REAL ESTATE MARKET WATCH WITH JOEY


11 SEPTEMBER 2014

A phenomenon I’ve noted previously but not underscored I want to underscore for you now. It is the remarkable strength of the Philadelphia area’s real estate market in the second-quarter of both 2013 and 2014.  Admittedly, in between those robust selling seasons was activity so lackluster that our overall statistics, which I shared last month, are unimpressive. Still, to have two terrific spring markets back to back on the Main Line after what we’ve endured locally over a period of years is marvelous—and worth taking a moment to examine.

According to Kevin Gillen of the University of Pennsylvania’s Fels Institute (institute report, 9/3/14), the area’s sales volume in 2014’s second quarter was 16,000 units, up from 15,500 for the corresponding period in 2013.  This is only “the third time in the last five years that quarterly homes sales met or exceeded their ten-year historic average,” he notes.

Inventory was up this spring locally, as I mentioned in my last report.  Besides being most welcome owing to the current paucity of supply relative to demand, that upturn was remarkable in that, as Gillen reports, it followed on the heels of a ten-year low this past winter.

Another fascinating statistic reported by Gillen is that average days on market for a listing in the Philadelphia region fell in 2014’s second quarter to a new post-bubble low of seventy. That type of level has not been seen since 2008.

The big question now, as we await the statistics on this year’s third quarter, is whether 2014’s second quarter, like 2013’s second quarter, is an anomaly or, as Gillen phrases it, “the beginning of a sustained and long-overdue trend.”  Either way, it will be a long time until home values in the Philadelphia metropolitan area return to their 2007 levels.  Zillow predicts that happy date to be the fourth quarter of 2019 (philly.com, 9/10/14).

 

20 AUGUST 2014 

With the fall market imminently approaching, you may appreciate an update on real estate trends at both the national and the local level.  Here it is!

The U.S. housing market is, disappointingly, not providing the lift this year that economists hoped it would.  In fact, according to the Wall Street Journal (8/19/14), sales nationally are actually down more than 5% over last year.  Prices are basically flat.  The chief economist at Fannie Mae, Doug Duncan, has thus lowered his sights:  he now anticipates new-home sales for 2014 to be only a smidgen better than for 2013, and he no longer expects 2015 to be the “breakout year” for new-home sales that some are still predicting.   

One cause of the nation’s lackluster housing statistics appears to be slowing sales in such recently hot markets as Phoenix, Washington, D.C., Sacramento, and Las Vegas.  That cannot be the sole cause, however, since even in areas with a more balanced market dynamic—such as our own—sales are running behind for the year.  Based on TREND data through July 2014, sales in Montgomery County specifically are running 6% behind, sales in our area generally 4% behind.  Bafflingly, a continuing short supply of homes for sale does not appear to be the culprit, at least not in Montgomery County, where inventory so far this year has been well above 2013 levels.

Although Main Line real estate activity in early 2014 was hobbled by severe storms, the spring and summer markets proved outstanding for those sellers who took the time upfront to make selective repairs at their properties, to declutter and stage their residences, and to price their listings competitively.  For myself, almost all my inventory year-to-date sold in bidding wars—six simultaneous offers I had on one listing!—or to a single buyer submitting an offer instantly at or over my client’s asking price.  There is nothing like engendering “fear of loss” in prospective buyers by presenting them with a beautiful product at an attractive price to bring them to their highest and best offers, fast. 

 

9 APRIL 2014 

Although first-quarter sales statistics are bound to prove disappointing, in part owing to severe weather throughout the winter just ended, I want to give everyone a heads-up:  it looks like the 2014 spring market will be a reprise of the 2013 spring market!  For those of you who don’t remember, last year’s second-quarter sales activity was frenetic, resulting in energetic bidding wars, the reintroduction of Escalation Clauses, elevated sales prices, and significant appraisal problems for transactions involving mortgages.   

Although the 2014 spring market has barely begun, already we are seeing swarms of buyers at open houses for new listings.  Already we are seeing up to six offers instantly appear for good product reasonably priced.  Because of the tick-up in contract prices, sellers are already exhibiting a renewed preference for cash buyers over those needing a mortgage. 

It bears pointing out that, post-Bubble, appraisal standards were tightened up in an effort to prevent irresponsible real estate valuations and outright fraud.  The current rules make it difficult to assess residential properties in a way that mirrors our improving marketplace; hence the paramountcy of “cash” buyers (truly cash buyers, buyers with a less than 80% loan-to-value mortgage contingency, or buyers needing a mortgage but waiving the mortgage contingency) when, as is presently the case, home prices are once again on the move—upward! 

 

31 JANUARY 2014

Now that the year-end data is in I can report that, according to the National Association of Realtors, sales of existing homes (that is, excluding new construction) in 2013 numbered 5.09 million, which is an improvement of 9.1% over 2012’s tally and the best annual result since the height of the Bubble in 2006.  NAR is projecting existing-home sales to remain at about that level in 2014.

That leaves it up to new construction to make up for expected shortages in the total supply of residences for sale vis-à-vis the anticipated level of buyer demand both this year and beyond.  Unfortunately, the inventory of new-built homes is essentially at a fifty-year low, and the latest annualized pace of 999,000 units is insufficient to meet the challenge.  NAR says another fifty percent increase in housing starts is required to help lift us out of the present imbalanced dynamic, which is exerting a dampening effect on the housing recovery. In the short run, in 2014, we can thus expect a continuation of the housing shortage and a concomitant modest rise in home prices in nearly all local markets.