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Wednesday, June 30, 2010

May 2010 Real Estate Market Report

As expected, the Market did react to the combined loss of the tax credit and end of the Homestead deadline. The good news is the reaction was less than expected. Adjusting for seasonality, the metro area pending sales fell 30% compared to the feeding frenzy of Feb - April (which equaled the peak activity levels of 2004/05). We expected closer to a 50% drop. The sales activity was equal to the pace in both May of 09' and 08,' when bank owned properties were fueling the market. Now it seems the activity is being fueled by both a carry over of momentum from the prior 90 days as well as a general feeling by consumers that they have held back long enough (going on 5 years) and are simply ready to spend. The direction of economic news, even locally, is generally good so Buyers are gaining confidence. This won't be a flood, but if it continues, it will be a strong offset for the increase in bank owned homes and potential rise in interest rates that will hit the market later this year and next.

The market has improved at all price points in terms of months supply of For Sale inventory, the most in the under $100,000 market.

Under $100,000: May 08' - 9 months supply vs. 4 months today - 55% improvement
$100,000 to $400,000: May 08' - 16 months vs. 7.5 months today - 53% improvement
Over 400,000: May 08' - 24 months vs. 15.5 months today - 35% improvement

If you are one of those carry over buyers, you would be wise to take advantage of the prices and current inventory before the interest rates rise. Even a marginal increase in interest rate means much more money than an additional decrease in value. In other words, the percieved savings as you are trying to time the bottom of the market will be far outweighed by any increase in rates.

In terms of market activity, our sales type breaks down as follows: Bank Owned: 27.2%, Leases: 19.4%, Short Sales: 32% and Traditional Retail: 21.4%. So financially distressed sales still make up nearly 80% of all transactions, it is just that the mix has shifted from mainly bank owned to an even mix of bank, short sales and leases. As banks learn the importance of avoiding foreclosure, Short Sales may move to as high as 50% of all transactions. It is important for Sellers to keep in mind that Traditional Retail properties make up nearly 50% of all listings, yet 20% of all sales, highlighting the importance of getting your price to a level that will draw attention competing with the financially stressed sales. As a Seller, if your home has been on the market during the past four months and has not received an offer (in the most active time in the past 6 years) then it is pretty clear your price/condition balance is out of whack.

Here is a good snap shot showing the importance of strong pricing when a home is first placed on the market.

No Price Reductions 1 or more Price Reductions
Sale Price Range SP to OLP% DOM SP to OLP% DOM
$0-100,000 96% 52 71% 155
$100,001 - 400,000 96% 80 83% 176
Over $400,000 90% 158 73% 373

From the chart we can make some general conclusions: For under $100,000, if priced right, on average, you can expect an offer in less than 60 days at 96% of asking price. Homes that are not are most likely over priced by over 20% and will remain on the market for another 100+ days. For $100-400m if the home does not sell in 80 days it is on average over priced by 13% and will stay on the market an additional 100 days. The $400m market on average will take 5 months to sell for 90% of asking price. If it missed that market, then it will likely remain on the market for another 7 months and will be over priced by 27%.

The overall conclusion regardless of price range is if a Seller is not getting offers within the "No Price Reduction" market times, a fast price adjustment is in order.

The even better news to the improving market activity is our Company market share grew significantly this past month, as it has all year as well. In May our Pending Business share % increased by 22%, more that any of our top competitors (CB, Re/Max, KW or C-21) and more than the market as a whole.

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