Sunday, January 30, 2011

Charlottesville Albemarle Area Pending Home Sales, January 2011

This post looks at
  • pending home sales for January, 2000-2011
  • the 18-24 month market performance lag behind NOVA
  • local and national unemployment
  • 66% of all sales in 2010 were at the $300k or less "first time buyer" price point and the Federal Tax Credit was in place
Below is a chart of "pending" sales, meaning they'll close in 30-90 days.  But not all will close.  Of those contracts that are "contingent," the primary reason for failure is that buyer's current home will not sell.  Other pending sales will fall apart due unemployment or failure to rate-lock mortgage, or seller doesn't meet buyer's conditions, or home inspection reveals deficiences.  The numbes come from RealCentralVA.

In his post, Realtor Jim Duncan doesn't mention what is currently motivating some buyers: the historically-low mortage rate, which as of 1/27/11 was 4.8% for the 30 year fixed. 

AND while prices in this area often remain at bubble highs, relative to the pre-bubble rate of appreciation and inflation (1-2% annually) some prices are lower than in the previous three years--especially when the contract is for a foreclosure, short sale, and (interestingly) in some cases new construction.

BTW, we don't think this area is experiencing "housing armageddon," as Jim termed it in ref to a recent post highlighting local foreclosures.

But the turmoil is noticeable.  Could it be that this area is just now entering a couple of years of rolling around trying to find its bottom?  It lags Northern Virginia by 18-24 months, which has had a wave of foreclosures rise then clear.  This kind of turmoil can bring higher inventory, unstable prices, sellers going under due to fewer buyers and lack of economic recovery, and therefore more foreclosures.  Local unemployment remains much higher than just a few years ago; national unemployment is projected to remain above 9% nationally through 2011.

The 18-24 month Northern Virginia lag isn't our idea: it was put forth by the Va Housing Development Authority in their market conditions report for the CAAR.

Additionally, there are fewer qualified buyers at the low end "first time" price point--$300k and less-- ince the tax cred ended. 66% of all area sales in 2010 were in this category.  Sales dove when the tax credit ended mid-2010.  And there are a tiny number of buyers at the "high-end"--$900k and up--which has years worth of inventory.

Caveat emptor.  Buy as if it's 2012.  (or 2013.  Or 2014.)

Below: January Pending Contracts.  2011 is just shy of 2010's number, but lower than the year 2000; it's 48% off the peak in 2004.

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