As fall arrives we find momentum continuing to build in our local housing market. The latest example was the sizeable gains in homes sold during September. Sales were up nearly 20% versus the same month last year. Buyer activity has consistently risen over the past year. At the same time, the number of homes for sale has steadily declined. Both trends bode well for housing to continue its recovery.
And when we are asked about “recovery” what people really want to know about is home prices. In all areas of the country, changes in real estate prices lag behind changes in sales. For example, while sales were dropping dramatically in California, down 45% from 2005 to 2007, prices were still on the rise, increasing 7.2%. The same thing occurred in our own market. The number of sales dropped 17% while prices rose 5.1% from the end of 2006 through the first quarter of 2008.
This phenomenon is the same on the way back up. While most major metro markets around the country have had rising sales for the past couple of years, only recently have home prices begun to rise – albeit somewhat modestly. The latest S&P/Case-Shiller national home price index, which tracks prices in major U.S. markets, shows that prices are up three months in a row in all 20 markets followed.
While that is not the case here – not yet anyway – we are seeing the sales patterns that must precede price recovery. Recall our market had rising sales for eighteen months after the rest of the country began moving down. Therefore, it is not surprising to see our market also trailing in the recovery. Areas like Seattle, however, are picking up steam much faster than the rest of the country did when it started to turn around.
It is good news for our area that September marked the sixth month in a row of nice year over year gains in closed sales. Four of those months have seen double-digit percentage increases. In fact, only three of the past 12 months have seen a decrease in sales.
On the supply side of things, the number of homes actively for sale is 27% lower than last year at this time and 50% less than the level seen in 2007. For home sellers, this is the lowest level of competition since February 2006.
After a steady decline the previous four years, prices have essentially remained flat over the past 12 months. Now with prices at multi-year lows and financing rates unbelievably low, home affordability is stronger than ever.
Buyers have clearly received the message. They have driven sales up 9% this year. As the broader economy picks up, there should be sustained interest in housing. Recent nationwide surveys show that a great many buyers delayed moves, rightly so, over the past 5 years. These same surveys show that they are now coming off the sidelines. Our own market is living proof of that.
The combination of all this news has placed us in a balanced market for the past six months. It has been more than a decade since we’ve seen a sustained balanced market. It puts us on the steady ground needed to have a lasting recovery.
As we entered the fourth quarter, there are a number of local sub-markets that are actually in a seller’s market. With these conditions, expect to see more sellers preparing to list their homes right after the New Year rather than waiting until the typical spring season. If the trends of 2012 continue through 2013, our market will join the others now returning to price appreciation.
