Real Estate Market - The Dead Zone
To quote Donald Trump participating in a recent Forbes panel on housing and the economy "In a developer's world this is historically the slowest time of the year. I'm sure some of the indexes that lag a bit may disagree with this, but in terms of people coming through the sales-office doors or calling brokers, this is the dead zone."
In this article Forbes states that the U.S. Department Of Housing And Urban Development believes that there is an 8.5 month supply of housing inventory at current absorption rates. Months-of-Inventory (or "MOI") is calculated by dividing the available inventory (aka "supply") by unit sold in 30 days (aka "demand"). A six month supply is considered normal. But many signs point to more inventory coming to market. More short-sales and foreclosures could dramatically increase the number of homes for sale causing a market glut and resulting in increased downward pressure on prices. It's a matter of simple economics (remember the 8:15 am college class we all slept through?), as supply increases and demand declines prices will continue to fall. Our homes are commodities, not products. And simple supply and demand economic principles apply. With an abundance of homes for sale, prices will continue to be soft.
In June 2010 Anne Arundel County had 4,303 active listings on the market and there were 556 units sold. That translates into a 7.7 month supply of housing inventory in the Anne Arundel County. Last year in June 2009 Anne Arundel County had 4,271 active listings and 482 units were sold. There was an 8.9 month supply of housing inventory during the same period last year. When considering the whole metro-Baltimore area (consisting of Anne Arundel, Baltimore City/County, Carroll, Harford, and Howard counties) there were 19,854 active listings with 2,579 sold in June for a 7.7 month supply. The supply is down only slightly from this time last year when the monthly supply was 7.9 with 18,852 active listings and 2,375 units sold.
The decline in the local housing inventory year-over-year is slightly more than 15% but we still have a long ways to go before this is over. According to Spencer Rascoff at Zillow.com:
The months-of-supply data is hogwash because banks are holding onto their foreclosed inventory and waiting to list. There are also millions of homes where they haven't yet started the foreclosure process, but could at any time. Historically, months' supply has been a good way to look at housing data and make predictions on prices going forward, but I think in this market that data can be very misleading.
Were banks to start dumping inventory onto the real estate market, that act alone could send us spiraling into a deep decline in the housing market. In Maryland and in Anne Arundel County we've been relatively immune for the havoc that a glut of foreclosures and shorts sales can have on normal real estate transactions. Unlike California, Nevada, Florida and other states where almost every transaction is a foreclosure or short-sale, the majority of Anne Arundel County transactions remain normal real estate transactions.
In June 2010 MRIS reported 70 foreclosure sales in Anne Arundel Countywhich is 11.9% of the total units sold. Compared with last year MRIS reported only 73 sales or 13.8% of the total units sold.
With July half over and August still ahead, we can expect slowing sales in Anne Arundel County. Pending sales is a good predictor of future sales. With 500 sales pending at the end of June, we should expect sales to decline in the months ahead.
What's the incentive for buyers to purchase right now? With sales prices declining or at best remaining flat, there's no motivation to hurry up and purchase right now. With only one buyer for every eight homes for sale, sellers will need to ensure that their homes are properly price positioned when compared with the competition, in the very best condition, and offer incentives and inducements to get the buyer's attention.
If you are interested in renting or buying a home in Annapolis, Maryland or the surrounding area and want to tour any property currently on the market, or if you have a home to rent or sell in Annapolis, Maryland and want a professional consultation on current market conditions, please contact me at 410-923-3217 or e-mail me at showell@cbmove.com or visit my website at LiveInAnnapolis.com.
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Stephen Howell came to Annapolis to sail the Bay in 1994. What he discovered was a whole new lifestyle. Ever since Stephen Howell has been successfully helping others make the most of Annapolis. You'll find that with the right professional by your side, you can Live the Lifestyle and Live in Annapolis.
Stephen Howell and Rocky (his lab-mix from the SPCA of Anne Arundel County in Annapolis) now live in Winter's Chase at Riva Trace in Annapolis, Maryland. He works in the Annapolis real estate market. His website lets people search the Washington and Baltimore metropolitan area MLS. Buyers can also search for waterfront homes along the Chesapeake Bay. His website has current real estate data on Annapolis, Anne Arundel County, and Maryland.
