Once again this month, just as in April, to the casual observer, our Lake Norman May 2010 housing market report above might look very strong. After all, inventory is down and contingent, conditional, pending and closed sales are up.
It is so important to put all statistics in context. Yes, our sales are up and our inventory is down. But, remember that April 30th was the deadline for opening sales contracts for the homebuyers’ tax credits with a June 30th deadline for closing. Keeping this in mind, there are at least several reasons to be cautious when assessing our current Lake Norman housing market:
- On May 1st we had a total of 227 contingent, conditional and pending sales (compared to 200 on May 31st) and they resulted in only 85 closed sales in May. This means only 37% of the housing contracts that were active on May 1st actually closed in May. Pending sales are ones that are just waiting to close . So forgetting the conditional sales for a moment, why did we only close 85 out of the 117 pending sales? The answer lies at least in part to the number of canceled contracts due to the tough lending environment.
- The number of Lake Norman single family homes under contract on May 31, 2010 was actually down 13.5% when compared to the beginning of the month. Did our number of sales contracts peak in April?
Let’s take a look at the details:
- Active Listings dropped 15% from a year ago. However, they were up 2% from last month. Based upon our May sales, we now have only 16 months of inventory. While a vast improvement over our 27 months in February and our 20.5 months in March, this is not good enough. Remember that 6-8 months of supply is considered a balanced housing market. To achieve this given our current inventory levels we will need to sell about 160 homes per month! While we are trending in a positive direction, we still have a long way to go. Note that the average price of our active listings dropped 15%. We are seeing a number of price reductions.
- Contingent Sales remained stable. These are the homes under contract that are contingent upon the buyer’s home selling.
- Conditional Sales increased 27% this month compared to a whopping 149% last month! These are homes that just went under contract and still have financial and inspection conditions. I would be hard pressed not to attribute part of this increase to the April 30th deadline for the Federal Tax Credit programs. The question is, how many of these will translate into close sales?
- Our pending sales represented a 18% increase over a year ago. These are the contracts that are past inspections and are just waiting to close. Pending sales are usually the best indication of future sales and help substantiate that we are on track to meet or exceed the June 2009 sales number of 87 and the June 2008 number of 80 sales.
- The number of closed sales were 29% higher than May 2009.
Note that our average sales price increased by 16%. Like last month, we also saw increases in the average price of conditional and pending home prices. This does not mean our prices are increasing. Rather, it means that our higher priced listing sales are improving. Because of the nature of our Lake Norman housing market, we really can’t use the average sales price to determine if our prices are increasing or decreasing because our inventory ranges from under $100,000 to $9 million. Our average prices vary with the prices of the homes sold. We are seeing more luxury home sales which can skew our average prices substantially. There are definitely more sales above the $417,000 conforming loan limits as well.
6-Year Comparison of Lake Norman Home Sales By Month
* Please note that all of my numbers come from the Charlotte Region Multiple Listing Service and will not include sales that took place outside of our MLS.
**I have made an adjustment of the totals reflecting the ACTUAL sales every month in 2009 and 2010 and the totals in the prior calendar year. The columns may not add up but I do my best with what I have to work with!
I love this chart because it truly tells the whole story. While our sales trends are positive, you only need to take a look at the sales back in 2006 and 2007 to realize how far we have fallen.
Considering our improved closed sales numbers in March, April and May and our current conditional & pending sales I would expect Lake Norman’s June closed sales to equal or slightly exceed both 2009 and 2008. Yes, in sales volume, our market appears to have turned a corner and in this respect we probably hit bottom last winter.
Foreclosures, shortsales and other types of distressed properties plus first-time home-buyers are still a good portion of our market. But, relative bargains are also inspiring higher priced buyers to jump off of the fence. Since April we have had 6 closed or pending sales over $2.5 million. My waterfront buyers are beginning to jump in after waiting as long as two years in fear that they may loose out on properties with good water that are priced relatively low. There is still a serious disparity between the prices of many of our closed sales when compared to similar active listings. But, I have noticed more sales at slightly higher prices than the prior foreclosure/shortsale lows. And, we are even beginning to see multiple offers on some foreclosures!
The Big Picture
At the annual meeting of the National Association of Real Estate Editors recently, Stan Humphries, the chief economist from Zillow, stated that “While home sales likely reached the bottom of the current cycle last year, home values in many markets are still in decline”. And, according to Doug Duncan, chief economist for Fannie Mae, “Housing demand may not see a normal balance with new household formation and housing starts until 2013”. Finally, according to a report from Fiserv, Inc, markets like California and Florida that experienced the greatest price bubbles won’t see home prices return to peak levels until 2025.
For our Lake Norman housing market, it looks like we are in for a very very slow but steady recovery. The million dollar question is when will we see prices stabilize or even begin to inch their way back up? Probably not until at least 2011 or even as late as 2013.
OTHER ARTICLES of INTEREST