June Real Estate Sales: Confusion Combined With Optimism

Two interesting bits of info moved across my computer screen about 6:15 this morning. Actually, three interesting bits.

The first was that the Rays won the baseball game last night with a key hit in the ninth inning. While that is a good reason to cheer, it is not what this article is about.

The second interesting bit was that PMI Group has done their quarterly research and determined that Tampa Bay has a 99-percent probability of seeing real estate values continue to fall through 2011.

The third interesting bit was that the Pinellas Realtor Organization released the June sales figures and they looked great compared to what we've been seeing for the past two or three years -- certainly not like an area that is going to see continued price declines for two more years.

The PMI Study

Mortgage insurer PMI Group, Inc. analyzes the nation's real estate market every quarter. They then project trends in pricing for the next two years. They are always looking two years out into the future and base their projections on such risk factors as income, interest rates, home prices and affordability data which has been collected since the early 1980's.

In their latest study, they said that Tampa Bay will experience about two more years of declining real estate prices -- actually, they said there is a 99-percent probability that Tampa Bay will experience two more years of declines. In fact, they said that 324 of the nation's top 381 metro markets face declines during the next two years.

Sounds like negative thinking to me. What's more, I'm not sure it's true. They clearly have not analyzed the June sales figures for Pinellas County and compared them to last year's figures. Let's take a look ...

June Sales Report

As usual with this report, let's start by looking at the Absorption Rate (AR). The AR, as you know by now, is determined by dividing the number of units sold in the month by the total number of listings in the MLS system.

For single family homes, the AR for June stood at 11.1%. That's a real nice, healthy jump from May's AR of 8.9%.

For condo's, the AR for June stood at 7%, and that's a nice jump from May's 5.7% AR.

So, as you can see, sales are increasing in the area. Remember, when property sells faster it usually reflects improving levels of demand, and increasing demand usually means prices want to go up rather than down. You remember that from Econ 101, right? The AR, by the way, has been going up for both single family homes and condos every month for quite a long time. I guess that's something the folks at PMI don't know about, or perhaps just overlooked.

June Single Family Listings

There were 6,702 single family homes in the Pinellas MLS during June. That's a decrease from May's 6,910. Fewer homes on the market mean that buyers need to start looking for their dream home now because the choices are getting slimmer with each passing day. How slim are the pickings starting to get? Well, while they are still pretty good in most neighborhoods, the choices are way down from where they were just two years ago. In March of 2007, there were 11,226 single family homes in the Pinellas MLS. That's quite a difference, and it means slimmer pickings for buyers.

Single family home sales in Pinellas County for June totaled 746 homes. Again, that's a nice increase over May's total of 616 homes sold. In point of fact, single family home sales have increased every month of 2009, starting at January's low of 381 sales. I like this ... it shows nice steady progress.

The median price for a single family home in June stood at $146,500. That's down 20.8% over June, 2008's median of $185,000. Still, the median price has risen slightly every month this year except for February. Prices have been pretty stable at about $145,000 or so and have varied only by about $5,000 in 2009. So, I'm seeing price stability which may be a sign that the market in Pinellas County has "bottomed-out" as they say. Still, if you are a seller, you need to price your property properly for today's market. Let your real estate agent or appraiser help you determine the correct market price.

Condo Sales For June

Condo sales picked up pretty nicely in June as well. There were a total of 6,059 condos in the MLS for June as compared to 6,234 in May. In February there were 6,775 condos on the market, so that's a nice decrease in inventory for the past six months.

Sales in June took a real nice jump that ought to have condo sellers pretty excited. During June, 422 condos were sold in Pinellas, as compared to 355 in May. Condo sales have been increasing every month from January's low of only 189 sales -- quite a nice increase, don't you think!

There even seems to be something of a slowdown in price declines for condos. The median price for June was $138,500 but in June of 2008 it was $160,000. While this represents an annual price decline for June to June of 13.4%, that's a lot better than other median prices which saw annual declines approaching 30% for condos. Yes, I think condo sellers need to feel a bit of encouragement when looking at these June figures.

