I have three home listed right now ranging in price from $299,999 to $819,900, and they are getting more looks than just about anything else I have on the market. The only other home I have that is getting more attention is priced at $169,900 which is below recent appraisal. To check out these four homes just click the address: 3810 Marsh Lilly, 705 Conesus Ln, 3650 Lower Park Rd, 124 Pine Arbor. The two most expensive homes 705 Conesus and 3650 Lower Park are getting the highest traffic on all of my websites, and they are getting showings as well. They are both in terrific areas and offer five bedrooms and four bathrooms. The home on Conesus Lane is located in Tuscawilla in Winter Springs, and the home on Lower Park Road is in Baldwin Park directly across the street from Blue Jacket Park. Both are in excellent school districts and highly sought after neighborhoods.
If you would like to see either one, give me a call directly at 407-924-7670 or e-mail me at sellmyhome@davidwelch.com.
Orlando Real Estate, David Welch Real Estate Optimist
I have to say that today was a little exhausting. We started at 9:00 this morning in Baldwin Park, and finished in downtown Orlando around 7:00 this evening. It is a lot of fun for me, but really hard work for the director, the camera and sound guys. They all did a great job though, and I felt like we accomplished quite a bit. Of course, what do I know. I have never done anything like this before. All the professionals agreed that we did get quite a bit done today, and we should be a little ahead of schedule. Hopefully, this means our episode will be on sooner rather than later. The couple I am working with Doug and Lisa are terrific too. This was a long day in the heat and afternoon thunderstorms, but they were real pros at this.
I am really excited to be part of this and would like to thank Doug and Lisa for inviting me on this adventure. Keep your fingers crossed that we find the right house for them. Will it be house number one, two or three?
I wrote a little while ago about the state of Florida making it possible for first time buyers to be able to use the tax credit up front. There are couple of issues that seem to be holding this up. First, the state and county governments seem to be a little at odds as to how to administrate and exactly who is fronting the money. Second, I have heard that the plan is to make this money in the form of an 18 month balloon loan, which I understand may be in conflict with FHA policies. Since most first time buyers are using FHA financing this could be a big deal. Finally, the banks are still trying to figure out how this fits into the whole financing scenario.
When you add these issues with the fact that FHA will not allow this money to count toward the buyers' 3.5 percent out of pocket and the fact that we are quickly running out of time (see my tax credit countdown), I believe it is unlikely this will help many people. The good news is that there is still time to take advantage of the tax credit. If you just are not able to find a home and close before November 30 this year, great deals will still be available in Orlando real estate for while. Right now, prices have stabilized and the market has been experiencing solid sales numbers. Until we work through the foreclosures and short sales and the job market begins to improve prices will remain lower.
I do believe that the super low interest rates will begin to rise first as economic indicators continue to turn positive. Then jobs numbers will begin to improve slowing the number of short sales and foreclosures. This will also cause sales to pick up and begin to push home prices back into an upward trend by the end of the first quarter next year.
My dad used to say figures lie and liars figure. I don't know that he made that up, and I don't mean to call anyone a liar. I do want to point out how the same numbers can be used two different ways to make very different points. DISCLAIMER: My blog is RealEstateOptimist.com, so I tend to see the glass half full. Bad news sells papers, so the media tend to report...bad news. Last night on the ABC evening news the government report on new home sales was actually reported in a positive light, as it should be in my opinion. Sales in June were up 12% year over year. The exact same report showed little change in sales compared with May, so the Orlando Sentinel reported "US New Home Sales Flat".
It has been my experience that there is a positive side to many situations. The bible says that God uses everything for good; I just can't always see it. I do believe that there are some good things going on in the real estate market right now. Since prices in Orlando have dropped to half of their highs of 2005 and 2006, affordability is through the roof here. The combination of lower prices and lower interest rates has pushed our affordability to the highest levels I have ever seen. In May the affordability index reported by the Orlando Regional Realtor Association was nearly 200. An affordability index of 100 would indicate the median wage earner can afford the median priced home. At 200 the same median wage earner can afford two median priced homes. June's prices went up slightly as did the interest rates, so the index dropped into the 180 range, but that is still 40 to 50 basis points higher than what we have typically seen in Orlando.
