In the next few months, we’ll know whether the rise in prices and activity this spring was “for real,” or if it was another “bubble” created by tax credits. Activity in July and August slowed considerably, not only in comparison to last year but in comparison to any year in the past decade. Though unit sales and dollar volume were up through the first six months of the year, they declined 20%-30% in July and August. To date, average price has continued to climb in 2010 (in comparison to 2009) but this increase looks tenuous given increasing inventory and decreasing numbers of first time buyers.
STATISTICS
For the Philadelphia area*, when comparing August 2009 to August 2010:
Closed dollar volume was down 26% in August 2010: down 24% in PA, down 31% in NJ
Closed units decreased 29% in August 2010: down 28% in PA, down 33% in NJ
Average price was up in August 2010: up 4.6% overall, up 5% in PA, up 3% in NJ
Pending properties decreased 24% in August 2010: down 23% in PA, down 25% in NJ
Average days on market for closed properties climbed 2% in PA (79 days) and 7% in NJ (102 days)
REALITY CHECK
On the good news side, there was some “settling” in the decrease of the number of “pending” properties. As the chart shows, from January-April, there was steady growth in the percentage increase of pending properties (comparing the months in 2009 to the same months in 2010). When the time to be under contract to qualify for the tax credit ended on April 30, there was a 38% decline in pending properties in May 2010 compared to May 2009. The good news is that drop has subsided every month, leading to a 24% drop in pending properties comparing August 2009 to August 2010.
That said, this year-over-year decline in pendings will probably be more noticeable in the next few months as the comparisons are made with the Fall market from 2009 (before the first tax credit expired). It may take until mid-2011 for this trend in pending properties to change. Hopefully, the market next year will undergo a lasting (un-stimulated!) change, and we may see signs of enduring growth over the summer of 2011.
There was a post in the “ActiveRain” blog that demonstrated the loss in the market in the Westchester County (NY) area that has some application to the Philadelphia area*:
Over the past decade, an average of more than 7,200 properties closed every year in August in the Philadelphia area*.
In August 2010, approximately 3,700 properties sold in Philadelphia area*.
Translated into “real money” for “real sellers” – in August 2010, almost 50% fewer sellers got nothing, although there were nearly twice as many properties active in the market!
OUCH!!!
Inventory continues to be dangerously high given the decline in closings and pendings: there are a record number of properties on the market now, while there were fewer closings and pendings in August 2010 than there had been in any August since 2000. These developments will probably continue through the rest of the year, as the market works its way through a 12-18 month period of adjustment to the end of the tax credit.
*Statistics described in the above information as “the Philadelphia area” are downloaded from the TREND Multiple Listing Service, and they are based on information from Berks, Bucks, Chester, Delaware, Montgomery and Philadelphia counties in PA; and Burlington, Camden, Gloucester and Mercer counties in NJ.
With permission Chuck Cosgrove