Here's something everybody should keep in mind. When you compare overall sales volume of June 2009 to June of 2008, both single family and condo sales combined, the sales volume is up by 21.8%. We sold a total of 1,168 properties in June of 2009 versus only 959 in June of 2008. I find that to be very encouraging.

So, would somebody please call the guys at PMI and let them know that we don't agree with their latest bunch of bad news.

For more information about real estate in the Tampa Bay are, please visit my website at www.TheStPeteRealEstateSite.com.

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May Sales Report: Have We Turned The Corner?

The sales figures are in for May for Pinellas County. They look encouraging. Very encouraging.

Let's start with the Absorption Rate (AR) as usual. As you know, the AR is determined by dividing the number of units sold in the month by the total number of units listed.

For single family homes, the AR for May was 8.9 percent as compared to 8.5 percent for April. For condominiums, the AR for May was 5.7 percent as compared to 5.3 percent. I will grant you that these are not huge increases, but they are increases rather than decreases.

Single Family Homes

The number of homes listed in the MLS for May stood at 6,910. In April, there were 7,126 homes in the MLS system. This means less inventory for buyers to select from, and less competition for those wanting to sell.

The number of sales increased in May to 616 homes sold as compared to 604 in April. Not a big jump, but a jump nevertheless.

Here's something important. The number of single family homes sold has increased every single month since November 2008. That's half a year of monthly increases in single family home sales volume. I think that is significant.

The median price continues to fall as compared to prices in 2008. For May '08, the median was $175,000; for May '09 it fell to $145,000. That's a drop of 17.1 percent in a year. Sellers need to take note of this and price their property accordingly.

Here's something everybody needs to take note of: the market may have hit bottom or it may be near bottom. What do I base this on? I've checked the median selling prices each month going back to December 2008. Those prices have remained pretty doggone stable. In December '08 the median was $145,000. In January, $125,000. In February and March, $140,000. In April, $144,000. And in May, $145,000. That's a pretty flat bunch of pricing numbers. I'm not an expert in these kinds of things, but I kinda see a pattern that says maybe, just maybe, we've hit bottom or are pretty close. What do you think?

Condominiums

Condos still seem to be lagging. I don't know why. The condo lifestyle is very appealing for a lot of people, but they just don't seem to be buying right now -- just check the AR.

In May, there were still 6,234 condos listed in the MLS as compared to 6,470 in April. Only 355 condos were sold in Pinellas County in May, and only 340 in April. The median selling price for sold condos in May was $130,000 as compared to $175,900 in May of 2008; that's a 26.1 percent drop in median value.

There could be a lot of reasons for this low volume in condo sales, but I have a theory that a lot of it has to do with the way so many condo communities have had to drastically increase the monthly maintenance fees. Many of these fee increases have to do with paying increases in the annual premiums for property and flood insurance on common areas. There is a limit as to how much people are willing and able to pay for services associated with the condo lifestyle. Well, I think that has something to do with these slow sales figures.

All together, there were 13,144 properties listed for sale in the MLS for May 2009. Just so you know, in May 2007 there were 18,166. That's a drop of almost 5,000 properties. Pretty significant reduction in inventory, right? Well, maybe. I think that there are a lot of sellers out there who would still like to sell their property, but have simply given up for the time being. Sure, they'd like to sell, but will wait for times to get better -- or so they think.

The question is, when will times get better? And how much better will they get? The market seems pretty flat right now. The so-called experts are now saying that it may take years before the market returns to 2006-type pricing -- some gurus say it may be the year 2018 before we see prices like that again. How long can these frustrated sellers wait? There's even a term for these people who would like to sell but have withdrawn from the marketplace. They are called "ghost sellers" because they are not actively on the market but if the right price came along they'd sell.

Because of the ghost sellers, I think there is actually more inventory out there than what we see on MLS. And I'm seeing some more signs of misguided people trying to sell on their own without the aid of a real estate agent. So, by rights, you should add them into the inventory count as well. The long and the short of it is, there is still a lot of inventory to be sold ... and until it is sold we will remain in a buyer's market.

