The second quarter of 2009, Has the stabilization begun?
Several of the market indicators that I watch to gauge the direction of the real estate market cycle are suggesting the stabilization has finally begun in the Poconos.
One of the most revealing market indicators is the average sales price. It appeared to stabilize in March and has since increased in May and June of 2009. The trend looks like this, March $155,121, April $155,634, May $158,422, June $160,483. Prior to this, the average price of homes in the Poconos had been steadily dropping since October of 2007.
As for the supply and demand conversation, while closed sales remain off (for the second quarter in a row) by 20%, inventory remains 11% lower, and the future looks bright as pending sales are up 9.1%.
To clarify these percentages, only 257 less homes have sold in the first half of 2009 when compared to the same time period of 2008, and there are 42 more homes that are projected to sell in July and August of 2009.
While Realtors have been maintaining an inventory of homes to sell, that they haven’t carried since the late nineteen nineties, buyers have appeared to (begin to) come back into the real estate market.
If buyers are coming back into the marketplace, what are they buying? The answer, FORECLOSURES! Monroe County is averaging a 30% foreclosure rate in 2009, one in every three homes being sold is in foreclosure status. Why are foreclosures selling? There are a few items to look at here. The first is, according to CNN Money, Americans have gone from saving 3% to over 7% of their income. The percentage is projected to break 10% by year end. Investors are looking to place this money somewhere, and as the greed on Wall Street has scared a lot of investors away from the stock market, real estate has always been the next logical investment in the business cycle. On average, you can purchase a home in Monroe County that is in foreclosure status for $0.30 to $0.60 on the dollar. Some of these properties only require mild repair.
The good news about this part of the cycle is, once the foreclosure inventory is depleted, the homes not in a distressed status will begin to see the bulk of the market’s activity. Most of the foreclosed homes are being purchased by investors and first time home-buyers. A portion of the properties purchased by investors will be rented out. This will attract gun shy buyers from out of the area, who will rent for 6-12 months before they buy.
In closing, it would appear that the transition into a market stabilization has begun in our area. All of the market indicators support this and show no signs of reversing. Once the closed sales drop from being off by 20% to 0, we can begin our real estate market recovery. The trend is suggesting that we may hit this bottom in the last quarter of 2009.
Dominick J. Sacci is Senior Vice President and General Manager for Better Homes and Gardens Real Estate Wilkins & Associates. Mr. Sacci has been tracking market statistics for the last nine years. Market data was compiled from the Pocono Mountain Association of Realtors MLS system. Readers can discuss the residential real estate market with Mr. Sacci at www.pbjonline.com/blog