Conflicting Data

This week has seen alot of conflicting data on the real estate and econmic fronts. Last Friday, median home prices rose in Ca. for the third consecutive month, with May prices up 4.2% from April 2009. Inventory statewide continued to drop as well, down to 4.2 months for May compared to 4.6 months in April and 8.7 months in May 2008. That was some of the good news.
On the negative side, unemployment continues to rise and delinquencies on home loans with it. Now we are seeing significant increases in prime loan defaults and also on properties valued at $1M or more. This new round of increases in defaults is driven by job loss or underemployment for those who may have found a new job. 8.5% of all mortgages were 30 days or more past due in May, not inlcuding those in foreclosure. That's up from 5.7% a year ago. Consumer confidence also showed a decline this week likely reflecting concern about deficits and employment.
Local statistics reflect some of these trends, but not all. Inventory of homes in Gilroy and Morgan Hill priced below $400,000 stands at 18 DAYS, the lowest in many years. At the $1M price level, we have 15 MONTHS of inventory! Yet in Almaden one seller of a semi-custom home on a tract-sized parcel listed for $1.25M, received five offers within the first ten days of being on the market. Hollister reflects similar statistics with demand at the entry level (below $300,000) outstripping availability and country properties languishing. There is a huge compression in features available for the dollar in San Benito county properties. Inventory of country properties with acreage in Santa Clara county has been stable recently in spite of the fact that sales since February have been improving. This increase in activity is due primarily to lowered asking prices- we now have more than 50 homes on acreage priced less than $1M.
Another bit of good news is that short-sale transaction times are finally getting shorter. I have clients that received price approval within 25 days! This was primarily accellerated by the fact that the property already had a Notice of Default placed on it; but the listing agent had a complete package for the lender, and while there were two loans on the home, they were both with the same lender.
So what does this portend? I believe the market is stabilizing. Even with unemployment predicted to rise through mid-2010, I expect prices to begin to solidify and even rise in the "hot" market segments. There is pent-up demand across all price tiers. If mortgage money remains affordable and available, and especially if purchase incentives are extended to more buyers, this demand will surface and people will buy.