Thank you ABC news for the positive report last night.
I have been a full time agent in the Orlando real estate market since 1997. Around 2000 I began to see a real change in our marketplace here, with sales picking up faster and prices going up more quickly than historical averages. Our systems were not as good as they are today, and our association statistics were not as readily available. So, it was more of a gut feeling than anything else when our market started to really heat up. I know that my own business really took off in 2000 and grew tremendously through 2005. In 2004 was the first time I really started looking at and tracking our inventory to see what was going on. What I saw was that the number of homes available for sale was dropping pretty significantly. I believe it was later that year that the news media really started reporting on our red hot market. By the time Charley came through damaging an estimate 20% of the homes our inventory was really down, and because of damage a lot of people were delaying putting their homes on the market. This additional drop in inventory and a slow down in new home construction lead to the incredible boom of 2005.
Of course, the market at that point continued to heat up to the point that we actually got down to about a one month inventory of homes available for sale. Because this is really just about supply and demand, prices were driven through the roof. People became desparate to purchase a home for fear of being permanently priced out of the market. Sellers, builders, lenders and real estate agents struck while the iron was hot selling anything they could to the highest bidder. We will probably never see another market quite like that in our lifetime. There most definitely will be up markets again, but I just cannot imagine another one like what we experienced.
Then, as if someone turned the light off it all stopped. We did not see a gradual slow down, but an abrupt end to the boom market. Prices did not change immediately, but sales dropped very quickly. This lead to increases in inventory, especially when all the new homes under construction for flippers began to be completed. Prices actually resisted coming down for quite some time. Then bank owned properties started hitting the market and short sales began undercutting the banks early in 2008. When the TARP funds hit the banks in the third and fourth quarter of 2008 REO prices were slashed. Our peak median price in Orlando was just over $260,000. By the time our prices stabilized in April of 2009 the median price stood at half that. I feel pretty confident that with nearly four months of stable prices that values have bottomed. That is where we came from and where we are today. Sales are actually pretty good, but new contracts are fantastic. Inventory is steadily declining with fewer REO's in the active inventory. With prices now finally steady, we can begin to see a recovery in our real estate market.
Let me first start by saying that I have nothing against the cash for clunkers program. In fact, I think this may be one of the most effective and innovative aspects of the stimulus package. Anyone can walk into a car dealership, and receive a $3,500 to $4,500 voucher to trade in their gas guzzler for a brand new, more fuel efficient car valued at $45,000 or less. I recently helped my mom with the purchase of a new car (she would have qualified for this) and the process took just a couple of hours and was fairly painless. What I would like to see is this kind of incentive translated to the real estate market.
The $8,000 tax credit may sound like it is the same type of program, but it is not. First, it is 10% of the purchase price of the home, so if you buy a $50,000 condominium the most you qualify for is $5,000. Cash for clunkers gives you $4,500 for purchasing a new car, foreign or domestic that provide 10mpg more than your trade regardless of price. If you purchase an $18,000 Hyundai, the voucher is picking up 25% of the price. Second, the voucher is immediate and may be all the down payment you need. The tax credit is refunded to you when you file your income taxes or ammended return. The tax credit also cannot be used as part of your downpayment under FHA. The state of Florida has passed legislation to allow access to the $8,000 up front, but there are two issues with that: first, the banks have no idea how to get that money into your hands (bridge loan, 2nd loan, etc.); second, you can only use it for additional down payment or closing costs. The plan here in Florida could be helpful if somebody know how to make it work. If cash is tight though, it still won't pick up your 3.5% down payment required by FHA. The other way that cash for clunkers beats the tax credit is that it is available to anyone with a car built since 1984. The tax credit has several limitations: first time home buyers only; if married, both spouses have to qualify; the credit is reduced if you are single making over $75,000 or married making over $150,000; and if your married you only get one tax credit.
The purchase of a home is an investment, but the purchase of a car is just a purchase. The size of the assistance should be raised to $18,000 which is about 10% of the national median sales price. Make this assistance in the form of a voucher that is used at closing, so it is immediate. Allow this money to be used as downpayment on the home. There are two reasons I have heard not to allow this money to be used as the downpayment. First, the money is supposed to be used by the new home owner to fix up the home or make purchases for the home to stimulate the economy. If they don't have the money to close the deal in the first place, the stimulus money won't be spent and another house sits on the market. If this gets more people in homes, absorption of the inventory goes up and stabilization in the real estate market happens faster. It also stimulates the individual economies of the sellers whose homes are getting purchased. Second, FHA argues that if buyers have none of their own money into the home, it is easier for them to walk away from it if prices go down more or things get tight. This is a lousy argument. 100% financing was not at the core of the mortgage crisis. Greed and fear caused people to borrow more than they could afford and lenders to make loans they never should have made. VA and USDA have been making 100% loans for years, the Nehemiah and Ameridream programs were creative solutions to getting around the FHA downpayment for more than 10 years. At this point, it is unlikely home values are going to go down much more if at all. Those new cars being purchased depreciate when you drive off the lot. The $18,000 is instant equity in a likely appreciating asset. Finally, make this money available to all home buyers. Sellers need help too. Their home has dropped in value significantly, and the person buying their home needs help with closing costs. There are also second home buyers that have had their IRA's and 401k's slammed by the stock market, why not give them a reason to go ahead and take advantage of the prices and mortgage rates in the housing market.
Make the home buying program look more like cash for clunkers, and see what happens. Maybe Washington could throw in some of those funny looking light bulbs too.
Orlando real estate sales have been up for months now. In fact, I believe we are looking at about nine straight months of year over year improvement. If you watch the stock market and oil prices, they appear to indicate that sentiment is moving to the positive side as far as residential real estate is concerned. Of course, I am the real estate optimist so I knew it would just be a matter of time before others would begin to see the light. Eventually, the positive sentiment will lead to increased consumer spending. This in turn will begin to lift us out of the recession creating more jobs. When job creation returns watch real estate really begin to pick up. Of course, so too will interest rates and prices will likely begin to go back up as well.
Here in Orlando, real estate sales have been on an upward trend since January 2008 while prices really began heading down since about that time. We have seen prices level off for about four months now with the median price since April hovering around $130,000. Unemployment will remain high for a bit longer, which is typical in this type of economic cycle. Employers are hesitant to make new hires until they have confidence that sales will support the new jobs. When job creation begins again, the opportunity to take advantage of our current buyers market will certainly be over. The $8,000 tax credit expires in just a few months. The Fed will likely stop buying up mortgage backed securities by years end which has been helping to keep mortgage interest rates low. Even though everyone keeps predicting a new wave of foreclosures, we have actually seen fewer coming to market. All in all, the Orlando real estate market has stabilized. We will see slower sales over the next few months which is typical of the time of year. I expect they will continue to exceed last years sales. If banks begin approving the back log of short sales (over 3,500) with pending contracts, we would actually see a huge surge in sales. Either way, we are looking at a much stronger year.
If you are a first time home buyer, you may have looked into Orange county down payment assistance. Just checking the county website, you may believe that you might qualify for $20,000, $30,000 or even $35,000. Beginning back on June 23rd those numbers have been revised down to $5,000, $17,500 and $25,000. The amount of assistance is still based upon household income, but funding from the state has been slashed to balance the budget. That funding comes from a fund called the Sadowski fund, and it was formed by the state to provide assistance for affordable or "workforce" housing. This fund was established as a result of an increase in documentary stamps taxes on real estate transactions. When the market was really good this fund became quite big, so the state legislature put a cap on it and swept the excess into the general revenue fund. The Realtor association has been asking the state to "scrap for the cap" for years. Now in lean economic times it appears they have completely raided the fund to balance the budget. This has left downpayment assistance programs like Orange county's without funding. Assistance is still available, and there is even a state bond program providing down payment assistance.
If you live in Orange county you can sign on to the Orange county property appraiser's website www.ocpafl.org, for Seminole county you can go to www.scpafl.org, and Osceola county is www.property-appraiser.org. Check out the latest working numbers for 2009. Many of you may find the values used to tax your property are high. You can challenge this valuation, and lots of people are these days. If you purchased a home at the peak of the market, you may be able to prove a case for a much lower valuation and save money on property taxes.
This is the time to begin this process to potentially impact your 2009 tax bill before it comes out in November. The best way to start is by having an appraisal performed by a licensed appraiser. I recommend Paul Rodriguez, and you can contact him at 407-826-8331 or through his website www.APDServices.net. This is probably best if you have a fairly substantial tax bill. Paul told me of a customer of his recently facing a nearly $14,000 property tax bill who successfully argued for a much lower assessment saving nearly $6,000 in property taxes. That is not typical results, but if you think your value is overstated call Paul to see this makes sense for you.
When I turned 40, my wife surprised me with a big party. One of the presents I received was a flip book with all kinds of pithy sayings. I think my favorite is "the older I get the better I was." I catch myself sometimes longing for the good old days, but then I think the best days are still ahead of us. Wisdom, I think is a combination of intelligence, experience and time. When I was a teenager, I knew everything and I suppose that is typical since I have two teenagers of my own now. I saw a bumper sticker that read "hire a teenager while they still know everything." In my twenties, I was invincible. I understand the armed services really prefer people under the age of 26, because that is about the time people start to realize they are not bulletproof. In my thirties, I had it all together. I had plans for my family, my career and my finances.
Now, in my forties I realize just how much I still don't know when I try to help my children with their homework. I go for a run, and the next day I realize I should have stretched more - I am vincible. As the recession rolls into 18 months and the real estate recession marks it's third anniversary, I still have it all together. There is just a whole lot less of it to have together. This is not going to last forever, and we should all learn from this going forward just like our parents learned from the tough times they experienced. We have learned, experienced and time has forged our collective wisdom to make it stronger than it was before.
Check out www.DiscoveryChurch.org for yesterday's sermon about Gideon. My inspiration for today's blog. I'll be running some numbers on sales for July a little later too.
I love technology. It is actually the practical part of technology that I really appreciate. Cool stuff is not cool unless I can leverage it to help my business some way. Start with this blog. I write about what is going on in real estate in Orlando, and it allows me to inform my customers and prospective customers. I can also advertise and promote the properties I have for sale to potential buyers here with pictures and virtual tours. My blog is picked up through RSS feeds to update other websites and blogsites disseminating the information even further. My websites have literally hundreds of pages of general and local real estate content. I could never afford to publish this information in print and provide it to the nearly 1,000 people each day that visit my sites.
Our MLS allows me to promote my listings locally, nationally and internationally with more information than any newspaper ad ever could. It also links me up with detailed tax information, financial tools, maps, and transaction management programs. I can keep my customers, buyers and sellers, up to date on the most current listing activity with automated e-mails. The MLS and websites allow me to track how many people are looking at properties I have listed, how many click through for more information and how many took the virtual tour. Prospective buyers can contact me back to arrange a showing with the click of a button. All of these are even available on your web enabled phone. Even our lockboxes notify me when someone has shown one of my properties and automatically follows up with that agent for feedback. I can even link my blogs with tools like Twitter and update my status on Facebook to keep in touch.
Mary Shanklin with the Orlando Sentinel did a great job of explaining how foreclosure filings are measured in this article today. http://www.orlandosentinel.com/business/orl-bizforeclosures-florida-071609071609jul16,0,2972151.story
The good news is that foreclosure filings were down 24% in June compared to May. The bad news is that there were still nearly 6,700 filings last month. I am writing this post for a couple of reasons: obviously, it is Orlando real estate news; it is good news that the filings are down; the author took the time to define what a filing is. I don't want to take away from the drop in the filings, because that is definitely an indicator of the overall health of the real estate market and economic conditions. The key point that I find especially important here is that the author took a few lines to explain what a filing is.
I hear from people all the time making comments that 1 in every 132 homes has been foreclosed on in Orlando or that 6,667 were foreclosed on last month. Many times when I read articles about foreclosure rates the authors don't explain that the Realtytrac reports are foreclosure filings not foreclosures. If someone has a home with three mortgages and they miss a months payments, they receive three notices accounting for three foreclosure filings. To use the author's example if a home owner receives a default notice one week and an auction notice the next that is two filings. Unfortunately, too many times these articles do not explain these measures leading to a more "sensational" article instead of responsible journalism.
Thank you Mary Shanklin at the Orlando Sentinel.
There are over 9,000 Realtor members of the Orlando Regional Realtor Association, and every one of us should support RPAC. Everybody complains about their elected officials, but what do you really do about it? RPAC supports Realtor issues which are our customers' issues too. We are the biggest proponents of property rights and put forth a tremendous effort and a lot of money to promote these issues. The only way we can stay in the lead on property rights and other issues important to Realtors and our customers is through RPAC. We cannot expect our elected officials to be experts in every issue that comes up. One way that they are educated about the importance and impact of their decisions is through our lobbying efforts funded by your RPAC contribution. Sometimes these same public servants need our help with an issue that important to them and us. RPAC has been able to step up to help fund special issues that effect the quality of life for us here in Orlando.
People often complain of special interest groups and the influence they have on City Hall, Tallahassee and Washington DC. I cannot imagine anyone that is not somehow a part of several of these special interest groups. Keep in mind that these groups are as diverse as our population and include not only Realtors, but teachers, police, firefighters, military, doctors, lawyers, grocers, retail, hotel and motel, tourism, healthcare, small business, and big business alike. Supporting RPAC is a way to get involved and help assure that the Realtor voice is heard here in Orlando at the state and federal levels of government. Besides all that, this Friday at the Winter Park Civic Center you can have all the barbecue you can eat for $10 starting at 5:30pm. The auction starts at 7:00pm. For more details go to www.OrlRealtor.com.
Orlando Real Estate, David Welch Real Estate Optimist, @RealtyOptimist
Banks could make my life so much easier as a Realtor, if they would just make up their minds about what they are going to do with: short sales, REO's and loans. Right now in Orlando there are over 7,200 pending contracts, around 6,000 short sales and 1,000 REO's. Over 4,000 of the pending contracts area short sales and REO's, with short sales outnumbering REO's 3 to 1. If all the pending contracts were pushed through, the number of sales closed in Orlando for the year would jump by over 70% - talk about your stimulus package. Realtors, title agents, surveyors, appraisers, loan originators, handymen, lawn services, movers, Home Depot and Lowes, taxes, HOA's and condo associations would get paid. The banks would also get paid. Remember 4,000 of those closings are short sales and REO's. That is 4,000 toxic mortgages taken off the books, and the only thing holding it up is the bank's inability or unwillingness to make a decision. Think about this too. Around 3,000 of those pending sales are not short sales or REO's, that means the sellers of those homes will be able to purchase another home or invest their proceeds. If the banks could make timely decisions on short sales, we could probably sell the other 6,000 in fairly short order as well.
What does this mean to the bank? Last month in Orlando, the Orlando Regional Realtor Association reported that REO's sold for a median price of $79,900 while distressed "short sales" sold for a median price of $152,000. I know it is a leap to say the banks would make an extra $72,000 on each deal, but it sure looks that way. If you applied that difference to the more than 3,000 pending short sales, banks stand to bring in an extra $216 million. Apply that same logic to the other 6,000 short sales in the Orlando real estate market and the total comes to almost $650 million extra that banks could be putting in the vault. If you can keep people in their homes that is even better, but if you can't then facilitating the sale will significantly reduce the banks' losses. Last month over 3,600 new contracts were written, but only 2,100 transactions closed. Demand for Orlando real estate is back, and with a little cooperation from the banks our good year could be a terrific.
ATTENTION: First time home buyers in Florida. The state of Florida has come up with a plan to make the first time home buyer tax credit available at closing. My understanding is that not every lender is participating in this program, so check with your lender to see if they do before you write an offer. You must qualify for the credit, and spouses must both qualify as first time buyers to qualify for the credit. It is all or none, even if you file separately. I don't know about other arrangements, such as partners, siblings, etc. that may be buying together. Contact your tax preparer or CPA for special situations like that. Also, keep in mind the credit is 10% of the purchase price up to $8,000. If you purchase a $60,000 home, the maximum credit you can get is $6,000. There are also limitations based upon your income, so check with your tax preparer or CPA to find out if this effects you.
There are some other considerations with receiving the credit up front. You can use it toward your down payment or closing costs. If you are gettin FHA financing, you will still have to put 3.5% of your own money into the deal. This up front money does not take the place of this requirement for FHA. I am not sure how conventional financing is treating it, so check with your lender. The best way to use this up front money may be to pay your closing costs, so you do not need the seller to pay them. This may allow you to negotiate a lower purchase price. It is a terrific program that the state of Florida is offering, and I applaud our state leaders for thinking outside the box. Keep in mind that the clock is ticking, and the countdown to the end of the tax credit has already begun.
To read the complete story from the Orlando Regional Realtor Association click http://www.orlrealtor.com/Main/Main.asp?CategoryID=3&
Officially, 2,131 sales closed last month with a median sales price of $131,200. Both of those numbers are increases over May's sales. Year to date sales are up more than 43% over 2008 with nearly 10,000 closed sales so far in 2009. This remarkable increase in sales has pushed the months of inventory down to about 8.4 which is a 61% decline since January and the lowest level in the Orlando real estate market since July of 2006. The number of active listings currently stands at 17,831 which is over 27% lower than a year ago when we had 24,575 homes for sale.
Of the sales in June approximately 46% were categorized as bank owned or distressed in the MFRMLS. It shows in the median prices too. Bank owned properties posted a median sales price last month of $79,900 while distressed sales were at $152,000 and "normal" equity sales had a median sales price of $172,500. The distressed and equity sales both represented increases from the prior month. Only the bank owned properties continued to slide. This should be important for bank executives to note. The distressed sales are primarily short sales. If the banks would just start approving these sales you could infer from this data that they may make an extra $72,000 per sale compared to foreclosing. That does not include the attorney's fees and court costs not to mention the time value of the money they are losing.
Pending sales stood at 7,230 at the end of June which is more than double the number of pending sales in June of 2008. New contracts last month set another record for the year with 3,686. Just think what our sales would be like if the banks approved short sales, could efficiently process their REO's and actually made loans in a timely manner. Demand is there, but the banks' ability to close the deal is the only thing slowing us down here in Orlando. It is a good thing that banks are not allowed to be in the real estate business.
Got land? Two vacant lots just listed in beautiful Gotha. Each lot is 147.5x200 and are adjacent to each other on 6th Street at the southwest corner at Dingens. I'll have more information later. Zoned R-CE this property allows horses. Buy them both, and you can build a home and keep a horse.
I just added a countdown clock on my web page dedicated to the first time home buyer tax credit. There are 145 days left to use the first time buyer tax credit, and people are already talking about extending it and expanding it. So far as I know it is just talk. I have not heard anything concrete with respect to any proposed bills to create a new credit. If no new credit is created, your time to take advantage of this incentive is running out. Keep in mind that contracts here in Orlando are taking about 45 days to close, you probably only have about 100 days to get a property under contract. I would not push it to November 30th either, in case there are any issues with your closing. You should also be aware that buyers are writing five offers on average before getting a property under contract. If you have not already started looking, start now so you don't miss the tax credit.
I say yes, sort of.
If you look at the past three years new contracts, you will see that December 2007 was the bottom of our market in terms of demand. We really did not see substantial decreases in prices until 2008 and 2009 which has significantly stimulated demand for homes in Orlando. June's numbers will be out in a few days and the number of new contracts is again around the 3,500 mark. It is no coincidence that the median price hit $130,000 in April and May and is around $131,000 for June. As prices are leveling off so is demand. At the same time the supply of homes available has continued to slide, and is currently around 17,800 homes which is about 21% fewer than there were at the beginning of the year. Basically, our prices have reached a point that has driven pace of demand higher than the pace of new inventory. So, prices have stabilized at a point where demand is stripping away the supply of homes. This price stabilization should stay in effect until the supply of homes available is lower than six months which has long been considered a balanced supply. At that point, there will be upward pressure on prices.
At the current rate of sell off, we could hit that tipping point in as little as six months. Of course there are always other factors that could shift the supply and demand curves. If the government decides to extend or modify the first time home buyer tax credit the pace of demand could be effected. Inflation could force the Fed's hand, and tighten credit markets possibly raising interest rates. Banks could get their acts together and start approving short sales in a more timely manner, process REO's more efficiently and maybe even approve loans again. They could flood the market by disallowing all short sales or releasing large numbers of REO's into the market or tighten lending guidelines further. In other words, barring govenmental or banking actions look for stability in our prices through the end of the year.
The official numbers will be out in a few days, but here is my take on what is going on in Orlando real estate. The big news you will be reading about in a few days is the 42% increase in sales compared to last June. So far there have been 2,121 closed sales with a median sales price of $131,500 posted for last month. That represents another month of year over year gains as well as an increase from May's 1,854 closed sales. The $1,500 increase in median price is hardly headline news, but it is the third month in a row without a decline. Of the closed sales about 55% or 1,166 were distressed properties (mostly bank owned) while 45% are normal sales.
The number of contracts pending used to be an indicator of future sales, but I am not so sure that it means as much with short sales making up such a big percentage. Right now there are 7,212 pending sales with nearly 52% or 3,743 of them being short sales. Only about 30% of the pending sales are "normal". If you break out the pending and closed contracts by type of sale you will see a pretty significant difference in the likelihood of a deal closing. There are 2,190 normal sales pending and 955 closed, 43.6% closed ratio. REO properties account for 1,279 pending and 827 closed sales for a 64.7% closed ratio. The majority of pending contracts are short sales with 3,743, but only 339 closed posting a closed ration of 9.1%.
Nearly 60% of the REO sales were identified as cash transactions while only 28% of the normal sales were identified as cash deals. The slow down in obtaining financing is probably the reason there is such a disparity between the REO and normal closed ratios. The banks expect cash deals to close within 30 days, while financing is taking about 45 days to obtain. Short sales are more a function of banks inability to adopt an effective and efficient process to approve short sales. Looking at these numbers, it is my estimate that the average short sale is taking about seven months to approve. I used that new math to guestimate this.
The number of active listings is continuing to decline, with only 17,825 properties currently available. At the current sales pace that represents only an 8.4 month supply of inventory. A more conservative measure using the first six months sales of 9,688 would indicate an 11 month supply. This is probably a better measure as sales will probably slow in the fall. Of course the number of listings dropped again by more than 1,000 from the prior month, so look for the months supply to continue to drop over the next couple of months.
It is July 1st, and we are half way through the year. So far we have seen house prices as measured by the median sales price drop pretty significantly. At the same time we have see interest rates at historic lows, and tax credits for first time home buyers. The result of the low prices, low interest rates and first time buyer incentives has been a dramatic increase in sales. The sales don't even paint the whole picture because the number of pending sales has skyrocketed. There are currently over 7,000 contracts pending, and I know they will not all close. If only half of them closed our sales numbers would be better by about 500 transactions each month. The banks' inability to get short sales approved, REO's cleared to close and loans finalized has been a big impediment to closing deals. Add to this the new HVCC regulations, and getting contracts to closing has been the single biggest hurdle.
In the next six months, I expect to see the pace of contracts and sales to continue at a fairly high pace through the summer before slowing down in the last quarter of the year. We should see a big push in October as first time home buyers take advantage of the tax credit before it expires at the end of November. I do not expect to see prices moving very much in either direction for at least the next six months as inventory has continued to drop. Interest rates however, will begin to climb by the fourth quarter as the Fed's policy of buying up mortgage backed securities begins to slow. I don't know that they will have to begin raising their rates before the year is up, but it is likely. The economy will almost certainly begin to improve, although employment numbers will not begin to improve before next summer. In a nutshell, the next six months is probably not going to look much different than the last six months in a lot of ways. I am hopeful that banks will begin to loosen up a little, so that we can get transactions closed. The sales pace will probably slow a bit as the great deals get bought up. If interest rates begin to go up, watch for the sales pace to improve as well. I see the light at the end of the tunnel, but it is still a long tunnel.
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