2012 Market review
2012 Market review
Well, it’s that time of year again where I go a little crazy analyzing numbers. I started in 2004 and at that time I didn’t really look at numbers very closely to try to see where things were going. If I had I could have (at least somewhat, I don’t think anyone saw the depths that we were heading to) foreseen the trouble that we were heading to. 2006 had strong pricing numbers, but inventory numbers were increasing rapidly. 2007 and 2008 were the really bad years: foreclosures and distress sales went from being 15% of the market to over 50% of the market and prices reflected this change. We’ve leveled off a bit after that, but still a declining market through 2011.
So, now here we are with the opposite problem of 2006: we are seeing inventory numbers come down. We calculate inventory in months of inventory – at the current rate of sales, how long would it take to sell everything on the market? By definition a seller’s market is 0-3 months of inventory, a balanced market is 3-6 months and a buyer’s market is over 6 months. For a while we had over 12 months of inventory, double what we would consider a buyer’s market. However, now we are experiencing a balanced market. Inventory and demand are in line with each other. We still see a lot of foreclosures and short sales, but they are now making up a third of the market rather than 60% of the market. Still above the rates we saw before values came down, but a great improvement from where we were. Banks are learning how to do short sales better so that hopefully the amount of vacant, foreclosed homes becomes less and less.
Average sales price for 2012 for homes was $126,490, up 10% from last years average of $114,991. Does this mean that the value of all homes went up 10%? Unfortunately, no, it doesn’t mean that. But what it does mean is that the amount of homes with a sales price of under $50,000 is down (27.5% of sales last year and 22.6% in 2012) and the amount of homes over $500,000 is up 15%. These together make for a better average sales price.
As you can see, we are recovering but not skyrocketing, which is a very stable way to recover. There is a lot of underlying strength to the market.
Dare I make a prediction for 2013? Let me dust off my crystal ball…
I think that we will see more short sales and less foreclosures and that collectively we’ll see distress properties as a percentage of sales come down, I think we’ll see the amount of new construction go up as inventory levels tighten up (Use a realtor to help you find the right builder and make sure you’re getting the best deal possible!), I think that prices will continue to inch up and that the homes below $50,000 will continue to shrink.
Everything points to a recovery right now. Of course, interest rates play into this, as does the potential to lose the mortgage interest tax deduction. However, I think that no matter the rates or the tax benefits, people will continue to need housing and we will continue to recover.
It feels so good to write about good market stats! If you’re wondering how all of this affects the value of YOUR home, please give me a call.