Hill Slowinski • Real Estate: Blog

Positive Trend Reverses Declines Since 2004

New sales contracts in 2009 for residential properties were 21% ahead of 2008.   The number of properties on the market at the end of 2009 was 25% lower than the end of 2008 -- a five month supply. This is a market which most housing economists feel is in balance between buyers and sellers. 

Falling property values opened the door for a new group of homebuyers who had been priced out of the market for several years. Average and median sales prices of single family homes, still well below 2008 prices, are affected by the larger than usual percentage of home sales at lower to moderate prices, bringing the average and median down.  For condominiums/coops, where sales are about even, the reverse is true, thereby inflating those numbers.

Single-Family

Fueled by huge increases in the low end of the market, sales of single-family homes finished the year 23% ahead of 2008 in number of settlements and 28% ahead in number of total pending sales.  As a result, sales of homes priced below $200,000 were up an incredible 262% over last year.  Sales of homes between $200,000 and $300,000 had a 32% gain, while homes priced from $400,000 to $600,000 were up 16% over 2008. 

In 2009, 57% of  sales under $200,000 were foreclosures while only 9% of the homes sold over $200,000 were listed as foreclosures.

Sales of homes priced above $800,000 were down 9% for the year, with sales over $1.5 million down 12%.  In the upper brackets, in December pending sales of homes above $1.25 million were up 54% over 2008 and homes between $600,000 and $800,000 saw a 119% increase.  Overall, pending sales in December were up 27% from last year. 

The inventory of available homes at the beginning of 2010 is 28% below 2008 EOY inventory. The effective inventory was 4.3 months, well below the 2008 year-end number of 7.57 months.  Inventory has continued to fall to the point where some neighborhoods and price ranges are suffering from a lack of inventory.

The year ended with the average home price down 17% from 2008 and the median price down 18%. 

Condominiums and Cooperatives

Sales of condos and co-ops ended with a 9% gain over 2008.    Condo/co-op sales also had a large increase in the lower end of the market, with units priced below $150,000 up 66% from last year.   There were also advances in the upper end of the market as sales of units between $800,000 and $1,000,000 jumped 59% over last year, while sales of units over $1.5 million were up 20%.  There were also 13% increases in the $300,000 to $400,000 and the $500,000 to $600,000 ranges.

The year ended on a mixed note for condominium and cooperative sales in December.  The year ended with 6.26 months of inventory, down from the 9.57 months at the end of 2008.

The total inventory of available units ended the year at the lowest point in four years, 22% below the same point last year.  This indicates new condos introduced to the market over the last few years has finally been absorbed, and with very few new condo projects scheduled to come on the market in the next year, the signs are good for a strong 2010 in the DC condo market. 

2010 Outlook

The gains for moderate priced homes were possible because of increased affordability and the availability of financing under the FHA and Fannie Mae/Freddie Mac up to $729,750.  Conversely, sales of homes above this limit were affected by the lack of available financing and strict down payment and credit score guidelines.  

Looking ahead to the single-family market in 2010, low inventories and increased sales (hopefully combined with increased availability of credit) should bring a moderate increase to home prices for the first time in two years.  It is more likely that prices for both homes and condos/co-ops have declined by at least several percentage points this year but that this decline is close to bottoming out.

 Price trends always trail those of unit sales by up to a year; so with sales starting to increase it is likely that prices will follow sometime by the middle of next year.  But gains for both sales and prices are most likely to be in line with the moderate recovery projected for the overall economy.  

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Third Quarter Results Show Prices Stabilizing, Confidence Building 

Led by a surge in single-family sales, new contracts for all residential properties jumped a very impressive 38% from last September.  Nine months into 2009, combined sales are 13% ahead of those at this point in 2008 and the gap between the top of the market in 2004 and now has narrowed to 28%.

There was a slight (2.4%) increase in the number of properties on the market at the end of this September from the same point last year; but with the increase in sales, the effective inventory of homes and units on the market today is down to 3.7 months (higher for condos and co-ops than for single family homes) as compared to 4.9 months in September of 2008.

The average sales price of single family homes, condominiums and cooperatives declined slightly from mid-year but the decline was small enough (in the 2.5% range) to suggest that we may be approaching the bottom.

Single Family Homes

There was a sudden sharp upturn - up 40% from last September -- in the number of new single family contracts in September.  Year-to-date, new contracts were up 21% from a year ago with these gains largely coming from homes priced under $800,000 (over 80%). Home sales are lagging above $800,000 and particularly those over $1,250,000.

Rather surprisingly, fewer new listings came on the market this September than a year ago and with stronger sales the inventory is down nearly 19% from this time in 2008. Some potential sale homes may have been diverted to the rental market for a year or two  (See recent articles at: HillSlowinskiRealEstate.com and HillSlowinski.com).  This has left only a 3.4 months supply of homes currently for sale, which is lower than it has been for years.

Average sale prices are presently off 16% from the end of last year but they are down only 1% from mid year. Median prices are down a similar amount from 2008 but they were actually up a fraction from the end of the second quarter in June.

Condominiums and Cooperatives

New contracts on condominiums and cooperatives rose 35% over September of 2008.  The largest increases over last year were in the $200,000 to $300,000 range (up 48%) and the $500,000 to $800,000 range (up 52%). 

Through nine months of 2009, contract activity on condos and co-ops is up 5% from the same point last year.  Most price categories show slight losses or gains from 2008. The most activity for the year has been in the $300,000 to $400,000 range (28% of the market) and that range is ahead of 2008 by 12%.

