Is the Tax Credit Extension dead or alive? Watch this short presentation to see Josh’s take on this current issue.
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Archive for June, 2010
Tax Credit Extension Dead or Alive
Friday, June 25th, 2010• • •
Salt Lake County Homes Sales Up…Avg Sales Price Down
Friday, June 25th, 2010On Wednesday I blogged about the national home sales numbers being down 33%, those losses were almost entirely in the Northeast (thanks Michigan and Detroit!). I thought I’d follow that post up with some numbers from Salt Lake County comparing May of 09 to May of 2010, where we’ve actually increased the number of homes sold by 16.7%. Here’s the full report from my friend at L1 Real Estate Brett Matsuura (www.brettmatsuura.com).
Salt Lake County Homes Sales Up…Avg Sales Price Down
It’s all of the news that May sales have plunged 33% across the Nation. In fact, a headline in USA Today says “New Home Sales Plunge 33% with Tax Credits Gone“. Let’s keep in mind that this figure is a combination of the entire Country and does not reflect what is happening in Salt Lake, Utah. In fact, you may be surprised and what I have to say.
In May 2009 there were a total of 1011 residential properties sold. In May 2010 there were 1214. This is an increase of 16.7%…a far cry from what the headline said in USA today.
Currently, the absorption rate for Salt Lake County over the past 90 days is 1084 homes per months. According to the Wasatch Front Regional MLS, Salt Lake County currently has 9169 homes that are either Active on the market or under-contract (I don’t count under-contracts as sold until they actually sell) and this gives us a monthly inventory of 8.45 months.
The average sales price in May 2009 was $225,000, in May 2010 $200,250…this is down by 11%.
So what does all of this mean. Well…a balanced market is 6 months inventory. Anything over 6 months is a buyer’s market and anything less than 6 months is a seller’s market….the higher the number the more severe the buyer’s market and the lower the number the more severe the Sellers market. Around 8 months ago…we had as high as an 18 month inventory….so we have come a long way in that aspect.
In a Buyer’s market, home prices will always fall. Just like in a Seller’s market they will always go up, so…this is normal.
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5 Dumbest Reasons Given for Not Buying a Home
Thursday, June 24th, 2010Each Thursday for the next five weeks I am going to take one of the five dumbest reasons people use to explain why you shouldn’t buy a home today. We will start today with:
Dumb Reason #1: Real Estate is no longer a good investment
There is no doubt that houses in this country have lost substantial value over the last five years. We could make the argument that the purchase of a home should not be looked at as a financial decision. However, that would just embolden those who make this argument. We will, instead, take this subject on directly.
The naysayers love to shout:
If you think real estate is a good investment, ask someone who bought in 2006.
They are 100% correct. People who bought a home in 2006 and need to sell it today could lose as much as 25-30% of its value.
However, a person who placed money in the Dow in 2007 and sold it in January 2009 would have lost 49.3%. Even if they sold today they would still be at a 26.7% loss. Does that mean that we should never again invest in stocks?
If someone bought gold at the end of 1987 and sold it in 2000 they would have lost approximately 50% of their investment. I am sure there were people in 2000 who decried gold as an investment when it dropped to almost $250 an ounce. I hope people didn’t listen as gold is now trading for over $1,200 an ounce.
It bothers me when people look at just the monetary price of a home. Its value is so much more than that. Your house provides shelter and a place to spend time with friends and family. Yet, your home also is expected to provide a return on investment. What other big ticket item that we buy do we expect that from? We don’t expect cars to appreciate. We don’t expect a boat to appreciate.
But, if a return is what you are looking for, let’s compare housing to the stock market. Not in short term intervals but over the long run. Here is the percentage return you would have on May 31, 2010 if you invested money in each of these instruments on January 1, 2000:
Real Estate was the best investment even throughout one of the most difficult decades in American homeownership.
We will cover Dumb Reason #2 – Renters are happier than homeowners next week.
We want to thank our friends at KCM blog and Steve Harney for this post.
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May 2010 Existing Home Sales Is Better Than The Headline Data Suggests
Wednesday, June 23rd, 2010
Existing Home Sales dropped in May for the first time in 3 months but still managed to post its second-highest since November 2009, buoyed by the expiring federal tax credit program.
An “existing home” is a home that cannot be considered new construction; a resale of an existing home. Existing Home Sales fell 2.2 percent in May.
The press is calling the drop in sales “unexpected” and disappointing, but a deeper look at the data shows the news isn’t as bad as it first appears.
First, on a regional basis, sales were mostly solid. Only the Northeast region posted a loss. The West even managed a gain.
- Northeast : -18.3 percent
- Midwest : 0.0 percent
- South : +0.5 percent
- West : +4.9 percent
Second, the supply of homes for sale dropped to 8.3 in May and, because home prices are based on supply and demand, this is a positive for pricing.
By comparison, in 2008, the average existing home inventory was 10.4 months.
And, lastly, in May, first-time home buyers represented 46 percent of all buyers. The number was likely buoyed by the tax credit program but that doesn’t damper the fact that first-time buyers provide a support floor for the housing market.
First-time buyers in Salt Lake enable “existing owners” to move-up to bigger homes, which, in turn, trickles up to the mid-size and jumbo markets.
Analysts expected more from May’s numbers and that may explain why the reaction to the data is generally negative. However, in many cities, home resales did just fine.
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