ARE WE THERE YET? To buy or not to buy – the big question of 2011

In Florida Real Estate Market, Market Analysis, Residential Market by Patricia Staebler

I wish I had a crystal ball to answer that question without a doubt, but with some market insight and good statistical diagnostic it should be fairly easy to provide some prognostics for the year 2011.

Usually market analysts first look back in the past, with the hope to gain insight in what is coming. We all know the past looks grim, but here are some interesting numbers for the year 2010, provided by the Association of Realtors:

Single-family market:

In 19 Metropolitan Statistical Areas (MSAs), five reported decreasing sales (Fort Lauderdale, Fort Myers-Cape Coral, Fort Pierce-Port St. Lucie, Lakeland-Winter Haven and Panama City).

In the same 19 MSAs ALL (yes, all) reported decreasing median sales prices, with changes varying from 1% to 14 %.

The statewide averaged numbers for Florida report a 5% increase in sales and a 4% decrease in median sales price.

Condo Market:

The numbers for the condo market do look different, the sales increased, but only due to harshly discounted prices:

In the 19 MSAs all but two areas reported increased sales; however ALL reported a decrease in the median sales price between 2 % and 30 %.

The statewide averaged numbers for Florida report a 29% increase in sales and a 15% decrease in median sales price.

Now after the look back, let’s take a look ahead and the best way to do that is to study the inventory and the absorption rate.

For the Mid-Florida region we have 49,695 single-family homes on the market and 5,018 were reportedly sold in January. Assuming the sales pace stays at the same level the existing inventory would be consumed in 9.9 months. Looking at the Manatee-Sarasota area we have 683 homes sold and an inventory of 6,787, which translates into an absorption phase of 9.9 months as well.

So, rounded we can say it will take about 10 months to absorb what is on the market right now, if no new homes for sale would be added. And that, ladies and gentlemen is the big unknown in this story. We really do not know how many foreclosures, repos, short sales, etc. are still lingering in the court systems. An absorption period of 10 months is not too bad; usually we say an inventory of 3-6 months is normal and indicates a balanced market. So without the further looming of foreclosures we could say with some degree of certainty that we are on the way to recovery. But with the unknown numbers of foreclosures which will hit the market at some point in time, we cannot be so sure.

If you are “sitting on the fence” on the lookout for a great deal, you should stay put for another three months at least. Investigate from time to time the inventory and absorption (your local real estate agent should be able to provide these numbers for you). If the absorption period closes in towards six months, jump off the fence and get your deal done.

As always, thanks for reading my blog, call with questions at any time.
And if a banker is reading this blog and can provide some insight into the foreclosure pool, I would appreciate it very much!

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