DAVID HARRELL

Mid-Year 2010 Review - New Castle County, DE Housing Market

Buyers seeking to take advantage of the soon to expire tax incentive fueled new contract activity in the month of April 2010 with a 56% jump compared to this time last year. Just as quickly, after the expiration date, the market momentum dropped off with a decline of 38% in May and June 2010 as compared to the same months last year. Overall, new contract activity for the 2nd quarter of 2010 declined 6% compared to the 2nd quarter of 2009 (chart 1).

Year to date as of June 30, 2010, there is an increase of 14% in the number of sold properties compared to this time last year. In addition, 3% more properties went under contract in the first half of 2010 than in the same time period last year. Median home prices have declined slightly (3%), and the number of homes for sale has increased by 6% (chart 2). 

MARKET OVERVIEW

Looking at the local markets within New Castle County provides us with further insight. Pricing declines in four of the areas range from 2% in the Newark/Glasgow area to 7% in the Wilmington market. All of the areas experienced an increase in sold properties compared to last year to date. The Hockessin/Greenville/Centerville market shows a 23% increase in median sales price, this indicates that higher priced properties saw a bit of recovery with the sale of 6 homes over $1 million compared to the sale of 3 homes over $1 million last year at this time (chart 3).

SUPPLY vs. DEMAND

Market conditions vary within our geographic area and also within price points. A good barometer of market conditions, months of inventory indicates how long it will take to sell the existing supply of homes at the current sales rate. Generally speaking, in a balanced market there is approximately five to six months’ supply of inventory.  A supply of less than five to six months generally favors sellers; there are more buyers in the market than homes for sale. Above that level, market conditions may be more favorable for buyers; there are more homes for sale than there are willing and able purchasers.

Demand as indicated by the number of homes that went under contract at each price point gives us another view of the impact of the tax incentive. There is a dramatic increase in new contract activity in April for homes priced below $400,000 –generally the price point to be eligible for the tax rebate for  first time home buyers and repeat buyers. This artificial demand spurred by the tax incentive slowed considerably after April. By the end of June, supply as measured by months’ of inventory, grew to 14 months from just over 6 at the end of April. As the market seeks to rebalance we will be better able to gauge the real level of demand over the next few months. (chart 4).

MARKET BAROMETERS

In addition to supply and demand, economists follow three other housing market indicators to assess the direction and overall health of the market: the number of new listings coming on the market; the average number of days it takes a home to sell; and the sales price as a percentage of the original list or “asking price.”  

For the first six months of 2010, there is a 10% increase in the number of newly listed properties (chart 5) when compared to this time last year. Roughly 15% or 823 of the properties listed are considered distressed properties, that is, they are either in foreclosure, bank owned or short sale listings. For comparison purposes, this data is not available for the same time period last year.

The average days on market prior to sale (chart 6) has declined from this time last year and stands at 78 days vs. 83 days at June last year. On a positive note, the area has experienced a downward trend from month to month during the first half of 2010.

Finally, home price reductions from the original list price, often referred to as “listing discount” have stabilized at 93% over the last 3 months (chart 7). The stabilization of this indicator from earlier in the year suggests that sellers are listening to the market when setting their list price; there is less of a gap between buyer and seller during price negotiation.

Overall the first half of 2010 shows modest improvement over 2009. The slow road to recovery continues – the artificially created demand, both high and low, experienced over the 2nd quarter leaves us waiting for signs of rebalance. Other factors, such as the concern for the many home owners upside down on their mortgage, our unemployment rate of 8.8% and the number of distressed properties in the market all impact the recovery of our local housing market.
 
At Patterson-Schwartz, we have helped people buy and sell in every kind of market. We continue to lead the way with superior guidance and strategy that is necessary to successfully navigate a real estate transaction in today’s environment.  Please allow us the opportunity to put our knowledge and experience to work for you.

(All reports presented are based on data supplied by TReND MLS. TReND MLS does not guarantee nor is it responsible for its accuracy. Data maintained by the MLS may not reflect all real estate activities in the market. Information is deemed reliable but not guaranteed. Data is as of 7/16/2010)