Local Market Looking Up for 2012

The following is taken directly from Chuck Cosgrove’s market update email:

IT’S BEEN A LONG TIME COMING . . .

Both Sam Cooke and Crosby, Stills and Nash sang these plaintive lyrics with different goals in mind, and it has been a refrain many real estate licensees have been humming to their own tune for several years looking for a different goal . . . the recovery,

It appears that, finally, the Philadelphia area* real estate market is bottoming out and showing signs of potential growth in 2012.

There is a theory that, for every one crazy good year of real estate, there will be two stagnant (or worse) years of recovery.  If you ascribe to the theory that we had three crazy years in 2003-04-05, then the bad times were from 2006-2011 and this is the year!  If you believe the madness began in 2002, or it didn’t end until 2006 (or later), then . . . it’s gonna’ be a longer time gone!

PRICE

By any measure (average or median), prices fell from 2010-2011, and prices will be difficult to maintain in early 2012.  The chart below identifies the 10-year average price in the Philadelphia area* (per TREND “Market Statistics”):

By the above measure, in 2011, the average price fell 2% in the Philadelphia area*.  Overall, the market was sluggish and prices leaned back toward their 2009 (pre-tax credit) levels.  The “Market Statistics” reports in TREND include new home sales.  Excluding new home sales, the average price for residential re-sale properties fell 3% (down 2% in PA and down 5% in NJ).  Because it is less affected by high-priced closings, the median price for residential re-sale properties fell 5% (down 4% in PA and down 7% in NJ).

The long and short of it is:  prices fell in 2011 because of high inventory – prices will, probably, continue to fall through the first 6-9 months of 2012.  Hopefully, they will stabilize by mid-late 2012, and 2013 will show growth in Dollar Volume, Closed Units and Average Price!

Watch prices very carefully in areas where you have listings – price is critical and buyers know it!

STATISTICS

This newsletter will compare 2011 to 2010 for the Philadelphia area*.  The information was gathered from the “Market Statistics” reports in TREND:

• Though Closed (Residential) Units were up in the last six months of 2011 (almost 43,000 total), they finished 6.5% below 2010:  down 6% in PA, and down 8% in NJ
• Closed Dollar Volume in 2011 (almost $11 billion) was down 8.5% compared to 2010:  down 8% in PA, and down almost 10% in NJ
• Pending properties fell 4% in 2011 compared to 2010:  down 5% in PA, and down fractionally in NJ
• Distressed properties:  17% of closed sales in 2011 were distressed properties – 16% of closings in PA, and 20% in NJ
• Days on Market for closed units increased 17% compared to 2010 – an average of 97 DOM for a closed property in PA, and an average of 115 DOM for a closed property in NJ
• There were approximately 94,000 new listings in the 2011, a 10% drop from 2010:  the last time the number of new listings was this low was in 2001-02, this is a continuing indicator that inventory will recede and another sign that prices may start to stabilize in 2012!

TAILWINDS

The regional recovery should begin in earnest in 2012.  Absent a major financial catastrophe, more units should sell in the Philadelphia area* in 2012 than sold in 2011. Inventory is going down – there were fewer active listings in early 2012 than there were in early 2011.  Hopefully, this is a sign that some of the frivolous sellers left the market and the serious business of cleaning out short sales and REOs can run its painful course.  As inventory starts to recede, particularly, as distressed inventory starts to recede, prices will stabilize.

HEADWIINDS

Until inventory gets down to the 4-5 month range, prices will struggle and it should be a close call whether there will be greater dollar volume in 2012 than there was in 2011. Inventory continues to stay at high levels, though it is showing signs of going down.  Over the next few years, interest rates have to go up (don’t they?).  Though the Federal Reserve Bank promised that interest rates would stay low into 2013 to stimulate the real estate market, that trick has been tried for 5 consecutive years and it has not worked.  If the definition of insanity is doing the same thing over and over again and . . .

For contrarians, there is ample reason to believe the real estate market will start to recover when interest rates start to go up:  first, because lower rates have failed for 5 straight years; second, because higher interest rates mean greater return on savings accounts at banks and buyers need to save money (it’s tough to save when the return on a money market is at, or under, 0.25%!); finally, why should you buy if you think rates are going to fall to 3%!

