This morning I looked at the front page of an area newspaper, The Daytona Beach News Journal, and saw the top headline “Home-Sales Pace Cools Off”. Just below the headline and to the left were the number of sales of homes in Volusia and Flagler Counties for December 2009 & January 2010 with January being lower. So I’m thinking . . . so? January is always a lower month in terms of the number of sales with December often peaking up just before the end of the tax year. Even more interesting is that the article goes on to state how January 2010’s homes sales were 40% above January 2009’s. Again, “cooling off”? Just another example of ‘negative sells newspapers’. Now the article did point out correctly that median sales price was down compared to the same period last year. This has actually been expected. Scott Nieminen with Realty Executive made a great point in the article, ”I think all this is part of the settling out process as we bounce along the bottom here for awhile. I think we’ll see some pricing variances for the next six to 12 months, but I like the higher sales activity we are seeing.” I couldn’t agree more. So let’s take a look at how to correctly assess the market.
Number of Sales Performance Year Over Year
You can’t really get a picture of market performance looking solely month-to-month. Sales volume will naturally be higher and lower during different months. When you look at those monthly performances month by month and year by year, you will see similar peaks and valleys. January in Flagler County is typically one of the lowest closing months throughout the year. This year in January we saw 88 residential homes close. What now is important to look at is how that compares to the number of sales from January 2009. Interestingly enough, January 2009 had 68 residential homes close. That’s a 29% increase in the number of homes sold from the year before during the same period. That’s a real positive and far from a ‘cooling off’. In fact, 2009 in our area finished at 10% higher than 2008 for total number of homes sold. Again, not a ‘cooling off’ at all.
Now we are waiting to see what the impact will be on demand as the Home Buyer Tax credit expires soon. An offset may be the desire to leave the north after being slammed by a horrendous winter.
Price
The industry typically uses median sales price to measure price performance. Prices over the last few years as we all know have been in a steep decline. In short, our home values plunged. The graph below shows Florida median price performace since 1988:
Florida Median Sale Price 1988 Through January 2010
As you might notice, it looks like a roller coaster hill, but the important thing to look for is flattening out we are beginning to see. That slowing of the decline is mostly in part due to the increase in demand or the number of homes sold.
Where is price headed next? That is difficult to say and most share the opinion that price may ‘dip’ again this year. There are other factors such as distressed sales (foreclosures), short sales (pre-foreclosure), and other economical factors which can impact price. The important thing to remember here is that because we have had such drastic declines in median price that the slowing of the pace in decline is key which we are seeing. Over the past few years we have decreases year over year as much as 30% whereas that decline was only 8% comparing 2009 to 2008. This is stabilization and is something we are all looking for before we can see improvement in price which will come from a steady increase in the quantity of sales and inventory levels (number of homes for sale).
It’s also important to keep in mind that no one expects a dramatic increase in price over the next several years as you see in the graph above. That was unrealistic and you can easily see the repercussions. A gradual increase is typical and what we are looking for in a healthy market.
Other Factors That Impact The Market
There are obviously other factors which impact market conditions such as foreclosures, short sales (pre-foreclosure), interest rates, number of homes for sale, unemployment rates, the local economy, etc. Interest rates, unemployment rates, and the local economy all impact the desire and ability for buyers to purchase.
The big one that most look at is foreclosures and short sales. Foreclosures are actually less than 1% of the homes for sale in the area and typically sell below market value and at a rapid pace. A high amount of foreclosures that are not selling is a bad thing, but we have been fortunate in the area that they move quickly. Short sales on the other hand comprise about 26% of all homes for sale and since they take longer to close are often less desirable to buyers. Unlike foreclosures, they typically sell at market value whereas foreclosures are typically priced below market value.
How Do We Compare To Other Areas of the Country?
Real Estate is local, and I can’t say that enough. How one state, county, neighborhood, or street is performing can be drastically different than another. This is actually very interesting. Let’s take a look at statistics from Las Vegas provided by Paul Francis of Prudential Americana Group. Las Vegas has:
- 10,194 homes for sale
- Flagler County, FL has 1,336
- 4,852 are Short Sales (48%)
- Flagler County has 347 (26%)
- 3,049 are Foreclosures (30%)
- Flagler County has 21 (less than 1%)
Obviously we are in far better shape and positioned for recovery than the Las Vegas market.
All in all we are seeing very positive signs in the area and look for a very positive future for Flagler County and Palm Coast. Also keep in mind these are overalls and individual homes and situations are unique.
*Flagler County statistics are based upon the Flagler County Association of Realtors MLS and are deemed reliable but not guaranteed.
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I am often asked what I think will happen over the next year in Real Estate in the area. We all wish we had a crystal ball to see into the future. This is especially true in the Real Estate word over the last few years. The only thing we can do is look at the data, activities, and trends to get a perspective on the upcoming year. My outlook based upon these areas is very positive for the area when it comes to residential home sales. Let’s take a look:
Kathleen West, Realtor
Stephen L. Guardino
Anita Hoppenstand