During the fourth quarter of 2009 signs appeared that a long-awaited recovery in detached residence sales may be happening. However, comparing the fourth quarter of 2009 to the fourth quarter of 2008, is like comparing apples and oranges.
The depths of the fourth quarter of 2008 are not likely to be seen again soon. Regardless, there are still areas of concern which could limit the degree and time frame of a full recovery.
Recent positive changes in the market were evident in the following fourth quarter (4Q) 2009 findings:
–A year-to-year increase occurred in 4Q sales for the first time in the last 3 years
–Sales in the <$200K price range rose by 14% compared to the same quarter last year – a recovery will likely start with low-priced properties
–Foreclosure sales as a percentage of total sales were up slightly, but some stabilization in “distressed” properties sales may be happening
–The percentage Sales price/Original List Price ratio improved again in 4Q 2009 compared to earlier 2009 quarters and was above that of 4Q 2008 representing the first such increase in the last 3 years
–The “Failed” listing percentage is gradually falling from the peak
–Supply of listings is much lower than in December, 2008 and is lower in all price ranges, nearing a “balanced” market of about 6 months supply in the <$200K price range
–Although still high, the percentage of transactions which followed a price reduction was lower in 4Q 2009 than in 4Q 2008
–Median Sales price was slightly above that of 4Q 2008
As usual, these positive findings must be viewed alongside several less-positive factors:
–4Q 2009 comparisons were against a severely depressed market condition in 4Q 2008. Future comparisons will not have that advantage.
–Percentage ratios are still low compared to past markets
–”Days-on-Market” (DOM – the number of days across a listing period) remains high although slightly lower than in the comparable period of last year
–As a matter of reference, if more than a 9-month supply of listings exists then the market is truly a buyer’s market. A neutral market has about 6-months supply. Currently, supply is extremely high in upper price ranges for both New and Resale properties
–Distressed properties still represent more than 1 in every 4 sales, keeping prices lower and DOM longer for non-foreclosure properties
–87% of properties are still initially being overpriced for current conditions, setting up price reductions, lower Sale price/Original List price ratios and longer DOM
These types of mixed signals will likely continue for at least the near future and caution must be used in order to not overstate the positive effects of market changes at this point.
Too many Sellers are still listing properties at prices that are being rejected by Buyers and foreclosures still set the bar for acceptable prices in many market segments.
When six months supply meets demand, recovery will be in sight!