The National Association of Realtors (NAR) revealed that sales of existing homes for the nation fell by more than 27 percent in July 2010.
While previous downward economic cycles have been spurred on by strong activity in the housing sector, this time around it is a much different story.
The homebuyer tax credit that expired at the end of June 2010 is noted as the main contributor for the surge of home buying activity in the first half of the year. Borrowers jumped into the market to take advantage of the $8,000 and $6,500 credits. In many ways future demand was pre-empted by the tax credits and the lack of sales in the month of July can be attributed to the lack of an incentive to buy that the tax credits manifested.
The lack of tax credits are not the only factor when we examine the decline of existing sales throughout the country. Low mortgage rates coupled with low housing prices have not been enough to get many buyers off the sidelines, and this phenomenon can be attributed to the perceived economic outlook. Fear of weak job growth or possibly job loss create a problem for would be buyers. Weak consumer confidence has penetrated the psyche of borrowers who could otherwise purchase a home now. The lack of confidence in the market, fear about future job losses and an overall slow economic recovery is enough to lead many to fear that house prices may continue to fall – and that promotes the housing blues.
The reality is that the economy is recovering, albeit at a slower pace than we had anticipated and job growth has begun in certain sectors. Housing construction is also at an all time low which allows for inventory levels to remain on pace with sales of properties already on the market. NAR chief economist Lawrence Yun recently commented “there could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve”.
On a local level in Naples, Florida inventory levels for single family homes and condominiums have reached their lowest levels since 2007. The most active portion of the market continues to be properties priced below $300,000, with the median price of properties sold in the second quarter of 2010 hovering at $200,000. The $300,000 segment comprises 69 % of the current market. From July 2009 to July 2010, 8,086 homes were sold in the Naples area of which 5,618 were homes priced below $300,000. Current inventory figures indicate a total of 8,731 properties for sale in Naples, of which 30% are properties priced at the $500,000+ mark. The near equal level of sold and available properties indicates a strong level of stabilization in our local market.
The sustained activity levels at the $300,000 can be attributed to the owner occupier market along with the investor market that has identified the Naples area as a profitable location to buy and hold property over the long term. The investor market is purchasing property with cash at lower price points, refurbishing their assets and turning their investment into rental options. The availability of competitive mortgage products coupled with favorable inventory levels provide all types of buyers with an excellent opportunity to purchase property. Sellers have realized that well priced properties are being sold in this market regardless of the national housing climate. And as the number of retirees continues to swell many have already identified the opportunities in Naples.
Downing Frye Realty closed $121 million in the month of June and is on target to reach its goal of closing over one billion dollars in sales by year end.
* Contact Fatima Khokhar Knapp for additional statistical information on the Naples area: Fatima@NaplesMeridian.com