Improvement Yes, But More Improvement is Needed

It's been a while since I have given an update because, quite frankly, it hasn't been real exciting to continue to report and that prices continue to decline. So what am I reporting today? The market is still sluggish and prices continue to decline.

There has been, however, some improvement in the pending sales (those not yet closed) of single family homes over the past four months. On a year to year basis those sales are 15% higher than last year. So that is good news of a sort. However, when we look closer at the numbers we see that the increase is concentrated at the lower end of the market, under $350,000, which is where the first time home buyers are shopping. Once you get above $350,000, the sales drop off dramatically and are still running about 30% behind the numbers for last year, which in itself was not a good year. Safe to say the $8000 taxpayer subsidy for first time home buyers seems to be having an impact, but that's about as far as it goes. To many of those purchases are of homes that are either short sale situations or foreclosures where the sellers of those homes are in no position to purchase another home, let alone trade up.

The pending sales of condos over the last four months are about the same as last year, so at least the situation is not growing worse. However, the sales are concentrated at the low end of the price spectrum, under $200,000. Above $200,000 it's still Death Valley Days for the condo market.

Right now we are hearing a lot of talk about the recession having ended, but from where we sit in your business it hasn't ended hear. Other than tax credit stimulated sales at the low end of the market, sales are not improving and prices are still going down. Before we can talk about price stability, we will need sales to improve about another 50% from their current levels. Not impossible, but it's hard to come up with the scenario where that will happen this year.

There has been improvement, but we need much, much more before prices firm up.

The Improvement is Modest, But We Will Take It

It is starting to look like there may be some consistent improvement in the local real estate market, at least as it relates to the sales of single family homes. Last month, the pending sales (those under contract but not closed) of single family homes showed an increase over April of last year. That was the first time in quite a while that we have seen an improvement in year to year sales, for pretty much any category of housing.

The improvement that began in April has continued into May. Over that period, the pending sales of single family homes in Monmouth County has been about 13% higher than for the same period last year.

Good news indeed, but we are not out of the woods just yet. Although we are happy to see improvement, the increase is not enough to stabilize prices. There is still a heavy oversupply relative to demand and to get to a point of price stability we will need to see sales improve year to year by about 75%, not the 13% we aer seeing now.

The closing of single family homes are still way behind the pace of last year. For April and May, those number are almost 27% behind last year. Also, condos have not shared in the good fortune. The pending sales continue to track behind the numbers of last year and the closings are off by even more than the single family homes.

The increased sales activity seems to be concentrated in the lower end of the price scale where you typically find first time home buyers. I would appear that the $8000 tax credit available to first time buyers is stimulating sales. Here is a crazy idea. If the tax credit is getting people into the market and buying, why not extend it to everyone, not just first time buyers. Why not say that if you buy a home as your primary residence, you get the tax credit also. Those in government say that they want to support the housing market. This would be a great opportunity to do something that might actually work.

Let's keep fingers crossed and hope the sales continue to improve.