2010: State of the Real Estate Market
" Pricing: There is continued downward pressure on home pricing, caused mainly by the number of foreclosures or bank owned properties on the market and the poor economy. According to the S&P, Case-Shiller 20-city "Home Price Index" by 2010 nationwide home values had receded to 2002 levels and average of a 35 % decline.
While 2010 brought pricing stability to some major markets, many in neighboring California, Jackson County saw the median price of existing homes continue to decline. In fact, existing Home Sales plunged in July as the full effect of the expiration of the home buyers' tax credit at the end of April was felt. Because home re-sales are counted when the sales contract closes, this data represents sales made primarily in May and June, after the tax credit expired. Home re-sales are now trying to find an equilibrium level supported only by the underlying fundamental factors.
Pricing in Jackson County continues to decline and in 2010 declined another 15% for a total of 40% since 2005. The median price home went from $275,000 in 2005 to $165,000 in 2010.
" Inventory: Jackson County will end 2010 with about 11 months
of inventory (2000 homes) on the market
..meaning there are 11 homes
for every buyer.
" Market demand: In the 1st & 2nd quarters of 2010 we saw a 14% increase in existing home sales compared with same quarter last year. This trend slowed after the expiration of the home buyers' tax credit in the 3rd quarter. But due to all time low home prices, low interest rates and investment properties that pencil home sales demand may be on the rise in the 2011.
" Sales by price point and type: To date in 2010 we saw 95.5% of all home sales under $500,000. We also saw 23% of the inventory (REO & Short Sales) account for almost 50% of the sales.
2010 Home Sales - Jackson County
$30,000 -$199,900 = 57% of all home sales
$200,000 -$299,000 = 25% of all home sales
$300,000 -$399,000 = 10% of all home sales
$400,000 -$499,000 = 3.5% of all home sales
$500,000 -$599,000 = 2.2% of all home sales
$600,000 -$699,000 = 1.1% of all home sales
Median Priced Home
" Interest rates: Rates on 30-year mortgages have fallen to an average of 4.2%. This is the lowest level on records dating back to 1971. The average rate on a 15 year fixed loans is down to 3.62 percent. As of November 2010 the Federal Reserve announced they will buy $600 Billion more in Treasury bonds through the middle of 2011 which is an action that should keep down interest rates on mortgages and other debt.
" High end properties: More bank owned high-end residential properties (over $500,000) and commercial properties are coming on the market in 2010 at extremely attractive pricing putting additional pricing pressure on this market. Because the market is limited for homes over $500,000 we are seeing high end bank owned properties come on the market at extremely discounted prices some as low as 50% of the homes value in 2005.
" New homes: There is a relatively weak new construction market as bank owned and existing home sales are now less than new construction cost.
What does this mean for Sellers?
" Is now a good time to sell? If you need or want to sell your home, the sooner the better, as prices are continuing to drop ..or if you can wait 3-6 years for to see prices stabilize and begin to appreciate. If you are selling your home in order to buy another home, than you may be just swapping dollars and this may be a good time to do it, especially if you are trading up.
" Competition: We see aggressive competition from bank-owned and short sale properties, which represented over 50% of the sales in 2009. This number will continue or increase in 2010. Because bank owned and Short Sale properties are the majority of homes sold all sellers must compete with these properties to get their own homes sold.
" It's all about the price: Pricing it right is the key. Don't trail the market, be the market! Banks owned properties typically come on the market at "fair market value" but then decline in the neighborhood of 10% a month until sold. It's a price strategy that works.
What does this mean for buyers?
" Is now a good time to buy? If you are purchasing a home with a bank loan right now is most likely as good as it is going to get! Home prices are at all time low, interest rates are at a historical low.
" Cash Buyers: If you're buying with cash your have less pressure as we will continue to see attractive home prices. However, with cash you can get additional discounts. Seller's, especially banks, are aware that the banking world is still in turmoil and getting a loan processed has become more difficult, so we are returning to the days where "cash is king" and has greater value than a bank loan.
What does this mean for investors?
" Buying a rental home: Capitalization rates have drastically increased on investment properties as we are seeing investors earn rates as high as 9% on rentals. Rental income has become the new dividend and with low interest rates this has become the best time in years to buy investment properties. For more details see our website www.hmoregon.com and click on the "Investments tap".
State of the Real Estate market
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