MARKETPLACE ANALYSIS

What’s Normal?

by Ann Guiberson, PRO President/ CEO®

Climbing inventory, rising mortgage rates, and slower home sales in the Pinellas market are changing the ways in which REALTORS® market properties and work with buyers and sellers. Unlike the past two years, real estate agents .And they must place more emphasis on pricing, as buyers are more cautious about looking at homes that appear to be overpriced. As the market settles into a more normal pace compared to the previous eighteen months, Pinellas REALTORS® are finding many ways to succeed during the transition. Some agents encourage sellers to price their homes in the bottom 25 percent of comparables and then be prepared to reduce their asking price from 3 percent to 5 percent after three weeks if showing activity is poor. Many REALTORS strongly encourage sellers to have a home inspection done and make the repairs before they will actively market the home. Agents are educating sellers to realize they have to do more to attract buyers at a time when there are a lot of homes from which to choose. In March, single family inventory grew by over 11% since February and by 33% since last December. The amount of inventory sold (absorption rate) in March was 14.7% of the total inventory, compared to March 2005, when 43.4% of the single family inventory was sold. The absorption rate for condos was 11% compared to 43% the previous March. The good news is that the number of March residential sales looked better than they have since last November with total unit sales at 1,647 compared to 1,433 in November, 1,555 in December, 1,208 in January and 1,228 in February. While the “feels like” temperature of home sales seems low, when seen from an historical perspective, sales are quite good —they just are not on the blistering pace set in 2004 and 2005. Compared to 2003, however, residential sales are better than the very good year we had in 2003. (See the residential sales charts in Marketplace Statistics in the Stats portal on www.pinellasrealtor.org.) The bottom line is the record number of listings on the market is not an indicator of a down market by themselves. To date, median prices are holding steady and should show a modest increase before the year is out. David Lereah, NAR’s chief economist, said most of the cooling in the housing market has already occurred. “We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month . fluctuations,” he said. “This normalization is healthy because it is taking a lot of the pressure off of the decision process for both home buyers and sellers—pressure that was driving abnormal rates of price growth across much of the country over the last few years.” Lereah also notes, “Higher interest rates had been tapping the brakes, notably in higher-cost housing markets since mortgage interest rates trended up last fall, but we’re seeing signs of stabilization in the market now with the sales rebound. Home sales should level-out in the months ahead. ”NAR President Thomas M. Stevens from Vienna, Va., said comparisons with market performance over the last year distort what people should expect from housing as an investment. “Housing is simply returning to a normal market, where annual home prices will rise a little faster than the overall rate of inflation,” said Stevens, senior vice president of NRT Inc. “However, in looking at total returns, you need to consider that the typical buyer is making only a modest down payment but enjoys a return on the full value of the home, which is many times the actual cash investment. In other words, normal is pretty good for the typical homeowner, and that’s what we expect for the foreseeable future. ”What can sales associates do to work in this market? • Encourage your first-time buyers to stay within their budgets because slower home-price appreciation means there will not be a quick build-up of equity to bail them out in the event of a financial crisis.• Tell your move-up buyers to avoid offers contingent on the sale of their current residence if they want to get a better price on their new home. • Counsel investors to hold on to their investment for a while and try renting rather than compete with other new and resale units. If they must sell, suggest they look to home staging to make their properties stand out. • For all residential resales, this market affords REALTORS® the opportunity to develop their value propositions as never before. Your knowledge of the market, of what it will take to price properly to sell, how to identify unique features buyers are seeking, negotiating skills, and the infinite number of other skills you bring to the table need to be packaged, tested, honed and perfected. While buyers and sellers catch their breath, REALTORS® can take advantage of this time to show exactly what real knowledge, real service, and real value are all about. ®

PINELLAS REALTOR® ORGANIZATION- May 2006