Anyway, I think things are starting to look better. And it's about time.

For more information on real estate in Pinellas County, please visit my website at http://www.thestpeterealestatesite.com/.

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Keep Advertising During The Recession

Back in my past life -- the one I had before I went into the real estate business -- I was in the marketing communications business, better known as the advertising and public relations agency business. I did that for about 25 years before I decided I was pretty close to being burned out and went into real estate.


Back in the late 1980's, two friends and I started an advertising agency and just about the time we had made it through the first two horrible years and were actually making a little money, along came a financial crisis and a recession that was pretty bad. Like a lot of businesses, we suffered financially.

In order to conserve cash flow, many businesses cut back on their advertising expenditures. After all, advertising costs stick out like a sore thumb on a balance sheet and this was about the time that companies started being managed by accountants who cared only about profit-loss statements and not by entrepreneurs who cared about customer growth and business expansion. So, the accountants-turned-CEO's eliminated those wasteful advertising expenditures and cut marketing costs in an effort to save some corporate money.

We had some clients who stuck it out with us and ended up doing pretty well through the recession. We had other clients who eliminated advertising and ended up not doing so well in the long run (or the short run either).

Why is it that some companies prospered in the recession and others failed, you ask?

Well, I don't remember all the facts and figures from back then, but Advertising Age magazine did some studies of the effects of advertising during a recession. Essentially, they found out three very important things that apply to real estate agents just as much as they do to international mega-conglomerates:

1. If you keep up your advertising expenditures during a recession, you will do better financially during the recession because the advertising exposure will allow you to maximize your share of the available business. Frankly, this means you will make more money during the recession.
2. If you maintain your advertising activities during the recession, you will pull out of the recession faster and with a higher level of name recognition (or, brand awareness) than competitors who reduced or eliminated advertising in an attempt to save money during the recession.
3. If you continue to support your advertising program during the recession, your business will grow faster and larger after the recession ends because you became better known than your competitors during the recession. So, in the end, your business will grow even larger at the expense of your competitors when times get better.

Now, the magazine had all kinds of statistics to support these three things but I can't remember all that. Suffice it to say that a recession might be a good time to grow your business at the expense of your competition if you just keep doing all those things that you would normally do to promote yourself -- you know, making phone calls, writing personal notes, promoting open houses, doing drop-by's, making monthly contacts with sphere of influence members, calling past customers, mailing post cards, updating your website, memberships in clubs and civic organizations. You know, all the regular things. Don't stop. Keep promoting yourself and your company right through the recession no matter how much it hurts to do it.

Good luck during the recession, and keep the faith baby!

For more information about real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.

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Housing Prices Still Falling

Just how far have housing prices fallen since reaching their peak in the summer of 2006? According to the latest S&P/Case-Shiller home price index, values locally have dropped 40.6%.

What does this drop mean? If you're a buyer or seller, it means that prices today are at about the same level as they were during August of 2003.

In addition, the March Case-Shiller report indicates that house prices have not yet stabilized in the Tampa Bay area. Housing values dropped 22.4% from March 2008 to March 2009 in Tampa, and between February and March of this year alone they dropped 2.7%.

This February-March drop is especially worrisome because it indicates that the value decline is continuing unabated. As property values continue to fall, the number of short sales and foreclosures will likely continue to increase as those who bought during the 2005-2006 market boom seek to sell upside-down properties.

These distress sales force values farther down for all properties. All sellers of property these days are being hurt financially by the results of the current downward spiral which apparently has not yet run its full course. Sellers today must price their property at reduced prices to be competitive with similar homes that are being offered at distress-sale prices. As these homes are sold, they in turn force other sellers to bring prices even lower and force CMA and appraised values even lower. It's a vicious cycle.

Someday this cycle will come to an end and we'll move from a strong buyer's market to something a little more even. But that probably will not happen until the current inventory of distress sale properties is sold. Right now, about one transaction in three in Pinellas County is a distress sale of some kind. The problem is that there are thousands of distress sales currently in the MLS system here, and we probably have thousands of other distress sale candidates currently considered "ghost listings". These ghost listings are owners who would like to sell, but are currently holding their property off the market waiting for better times. All in all, it might be quite a while before we move away from the current downward pricing spiral.