INVENTORY CHECK

The numbers below represent “annualized” inventory – to get a similar number for the area where you have listings:  find out how many properties sold in the last 12 months and divide that by 12 (to get an average of how many properties sell per month), then unclick “Settled” and click “Active”; then, divide the number of “Active” properties by the average number of sales per month (the previous number).

With year-end withdrawals and expireds, inventory continued to recede in all 10 counties in the Philadelphia area*:

Berks County is down to 9.1 months (slightly higher than the January-2011 level of 9.0)

Bucks, Chester and Montgomery counties are down to 7.0 months (slightly lower than the January-2011 level of 7.4)

Delaware County is down to 9.0 months (slightly higher than the January-2011 level of 8.7)

Philadelphia County is down to 9.0 months (about the same as the January-2011 level)

Burlington (NJ) County is down to 11.8 months (about the same as the January-2011 level)

Camden (NJ) County is down to 13.6 months (up from the January-2011 level of 12.7)

Gloucester (NJ) County is down to 12.0 months (down significantly from the January-2011 level of 13.3)

Mercer (NJ) County is down to 9.6 months (slightly higher than the January-2011 level of 9.3)

Housing Index Broke 100

NAR released its latest pending home sales index figure last week and for the second month in a row the index is up. But more than that, the index has broken 100. This is significant because the only time since the housing boom collapsed that the index has broken 100 is when the home owner tax credit was in effect. The fact that the index has returned to that level a year since the credit has been in effect means the housing market is strengthening completely on its own, without any stimulus… Read the article

Wow, some GOOD news! Home sales up over 2010

Wow, some GOOD news! Home sales up over last year in November.  Read the article

Tips for tackling a historic home restoration

Tips for tackling a historic home restoration.  Read the article

Tips for Black Friday and Avoiding Scams

Good info and tips for Black Friday and avoiding scams.  http://yourbucks.startlogic.com/Nov2011.pdf

Harvest Menu from Homes by Design – Look

Harvest Menu from Homes by Design – Looks really good! http://ow.ly/7kskV

Interesting article about the economy in

Interesting article about the economy in general, as well as new home building.

Want to refinance?

Interesting and relevant WSJ article regarding refinancing: Read Article

Use Caution With Media Statistics

It continues to frustrate having to combat misinformation in the news, especially when it comes to something as important as your biggest asset.

If you’re familiar with the Wall Street Journal article Housing Imperils Recovery, you would think that housing in our area is back to 2000 prices, based on the statistics released in the Case Shiller Index, which tracks housing stats nationally.  The problem is that Case Shiller does NOT include the Philadlephia market (which effects the surrounding suburbs) in the Case Shiller composite index that is released to the press.  Our market is NOT down to the level of the cities cited in the report, and has remained one of the more robust in the country.  Here are the stats for the Philadelphia area: 
Now, taking into consideration that each area, by zip code for instance, has different nuances, it looks to me like, if we follow the trend into 2011, we’re somewhere around the 2004 mark.  This falls in line with what our stance has been all along:  If you purchased a home in our general area between late 2004 and mid-2008, you will most likely sell for less than you paid.  I am generalizing here, or course.

What does that mean in reality?  If you did purchase between late 2004 and mid-2008 and don’t have to sell now, you haven’t lost any real dollars.  You only loose at the time you sell.  So if you’re planning to stay put, and hopefully refinanced at our historically low interest rates, chances are excellent you will come out ahead in years to come.

If you purchased prior to 2004, the odds are pretty good that you will come out ahead in our current market.  The farther back you purchased, the better.  So if you fall into this category and you’re looking to move up in the market, this would be a good time for you to think about it.  What you don’t realize on your sale, you will more than make up for in a more expensive home.  Prices at the top of the market have fallen harder than the low to mid-range.

People hit the hardest right now are seniors who need to sell their family home in this market who are not making a another purchase.  They have no way of making up for the down market.

As always, please contact us with questions or to discuss your personal situation.  If you like this information, or any of our other posts, please share.

Listing Agent’s Perspective

End of Summer is traditionally a slow time in real estate, and many agents take their vacation.  As the phone and email begin to ease up, I start to reflect on our year to date as well as begin preparation for the coming year.

