November 26, 2008

Current Home Sale Reports

Yesterday while reading the Wall Street Journal I noticed two pages that caught my attention. The first was the recent report by the National Association of REALTORS® (NAR) that reported a monthly downturn in home sales for October with western states being hardest hit (click here to read the article).

As I perused the local newspaper it also reported statistics from the Utah Association of REALTORS® (UAR) that existing homes sales fell sharply in October.

In Salt Lake County, for example, the number of home sales fell 19.4% from October 2007 to October 2008. In Weber County, homes sales fell 23% during that same time period. In Utah County, home sales were flat; and in Davis County the number of homes sold dropped 17.8%. Please understand these are home sales not home values.

It is important to note that in Davis County the median home value was virtually the same as last year at this time but up 6.5% from September’s numbers. In Weber County the median price was up 4.8% from last year at this time and increased 4.6% from September’s numbers.

About 104,000 existing homes and condos were sold in a 13 state region. Sales were up almost 41% from the same month last year and up by 6% from the totals in September (NAR Report). Many homes were sharply discounted foreclosures.

What does all this mean? When home sales increase we know that the real estate market is about to make a turn for the better. For the past five months that number seems to have bottomed out even though we see some spikes in home sales like we did last month. Some states are reporting an increase in home sales.

The next important factor to consider is the ratio of homes being sold versus homes coming on to the market. If more homes are coming on to the market than are being sold then prices will not rise and likely will drop over time. For example, in Davis County from November 1, 2008 to November 25, 2008, there were 507 new listings added to the market. Only 169 homes actually sold during that time. In Weber County, 375 new listings were added with only 144 properties actually selling.

With the addition of new inventory to the marketplace the natural supply and demand pressures will be to push prices down slightly. One may ask if now is a good time to buy or should I wait for the rock bottom before I purchase? Timing the market is risky. I personally am buying investment properties now because values are near the bottom and interest rates remain low. If you wait to purchase until the market has bottomed totally you will likely find yourself with a rush of buyers trying to purchase which will quickly force the prices up and you will have missed the best opportunity to buy. Interest rates will also increase when the up-turn is made which can cost you many thousands of dollars. Now is a great time to buy a home because it is such a strong buyer’s market… prices are low, seller’s are paying buyer’s closing costs, inventory is plentiful and loan rates are low.

Conforming Fixed 30-year rate: 5.75%
Conforming Fixed 15-year rate: 5.625%
Conforming 5-year ARM: 6.625%
FHA Fixed 30-year rate: 5.5%!!!
FHA Fixed 15-year rate: 6%
FHA 5-year ARM: 7.25%

Happy Thanksgiving!

Posted By: Steve Randall