Appraiser Stacey P. Anfindsen from the Birch Appraisal Group recently sent the following report. If you receive my newsletter or have read this blog in the recent past, there will be redundant information.
The low rate of national and local consumer confidence and the inability of out of town sellers to sell their existing residence have produced a buying funk on the local level. Second quarter market numbers were a slight improvement over numbers posted during the first quarter, but inferior to numbers posted in the second quarter of 2007. I will break my analysis into three parts; inventory, pending sales and closed sales.
June showings were down 19% in Durham, 19% in Orange and 17% in Chatham compared to 6/07. Lower showings are one of the reasons for increased inventory. Current listings are at the highest level within the past 6 months and are the highest amount of June listings within the past four years. For the first part of this decade, resale inventory was decreasing. Resale inventory is now the main growth component with percentage increases of 5% in Durham, 6% in Orange and 21% in Chatham. Such inventory growth has had an effect on home sellers. The number of sellers who have dropped price from original list has increased significantly in each county. Those sellers who have not found a price acceptable to current buyers have produced a dramatic increase in the number of expired and withdrawn listings.
Higher inventory, lower showings and an increase in the amount of expired and withdrawn listings typically produce a lower amount of pending sales. Listings with a status change from active to pending decreased 16% in Chatham, 21% in Durham and 7% in Orange. There was a 26% drop in contract pending sales in all of TMLS.
The result of the above has been a decrease in the amount of closed sales. Durham second quarter closings are off 29%, Orange closings were off 18% and Chatham closings were off 17%. Second quarter closings in TMLS were down 27%. The average days on market for closings increased in each county with the average closing in Chatham taking 115 days, the average closing in Orange taking 82 days and the average Durham home taking 80 days.
Increased inventory and a lower amount of closings has produced a higher current supply. The current supply of housing in TMLS is at 7 months. Per the National Association of Realtors, the national current supply of housing is 11 months. The current supply in Durham is 7 months, the current supply in Orange is 7 months and the current supply in Chatham is 19 months.
The only bright spot in the market pertains to house prices. The average list price is up in Durham and Orange and flat in Chatham compared to 6/07. The average closed price is down 1% in Durham, 2% in Orange and up 3% in Chatham. Appreciation rates in each county are above the national average.
The main trouble spot in the three county area involves housing priced at 800k and above in Chatham County. There is a 40 month supply of new and resale housing within this market segment. The market has historically absorbed between 2 and 3 houses per month in this segment, so house prices are either going to reduced dramatically or taken off of the market in order to get supply down.
Many agents that I have spoken with have stated that they have buyers who are able, but not currently willing to purchase a residence in our market. This is the "dam" that must be broken in order to reverse current sales and listing trends. The purchase of a residence requires confidence. For the majority of my lifetime, residential house price values and the market in general have never been questioned. Homeownership and house price appreciation have been cornerstones of the American Dream. Within the last nine months, we have been bombarded with stories regarding foreclosures, house price depreciation, credit tightening and the inability to sell a residence in a different part of the country.
The rest of this year and into 2009 will be choppy waters for both the national and local real estate markets. What we have in our favor is positive job growth, many inventory choices, house price appreciation and the continued presence on "top lists" which helps with our population growth.