Any agent you talk to will tell you that it is a very difficult business to be in right now, as bad news continues to sour consumer confidence and create insecurity.  People will often ask me, “when do you think the market will start to turn around?”  There is no real answer to that question because economic factors and world events are unpredicable and change too quickly.  One thing is absolutely certain, though:  Markets are driven by emotions.  And because the overwhelming majority of real estate transactions involve average people, as opposed to professional deal makers or investors, the emotions that drive the market up or down are guided quite simply by our collective confidence in our economy AND our government.  Right now consumer confidence is low and insecurity is high, so I don’t see the market taking any huge leaps forward anytime soon.

What does that mean for sellers?  The good news is houses ARE selling.  The “less good” news is it requires a lot more effort and planning on the seller’s part.  As buyer confidence diminishes, the “safety in numbers” mindset starts to settle in.  What I mean by that is buyers feel more comfortable purchasing homes with greater mass appeal because they’re concerned about resale.  So homes that are in need of updating, have difficult locations or are considered out of the mainstream become more challenging.  If you’re planning on selling your house and you find yourself saying — to yourself or out loud – ”I don’t need to fix that, the buyers can overlook it” or “I’m not putting anything else into this house, the buyers will have to take it as-is” or “the buyers will need to use their imagination”, you’re starting out on the wrong foot with the wrong mindset.  The first thing you will need to realize is that buyers control the market.   If they ain’t buy’n… you ain’t sell’n.   Not only are buyers nervous about overpaying, but they’re feeling empowered and very picky.  Beyond buyers, we also have to sell the house to the appraiser — the axe man in the transaction – who is really the one in the driver’s seat when it comes to price and cannot be overlooked.

So what is a seller to do to get their home sold?  Here is a list of the 3 most important first steps:

1. seek professional advice
2. seek professional advice
3. and seek professional advice

Seriously, it will mean the difference of whether or not you meet your goal.  As a team, we work with a pretty equal number of buyers and sellers, which gives us a very balanced perspective.  When our team lists a home, we carefully evaluate the home against the other active listings (competition) as well as the sold listings (marketplace) to see what things can be enhanced to bring the price up to the highest level possible for current conditions.  The combination of a strategic price with a good product will produce offers early on, bringing the highest selling price.  One of the first things a buyer asks about a home is, How long has the home been on the market?  You can practically hear the cogs and wheels churning in the buyer’s mind as they contemplate the answer, attempting to calculate the seller’s motivation level to come up with an offering price.  The longer the home is on the market, the more the balance of power shifts to the buyer’s side, so preparation and timing is key for the seller.

Food for thought:  We often hear,“We don’t have to sell now.  We’ll wait until the market turns around.”  Sellers who don’t like the price in the current market will often grab hold of the idea that they will wait for a better market.  If you can afford to wait, you may get a better price in a couple of years.  HOWEVER, here are some things to consider:

• What will interest rates be if you wait?  There’s a lot of talk about interest rates rising.  The higher the interest rate, the lower affordable purchase price for your buyer.  See Price v. Interest Rate: The Big Picture
• If you wait for a higher market to sell, you will also be purchasing in a higher market, AND most likely at a higher interest rate.
• What if things get worse and you’ve carried the home for another year or two or three, and then wind up selling for less than you could get today?

Bottom line:  The future is unknown.

As professionals at the top of our marketplace, one of the other services we provide is to enlist the help of professional stagers to help “package” your home for market.  Like any product that is trying to attract consumer attention, it must be packaged properly to appeal to the most likely buyer, and that package needs to be professionally marketed and exposed to as many qualified buyers as possible.  It’s part science and part art, and a really good agent knows how to get the job done well.

Markets are cyclical with ups and downs, and the real estate market is no different.  The difference in real estate is that people will always have to buy or sell.  The professional you choose can make all the difference for you, so if you’re contemplating a sale or purchase, please contact us for an in-person interview.

Currently, Jeff Macdonell & Associates is ranked #2 of all the agents in Bucks County for volume year-to-date.  We’re often asked what it is we’re doing to get our clients to settlement successfully.  The best answer I can give is that we approach our job with flexibility and creativity, as well as a solid grasp of our current market, which includes a lot of statistics and personal knowledge of the competition.  The market is a moving target that requires a marksman’s eye to hit.  Many agents put a listing into the MLS with a ”set-it-and-forget-it” mindset, hoping another agent will bring a buyer.  We are proactive throughout the entire listing process, which has garnered us a very loyal, trusting repeat/referral client base.  We work very hard, constantly striving to be experts in our field, rather than just employee/participants.

Read what our clients have to say about us by clicking HERE.