I just received our monthly newsletter from Mr.Chip's school of real estate and it had some interesting commentary about the market...check it out...

ENCOURAGING SIGNS

With the exception of Camden County, every county in the area had more units close in September 2009 than closed in September 2008 - last time this happened was 2005 (ahhh . . . the good old days).

More good news:  inventory continues to stabilize.  Fears of a rush of foreclosed properties and sellers trying to reach anxious first-time buyers did not materialize in a significant way.  There were inventory increases in some counties but it did not prevent the total number of active, residential, resale properties at the beginning of October to dip through 2008 and 2007 levels and to approach October 2006 levels.

REALITY CHECKS

Year-to-date totals are still down for units and volume but each passing month has signs of more activity.  For the first nine months of 2009, residential closed units are down almost 15% (compared to the same period in 2008).  After the first quarter of 2009 had 26% fewer units close, the third quarter was a significant improvement when it lagged last year’s total by 1%.  This improvement will probably continue in the fourth quarter but, given the slow first quarter, it will be difficult to match last year’s total unit sales (and volume).

The negative is that with this many buyers purchasing at the lower end, the average price dropped.  As the chart shows, comparing the average price for the region at the end of the third quarter each year, we had an average price drop of 7% from 2008-09, and almost 9% from the peak in 2007.  This is a small price correction in comparison to the 20% (and above) price changes that make national headlines.

OUTLOOK

With tax credit closings driving the market, October and November unit sales will be higher than last year’s.  If they are not, we have a serious problem.  Dollar volume may go up, but average price (in comparison to years’ before) will slip further.

The sellers who benefitted from the tax credit were those below the FHA threshold, in particular – those below the $300K price range.  We need to see more activity in the upper 1/3 of the market before we can proclaim, “good times are here to stay.”

The net result is the third quarter showed more signs of life than we’ve seen in a while, but the jury remains out on the verdict of a recovery until we start to see more “move-up” buyers.

Statistics used in the above information are downloaded from the TREND Multiple Listing Service, and they use information from Berks, Bucks, Chester, Delaware, Montgomery and Philadelphia counties in PA; and Burlington, Camden, Gloucester and Mercer counties in NJ.