DAVID HARRELL

Mid-Year 2010 Review - Kent 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 70% jump compared to this time last year. Just as quickly, after the expiration date, the market momentum dropped off dramatically with a decline of 23% in May and June 2010 as compared to the same months last year. Overall, new contract activity for the 2nd quarter of 2010 increased 5% compared to the 2nd quarter of 2009 (chart 1).

Year to date as of June 30, 2010, there is an increase of 33% in the number of sold properties compared to this time last year. In addition, 12% 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 decreased by 15% (chart 2). 

MARKET OVERVIEW

Looking at the local markets within Kent County provides us with further insight. A decrease in average prices spurred an increase in the number of homes sold in many of the market areas; Dover, Camden Wyoming, Harrington, Magnolia and Smyrna (chart 3).

SUPPLY vs. DEMAND

Market conditions vary within the 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 $250,000 –generally the price point for the tax rebate for  first time home buyers and repeat buyers in this market area. 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 18 months from just over 10 at the end of April. As the market seeks to rebalance over the next few months we will be better able to gauge the real level of demand (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 an 8% decrease in the number of newly listed properties (chart 5) when compared to this time last year. This is a positive trend and helps with absorption of the existing homes for sale.  Roughly 15% or 261 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 increased from this time last year and stands at 121 days vs. 109 days at June last year.

Finally, home price reductions from the original list price, often referred to as “listing discount” averaged 93% for the first half of 2010 vs. 91% this time last year (chart 7).  Buyers faced with the deadline of April 30 for tax credit eligibility may have had less price negotiation power thus artificially stabilizing this indicator. Again, the results of the next few months will likely provide a more realistic picture of the market.

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 State 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 7/20/2010)