Real estate prognosis – the good and the bad
Being the eternal real estate optimist that I am, I read the national and local May home sales statistics with a fair amount of contentment. The numbers contained some good news, some bad news and a lot of mixed news.
On June 21, the National Association of Realtors released its May report of existing home sales. The report said that nationally sales of existing homes fell 3.8 percent from a year ago in the month of May. Home sale prices also were down by 4.6 percent from May 2010.
According to the report, there also is evidence that the market is bifurcating – splitting into two parts. Sales of homes under $100,000 were up 6.7 percent nationwide in May compared with a year earlier, primarily in the western part of the country. Home sales priced between $100,000 and 500,000, which represent the vast middle tier of the market, declined nearly 19 percent.
Real estate junkies like me love to analyze these types of statistics as a way of seeing into the future, but why is this really happening? The real estate industry has traditionally depended on homeowners trading up to more expensive properties as the engine to keep the market flowing. This engine has been slowed down since many homeowners are facing economic uncertainty, tighter lending criteria and a lot of market competition.
Many of these middle range homeowners are sitting on their properties giving up the thought of moving up any time soon. In addition this middle tier of homeowners are either underwater on their mortgages or have other debt as well as uncertainty in their jobs.
According to Stan Humphries, chief economist for Zillow.com, "What negative equity has done to the market is to gum up the conveyor belt that has worked pretty well. People can't move up, or they don't want to."
Things, however, are looking brighter for Florida in general and Manatee-Sarasota in particular. The May sales of existing homes and condos were up for the sixth consecutive month statewide. In May, Manatee and Sarasota single family home sales were up 5 percent even though the median selling price was down 8 percent from a year ago. The median selling price in Manatee and Sarasota for May was $153,700 compared to the national median price of $166,500.
Condo sales were also up in May compared to last year with a 7 percent increase. Condo sale prices, however, dropped 6 percent from last year to a median selling price of $142,900. The bargain prices in condos are especially attractive to international and cash buyers, who are making a serious impact in the marketplace.
As I previously reported, waterfront and/or water view condos are available on Anna Maria and in other parts of the county as low as $200,000, better than a 50 percent drop from their high selling point.
Statewide, Florida also has increased sales of 3 percent last month on single family homes, and statewide condo sales rose 17 percent.
So there you have it. We all know that appreciation will never happen until and unless the overwhelming amount of inventory is reduced. So the good news is that this appears to be happening, if not nationwide, at least statewide. The bad news for homeowners is, of course, lower selling prices, which on the flip side is also the good news for buyers.
If you're like me, you'll keep your rose colored glassed firmly in place in anticipation of the June numbers. It may be a struggle, but I believe we are gradually clawing our way out of the black hole.