Well, that's my view.

For more information on real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.

April Sales Look Better

Okay, I kinda messed up. I simply forgot to write the April sales report. Hey, I was busy! So, here's a short summary.

April looked pretty good overall. The Absorption Rate (AR) for single family homes moved up to 8.5 percent compared to 7.7 percent for March -- that's a nice move for 30 days. Condo AR stood at 5.3 percent for April, also a move upward from March's 4.9 percent. Remember, the AR is calculated by dividing the number of units sold during the month by the total number of listings in the MLS inventory.

Single Family Homes

During April there were 7,126 single family homes listed in the MLS. In March, there were 7,492. We had 604 sales in April as compared to 574 in March. The median selling price for a single family home in April 2009 was $144,400; that's down 18.9 percent from April of 2008.

Condo Sales

Condominium listings fell from 6,671 in March to 6,470 in April. Condo sales in April were 340 as compared to March's 330. But brother, did condo median sales price ever take it on the chin! The median price for April 2009 was $115,000 -- that's down 33.1 percent over the median price of April 2008. Bad news if you're trying to sell a condo today.

Something we should all keep in mind is that about one-third of the sales being made now are distress sales of some kind -- foreclosures, REO's or short sales. With that many distress sales being reported in the market, it is going to drive prices down as buyers look for bargains in both single family and condo markets. Because of the distress sales, buyers are finding bargains. Based on the principle of substitution, if you're a seller now you need to be very competitive with your price or buyers will simply move on to a distress property that is similar to your property and buy it instead of your property.

Good luck and happy selling!

For more information about real estate in the Tampa Bay area, please visit my website at www.TheStPeteRealEstateSite.com.

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Hey, You Gotta Buy The House First

Forbes magazine has reported that some first time home buyers are claiming the $8,000 tax credit BEFORE they buy their house.

Somehow, that doesn't seem quite like it follows the spirit of the law to me. How 'bout you?

The argument for doing this is that some IRS practitioners and real estate professionals have been saying that taxpayers can claim IRS deductions prior to the actual contribution as long as the contribution is made by April 15 of the following year.

The IRS position is that the law requires a purchase to take place BEFORE the credit can be claimed. In addition, IRS Form 5405, used to claim the credit, has a line requiring the taxpayer to state the date of the home purchase. Tax practitioners who assist home buyers in claiming the credit prior to the purchase of a house may be subject to preparer penalties.

Just thought you'd like to know the latest.

For more information on real estate in the Tampa Bay area, please visit my website at www.TheStPeteRealEstateSite.com.

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What Was Your Property Worth In 2003?

Those wanting to sell a house in the Tampa Bay area today should first ask themselves this question: What was my property worth six years ago?

Try and give an honest answer. Don't inflate it to where you wish it was, but try to determine what it was really worth back then. What would you have paid for your house in 2003?

Remember, this was before the big price run up of 2005-2006.

Got the number? Good.

You know what? That's what your house is worth today according to the latest S&P/Case-Shiller Home Price Index. The index shows that home prices have fallen 39 percent in the Tampa Bay area since reaching their peak in July of 2006. This drop in prices means that values today are where they were in November, 2003. Some 23-percent of that price drop has taken place from February 2008 to February 2009 in Pinellas, Pasco, Hillsborough and Hernando counties.

We must be at or near the bottom of the market now, right? Well, maybe not.

Economist Joshua Shapiro informed the Wall Street Journal that "We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices." That's bad news for sellers, great news for buyers.

My suggestion to home sellers is simply this: If we are at 2003 prices now and it looks like prices may continue to drop, you need to adjust your price to current market conditions now and get the house sold at today's prices. If you wait and do not lower your price, the value of your property will likely be even less with the passage of time. In other words, sell it for what you can today, or perhaps take less in the future.

Apparently, the bottom is not in sight.

For more information on real estate in the Tampa Bay area, visit my website at www.TheStPeteRealEstateSite.com.

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