The real estate recovery began July 1, 2011.
This marked the one-year anniversary of a stimulus-free marketplace. For the next six months and, hopefully, for the next six years, there will be an un-stimulated, incremental increase in the number of units closed on a month-over-month basis (comparing July 2011 to July 2010, etc.).
In early 2012, more first time buyers will return to the market and there is a fair probability that the month-over-month increases will continue through the rest of 2012. This will be the first period of sustained, un-stimulated, month-over-month recovery since October 2005.
Will the recovery be fast and furious? Not quite . . .
There are many headwinds: interest rates will go up, a higher than normal percentage of potential buyers are still unemployed or afraid of being unemployed, a number of younger buyers were “spooked” by the real estate antics of the past 5 years and they will wait on the sidelines for awhile (or, they have to wait because they were in a short sale, foreclosure or bankruptcy).
Prices won’t climb for some time, because there is too much inventory. But, by the end of 2012, there should be more units sold than there will be in 2011, and “there’s your sign!”
It will be slow, it will have hiccups, but it will happen and, finally, it started a few days ago.
STATISTICS
June is over, so month-over-month comparisons to 2010 will look better for the rest of 2011. This newsletter will compare the first half of 2011 to the first half of 2010. Unless otherwise noted, information was gathered by compiling regional statistics for the Philadelphia area* from the county information available through “Market Statistics” in TREND:
* Distressed properties: 18% of closed sales were distressed properties in the first half of 2011, 16% were distressed in first half of 2010 – the percentage of Short Sales rose 2% in 2011
* Average price ($250K) did not change: it was up $26 in PA (staying at $255K), and down 0.1% in NJ (staying at $236K)
* Pending properties decreased 15% in the first half of the year, but they were up in both May and June (in comparison to the same months in 2010) because of the significant drop-off in activity following the end of the tax credit on April 30, 2010
* Closed units (20,000+) in the first half of 2011 were 20% below the first half of 2010: this will change in the second half of the year and there should be an increase of approximately 20% in comparison to the end of 2010 – leading to a close race to determine whether more units will close in 2011 than closed in 2010 (2010 will probably win this race, but 2012 will beat 2011)
* Closed dollar volume (slightly above $5 billion) was down 21% compared to the first half of 2010; but it was only 2.5% below the first half of 2009
* Average days on market for closed properties increased: 20% higher in PA (99 days), and 27% higher in NJ (117 days)
* There were 54,000+ new listings in the first half of 2011 – the lowest number of new listings since 2003 (but inventory is still high!)
REALITY CHECKS
In a separate download of TREND information for the Philadelphia area*, checking the “No” box beside “New Construction” and eliminating obvious sales that became rentals, the median price in the area fell 5% (from $204,900 in the first half of 2010 to $194,000 in the first half of 2011).
This is symptomatic of the much-heralded “double-dip” in real estate, but it is not as dramatic as it has been in other areas of the country. It is reasonable to expect that prices will continue to drop with inventory at dizzying levels (see below).
Through the first half of the year, 47% of the “status changes” in TREND resulted in a “Sold” property, 53% of the “status changes” resulted in withdrawn or expired properties!
INVENTORY CHECK
In early June 2011 in the Philadelphia area*, inventory levels remain high:
Berks County has 11+ months
Bucks County has 10+ months
Chester County has 10+ months
Delaware County has 13+ months
Montgomery County has 10+ months
Philadelphia County has 11+ months
Burlington (NJ) County has 16+ months
Camden (NJ) County has 17+ months
Gloucester (NJ) County has 16+ months
Mercer (NJ) County has 14+ months
Per the chart below (a breakdown on inventory in the Philadelphia area* by price ranges), inventory is showing signs of reaching a “plateau” – a positive trend that, with a little luck, may hold for the rest of the year.
*Statistics described in the above information as “the Philadelphia area” are downloaded from the TREND Multiple Listing Service, and they are based on information from Berks, Bucks, Chester, Delaware, Montgomery and Philadelphia counties in PA; and Burlington, Camden, Gloucester and Mercer counties in NJ