000. Indicating that financing is still available, 17 of the 139 February contracts actually closed the same month. The 103 homes closed in February represent the highest monthly number of completed sales since August '07.
The Parade of Homes (March 1 - 16), kicks off the traditional peak selling season for the area. The process of flushing the market of "distressed sale" homes has already begun. The numbers of pending sales for single family Flagler County homes stands at 254, more than double the number of only a few months ago. The Parade of Homes should add additional momentum to the market.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida