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April 15th, 2008 12:17 PM by David W. Welch
If you have not noticed by now, let me clue you in on something about me. I love numbers! I remember my dad saying figures lie and liars figure, but numbers and statistics can really give us insight into what is going on in our market places. I have always been big on tracking the inventory, and pending sales numbers. It is the basic economics of supply and demand that drive real estate sales.
Our inventory was down at the end of March, but only by a little less than 2%. The main thing I have seen with our inventory is that the buildup stopped back toward the end of last summer. We have been fairly steady since then. The inventory of new homes, however has dropped significantly since the fourth quarter of 2006. When that number gets low enough, we will see a decline in the resale inventory as well. Homes that are currently rented will convert back to being for sale when sales begin to pick up. This will keep our inventory up for a while, but I just don't know how long since the rental numbers are not as well known. Builders will begin building again, but they need to start making a profit, so they should not be undercutting resales as much on "to be built" homes. I don't see them negatively impacting the resales any time soon.
Pending sales are making a fairly dramatic rise here in Orlando. Back at the beginning of January I measured the total pending sales at about 1,500. This morning when I checked on the MLS there were 2,805 contracts pending. That is about an 87% increase in contracts in about three months. The other number I look at now, because of the impact of foreclosures, short sales and the mortgage issues, is new contracts. One of the reasons total contracts are building up is because transactions are taking longer to close. While foreclosures make up only about 15% of our listing inventory they account for about 25% of the sales. Many of these are just taking longer to close, so the property remains pending longer. Mortgage lenders are being more cautious, and guidelines are more stringent so loans are taking longer to close. Also, the new FHA limits being raised to over $350,000 in the Orlando market means that about 75% of the listing inventory can be purchased with an FHA loan. These loans tend to take just a little longer to close as well. Because of these factors, I like to see what new contracts are doing. More good news! January new contracts were around 1,200, February was about 1,500, March hit over 1,700 and so far in April we stand at 941 for the first two weeks. The first two weeks of March I counted 729 new contracts so April is up 29%.
I know every market is different, but keep this in mind. Orlando tends to be one of the last markets effected and one of the first to improve. It must be the great weather? As people are able to sell here, they will be able to buy there wherever that may be.
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