Having gone through the recent holiday season and the social gatherings the holidays bring, I once again got asked a particular question very frequently. Fortunately for me, lots of folks know I’m a Realtor, so they ask me how’s the market. Of course, most don’t plan to move anytime soon, but like lots of people, they view the health of the real estate market as a bellweather for the health of the overall market. My standard response lately has been, “Houses are selling, buyers are buying. My buyers are quite happy. My sellers are not happy.” The reasons are that in fact, our sales volume has been going up over the last six or seven months. However, that has been accomplished at the expense of overall pricing. Look at the chart below which shows average per square foot prices (including land) for our local multiple listing service area based on a 12 month moving average. Prices have been going down in each price category.
Fortunately, our inventory is also going down from 12.5 months of inventory in December of 2010 (at then current sales rates) to 9.1 months of inventory in December of 2011. As inventory goes down, we will eventually get to an equilibrium point where there is balance between buyers’ market and sellers’ market. Historically that has been at 5-6 months of inventory. Only then will we likely see an overall increase in prices. Another question for which there’s no easy answer is that of how many foreclosure homes will be added to the market over the next few years. Lenders don’t want to dump all of their inventory on the market at once since that would dilute the prices of all homes on the market. Foreclosures are currently down to 2007 levels according to a report on MSN Real Estate HERE, but the article explains that there are underlying issues that could change the rate of foreclosure in the future.
One reason for encouragement here in the Lake Norman NC area is that according to recent reports, North Carolina is one of the top five destinations for people moving from other, largely northern, areas. See the article about this HERE. Real estate agents in our area can attest that many of the buyers they are working with are from northern states, and many of them have come at the recommendation of friends who’ve already made the move. As they move to our area, they will help to reduce the excess inventory and finally see some increase in home prices.
I keep an eye on expert opinion on the economy from many sources. We don’t yet have full agreement that things are turning around, but I certainly see more positive than negative outlooks now, and that’s encouraging. For homebuyers, that positive sentiment and confidence in the future is key to their willingness to sign on the dotted line.