Amid much talk about a real estate "double dip", shadow inventory, and a continuing crush of foreclosures; the market seems to be reacting with a mind of its own. Here in the middle of Florida, a state hit hard by foreclosures, we are seeing what may be a new equilibrium.
Sure there is a lot of inventory, but not nearly as much as we've had. It's true that the vast majority of sales are still under $180k, but more high end properties are selling and showing. Investors are having a field day with distressed properties and they are rehabilitating these homes into rentals or "flipping" them. What do the numbers look like? Well let's see...
After the stimulus
We all know the "post homebuyer tax credit" world is a different one. The rush to close those deals which resulted in an artificial spike in sales numbers is now gone, and five good months since then have seen inventory levels falling each month. According to Trendgraphix.com, Lake County inventory levels have trickled down to 4139 total units. Although that's only down from 4214 in August, it represents a decline from 5539 in December, 2008. Loosely translated, if you are a buyer this means you now have 1325 less homes to choose from when looking for your dream home.
Let's look at the pace of sales. December gave us 359 sales in Lake County, FL which was the best month since the expiration of the tax credit. The average number of sales, however, has been holding in the low 300 unit level. If we take current inventory and divide it by the average monthly sales we have a little more than a 13 month inventory of homes. That's high, and generally represents what we all know- it's a buyer's market. But what happens when we look at lower end homes?
If you are in the market for a home under $150k, know that at the current rate of sales there is an 8 month inventory for you to pick from. This number is down from 13 months in December, 2008 and represents the lowest level of inventory since the end of the tax credit. In short, buyers are buying and they are buying lower priced homes pretty fast.
So what of the higher end market? The $500k plus market yielded 44 sales in 2010. Although that compares well with the 47 sales in 2009 it must be noted that in December, 2008 there were 475 homes for sale in this price range. Now there are only 244. Clearly there is less inventory to choose from at all levels.
So what does this all mean?
Coupled with still great mortgage rates this makes a compelling argument to buy now rather than wait if you are considering a home purchase in the near future. If you are convinced that prices will continue to fall I will leave you with this fact:
If you bought a $150k home in October at 4% interest rate that was prevalent then, your payment could have been $716.87/mo. If you waited until that same home lost 10% of its value but bought at the more current rate of 5.25% your $135k purchase would be $746.07. Yep that's about $30/mo more that you are paying for having waited, and don't forget most predictions are that rates will be in the 6% range by end of year...
So you may not be best served by listening to the media hype and remember real estate is all about location. There are many other factors that can contribute or detract from you getting a great deal these days, but one thing is sure- if you are in the market to buy, now is a good time!
Gerry Suarez, Jr NMLS 310298
Expert Home Loan Advisor
Team Leader, Mortgage Financial Group, Inc.