Looking at Listing Statistics

The Wall Street Journal reported last week that the number of homes listed for sales continued to fall in 29 major metropolitan areas in April. The decline was 3.6% from the previous month. Typically April is one of the first months where listings increase during the annual spring sales rush. Since 1982 the average increase in listings in April from the prior month has been 4.8%.

In our local area listing inventories have declined in most market segments as shown in my last blog. What is driving these declines?

1) Some sellers are withdrawing their homes from sale trying to wait out the housing market. This happens early in a market decline as un-forced sellers face the first wave of price drops and then again later in the market cycle as some sellers give up on selling at their price or any price. This, and teh unavailablity of loans at prices greater than $1M, is the primary reason inventories have declined at the upper and middle tiers of our local market.

2) The number of foreclosed homes declined significantly from Oct through April as banks placed a moratorium on new foreclosures. These moratoria have ended, and Barclay's Bank estimates that the number of bank-owned properties rose to 765,000 in April 2009 from about 629,000 a year earlier. Barclay's also predicts that bank-owned inventory has yet to peak and will do so in early 2010 at approximately 1.3Million homes.

3) At the entry end of the market, a combination of low interest rates, price declines and pent-up demand from first -time buyers and investors has depleted the supply of homes priced under $400,000 to less than 45 homes in MH, Gilroy and San Martin. Additional demand still exists at these prices and as soon as a quality home appears on the market, it usually has several offers. I see no relief for buyers (or un-forced sellers) in this sector of the market in the near future. Bank-owned homes and short-sales will continue to drive prices. While demand remains high, prices will continue to stabilize. If the banks release their inventory of foreclosed proerties in an orderly fashion, we will continue to have some price stability and possibly some price increases. If they dump these proerties en masse on the market, look for prices to fall even in the face of strong demand.

Some other things to consider include:
1) There are many investor-buyers who see the present prices as real bargains and recognize that at these prices they can rent a home for more than their mortgage payment. A positive cash-flow plus the potential of significant appreciation when the market turns around, has led many investors to purchase now. However, this reduction of inventory, says Gorilla Capital Investors, may be only short-term as eventually investors will want to sell out bringing these properties back to the market.

2) The lack of available and affordable loans at the upper tiers has essentially shut down this portion of our local market. Even good properties priced at or below market are not moving. The few sellers who can afford and obtain a jumbo mortgage today are looking for the best bargains and believe they can wait until they find one. The scarcity of land-loans has eroded the price of vacant land and forced sellers to offer owner financing to attract potential buyers.

South County Sales Are UP!

Contrary to what you may be reading in the press, the South County has been on a rising sales trend for 4 or 5 months now! We are likely leading the rest of the country out of the housing slump!
Periodically I review all the sales and listing data for trends that will be important for you! I ususaly track properties on acreage, properties selling for more than $1M, entry level homes and the overall sales data for Morgan Hill, Gilroy and San Martin. Here are some "headlines" and graphs that should give you a better idea of just what is transpiring in our market.

Here are the headlines:

Sales in the Morgan Hill, Gilroy and San Martin areas continued to climb for the 5th straight month! We placed 174 properties in contract in April at a median price of $455,000. Overall, the local market has only 3.7 months of inventory at this recent sales rate!

In the rural market (properties located on more than 1 acre) we had 18 homes enter into contract in April, the most in any single month since July 2007!!! However, while the median price for rural properties rose for the 3rd straight month, it was only $800,000. This glaringly demonstrates the significant shift in selling prices in the country areas over the past two years. Although inventory has been falling for 6 months now, we still have 6.7 months of inventory of homes on acreage. Primarily inventory has been declining sue to increased sales in the $600K to $900K price ranges. Yes, there are homes available on acreage for less than $700K in our area!

Homes priced above $1M also experienced a good month with 9 sales and a median price of $1.4M. Even though inventory has been decling since August, we have 11 months of inventory in the upper (>$1M) price range. The decline in inventory above $1M has been due to falling prices more than rising sales.

The fastest moving market segment continues to be the entry level with prices below $399,000. We sold 68 homes last month at a median price of $290,000. Inventory at the entry level remains low with about 1.5 months of inventory! BTW, a recent USA Today poll found that 42% of all first-time homebuyers thought now was a good time to buy a home, 48% said prices will keep falling and were waiting, and 10% were unsure. Very different from what the general population is reported in the press to be thinking!

Mortgage rates tied the all-time record set earlier this month for the lowest 30 year fixed rates since Fannie Mae started keeping records in 1971. The rates were 4.78% with .75 points. Rates today (Thursday 4/30) are 4.82% for a 30 year fixed rate conforming loan. Agency jumbo loans ($417,000 to $725,000) average 5.25% and Super Jumbos are running 6.5% with 1 point.

The trend in number of sales and inventory versus price is clear! As price increases, sales fall and inventory climbs. Look at the currentr mortgage rates and lender down payment requirements and you will easily see why.