DAVID HARRELL

3rd Quarter 2008 Review - Southern Chester County, PA Housing Market

The Housing Market (chart 1) ended the third quarter with a decline of 21% year-to-date in the number of sales (to 595 units) compared to the prior year-to-date total of 753. The number of properties available for sale increased by 3.3% to just over 1200 homes compared to September 2007. Pricing indicators show the median sales price declined 3.4% in September 2008 ($337,000) compared to September 2007 ($349,000).  A further sign of the change in this area is the 6.6% decline in the average sales price, $412,414 year-to-date vs. $441,334 this time last year. 

The days on market until a property is sold has increased to 95 days, compared to 77 days last year. Potential buyers are taking longer to make purchase decisions and have more property choices. As inventory rises, there is the expectation that there will be an increase in negotiability resulting in larger discounts from list price. The data does confirm that homes are selling with further reductions from the original list or asking price, as motivated sellers seek the “new market price” for their properties. To energize this market, a motivated seller must aggressively price their property in relation to comparable homes in the area and showcase it with strong curb appeal - this in turn will stimulate buyer interest and activity.

Looking at three housing market indicators on a monthly basis – the number of new listings coming on the market, the average number of days it takes for a home to sell and the sold price as a percentage of the original list or “asking” price – all confirm that the market is showing the continued stress of our weakening economy and tighter credit.

For the first nine months of 2008, the number of new listings has decreased nearly 10% (chart 2) compared to the same time period last year – fewer properties entering the market is a  positive trend for the overall absorption rate of homes for sale. Homeowners who have no urgency to sell are reluctant to list their properties until economic conditions improve.  The average time on market prior to sale has increased 23% in comparison to last year and has been fairly volatile over the past 6 months (chart 3)  - though with fewer than 600 transactions for our analysis, this is to be expected. Lastly, there had been some improvement in the “sold price” as a percentage of original list price until the month of September when it moved back to 93% (chart 4).  All of the indicators correlate - an abundant supply of homes for sale provides more choices for buyers, more competition for sellers and more price negotiation.

The weakening economy and tighter credit are key factors to the current housing market. Mortgage money is readily available within a changed lending environment that may require larger down payments, larger cash reserves, and tighter qualifying ratios. The turmoil in the financial markets leaves a potential buyer with a lot of information to process with the end result, a delayed purchasing decision.

 If you are planning on buying a home, either as a first-time buyer or as a move-up buyer, focus on the opportunity you have today to find the home you really want, with access to financing with low interest rates, and be less concerned about a potential short-term decline in price. Over time, as in past real estate cycles, prices will rise again.

(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 11/11/08. For analysis purposes, Southern Chester County includes Avondale Borough, Birmingham Twp, E. Marlborough Twp, E. Nottingham Twp, Elk Twp, Franklin Twp, Kennett Square Borough, Kennett Twp, L. Oxford Twp, London Britain Twp, London Grove Twp, New Garden Twp, New London Twp, Newlin Twp, Penn Twp, Pennsbury Twp, Pocopson Twp, U. Oxford Twp, W. Marlborough Twp, W. Nottingham Twp)