The inventory of available units at the end-of-September is 13% lower than at the same point last year.  The effective inventory actually went up slightly to 4.17 months.  The average price of a condo/co-op in the District is even with 2008 prices at this point, while the median price is down 1%. 

Summary

All of this strongly suggests that the decline in single family home prices is nearing an end, but it will take months, probably into next year, before we begin to see even small gains.  With sales apparently on the upswing we can anticipate seeing prices stabilize by late this year or early 2010 but price increases are likely to be modest, at best, after that.  Sales were stronger than any other month this year and all the way back to June of 2005.  Favorable interest rates and concerns that the first-time buyer subsidy may not be renewed certainly contributed to this, but the strength of this upturn certainly indicates at least some improvement in consumer confidence about our local housing market.

Careful Consideration Needed Before Removing Homes from Sale Listings

In May and June, many sellers, who saw little buyer interest during the Spring market at the prices they were seeking, removed their homes from the market.  They feared home values had not stabilized or would not meet their expectations, and they anticipated the market would return stronger in 2-5 years.  Renters benefited, in the meantime, as many owners listed their homes for rent in the interim, increasing the rental inventory.  To get them rented quickly, though, owners wisely resorted to offering concessions (e.g., first month free, price reductions) because each month vacancy reduced overall income opportunity.

This strategy may or may not be successful in the long term, depending on the attributes and characteristics of the home, the neighborhood, comparable sales, nearby foreclosures, and regional economy.  There are many factors owners need to consider in transitioning a home from a primary residence to a rental property.  Among them are:

• Research the market for vacancies and comparable rentals and realistically assess your neighborhood's market rate for rent
• Check federal, state and local regulations - some require the owner to obtain a license and lead certifications
• Check your homeowners insurance coverage and convert to a rental housing policy
• Co-op, condo, or homeowners' association rules often limit the number of rental units
• Check with federal, state, and local authorities for landlord-tenant regulations
• Know your fair housing laws, lead paint regulations, and disclosure responsibilities
• Perform a thorough background and credit check on applicants
• Renting your home may adversely affect your ability to refinance the mortgage later, so determine whether to refinance before renting
• Consult your financial planner, lawyer, and tax advisor if you plan eventually to sell and take the federal capital gains exemption   
• Account for management fees, legal fees, vacancy periods, insurance, repairs, time, and monthly expenses including mortgage payment, property taxes, etc.
• Prepare for the unexpected: default rent payments, eviction procedures, damages and repairs, legal fees, etc.  These can easily wipe out any profit
• See www.irs.gov for IRS Publication 527 on Residential Rental Property
• Assess whether a property management professional should manage the property

- Hill Slowinski, serving clients in DC, MD, and VA

Yes, we are handling more of these transactions in our office now than ever before.  I am finding myself more frequently in conversations with clients regarding the matter of foreclosures in our area.  They believe that the correction in the economy will necessarily generate more of these in the closer-in Washington Metropolitan region.  

I have access to a database that provides reliable information on foreclosure properties. This information is from a separate information source and not derived from the MLS listings.

What does this mean to you?  

• If you are planning to sell, I will check if any homes in your neighborhood are in process and whether that may affect our strategy for selling your home. 
• If you are buying, I will determine if any targets are in pre-foreclosure or scheduled for auction. 
• If you are interested in buying challenged properties, I will search for bank-owned properties that may be new opportunities. 
• I can help find pre-foreclosure and auction opportunities for you and investors working with you.

I can research for you properties in all stages of the foreclosure process.  The foreclosure process is complex and my research results will include foreclosure-effected properties in one of three stages: Pre-foreclosure, Auction and Bank Owned/Real Estate Owned (REO):

• Pre-foreclosure - identifies "short sales", homes on which lenders or other parties have begun the default against delinquent property owners. This can help you locate short sale opportunities.
• Auction - identifies "foreclosures", homes that have an auction date to sell the property as a result of a default and foreclosure related proceedings. This can help you locate investment opportunities.
• Bank Owned/Real Estate Owned (REO) - identifies properties currently owned by a bank, lender, or other financial institution due to a foreclosure-related proceeding. This can help you locate listing opportunities.

In addition, I will produce and email reports that include approximately 20 data fields that provide a comprehensive record of the foreclosure process.  Contact me for more information at: Hill@HillSlowinski.com or HSlowinski@LNF.com

 Hill Slowinski

W.C. & A.N. Miller Realtors, A Long&Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com

A recent Forbes piece you may find interesting:

For enterprise, Washington, DC/Northern VA is #45  of the top 200 "places out there that remain attractive to businesses", say Forbes in its special report,  "Best Places For Business And Careers" (See March 25, 2009 story).  

 --Hill

Hill Slowinski 

W.C. & A.N. Miller Realtors, A Long & Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com

Two recent Forbes pieces you may find interesting:

 According to Forbes magazine, in a recent article, "America's Most Livable Cities", which asks, "Looking for a better way of life? Start your search with these places", Bethesda, MD is the #2 "most livable" city in the US (See April 1,2009 story). 

 For enterprise, Bethesda is #48 of 200 "places out there that remain attractive to businesses", say Forbes in its special report,  "Best Places For Business And Careers" (See March 25, 2009 story).  

 --Hill

Hill Slowinski 

W.C.&A.N. Miller Realtors, A Long&Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com