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August 29th, 2009 8:40 AM by David W. Welch
Our inventory of homes available for sale is down around 16,700 from 24,834 a year ago. That means there are roughly a third fewer homes on the market. A year ago that inventory represented at 19.4 month supply of homes, today's inventory accounts for about an 8 month supply. That is almost a 59% drop in the months supply of homes available for sale. Almost 3,700 new contracts were written last month, and the total number of contracts pending has risen to more than 8,000. Month after month we are seeing sales figures that are averaging about 45% higher than last year.
Three things have fueled this surge in demand for Orlando real estate. First, prices have dropped to ridiculously affordable levels. Our affordability index has gotten very close to 200 recently. That simply means that the median wage earner could nearly afford to purchase two median priced homes. Second, interest rates have been extremely attractive as The Fed has worked very hard to keep the money flowing. Third the first time home buyer tax credit has definitely encouraged a lot of people to get into the market sooner rather than later. The market is stabilizing now with prices holding for five months now around the $130,000 mark. Interest rates will probably hold steady through the end of the year as The Fed continues with their plan of purchasing mortgage backed securities. First time buyer demand will remain strong through the tax credit deadline of November 30th.
What happens next depends greatly upon job creation. I believe at this point most economists agree that the economy is probably beginning to expand again. I believe that most also agree that employers will hold off hiring until they have greater confidence in the expansion. After that, you have more positive views that hiring will begin in the first half of next year. The negative projections are usually the ones you hear or read in the press, suggest the latter half of next year is the earliest we might see any appreciable change in hiring. When it happens you will see home prices start to rise again. Interest rates will probably take a jump as soon as The Fed ends their buying program at the end of the year. Even though the tax credit is ending, demand may slow slightly. The inventory of homes will continue to drop, so supply and demand should reach a balance by the end of the year.
Orlando Real Estate, David Welch Real Estate Optimist