What Happend to the Spring Market?

In a post earlier this year I interviewed four of the top real estate agents in the Greater Philadelphia Metro area about their thoughts on the market. All four felt that inventory, namely the lack of, was going to be the biggest factor in the market going forward…and I totally agreed with them.

Well, here it is half way through 2014 and I’m seeing some odd trends. Take a look at the numbers below that were taken right from the TrendMLS.  Thank you, TReND MLS for publishing this great info.

The Coyle Group - Philadelphia Stats - Appraiser

The Coyle Group - Bucks Stats - Appraiser   The Coyle Group - Chester Stats - Appraiser   The Coyle Group - Montgomery Stats - Appraiser

In Philadelphia and the surrounding “collar” counties (Bucks, Chester, Delaware and Montgomery) all of the inventory levels increased over the 2013 levels.  Adding to that, the data indicates that settled sales are flat or down compared to last year.  In fact, Philly, Bucks and Delaware counties are showing signs of over-supply (7 months of inventory being the lower end of what many in the industry would classify as an over-supply).

What?! The inventory levels were supposed to be low. It was a Buyer’s market, no one was selling. Buyers were chomping at the bit to jump on any listing that popped up. There were going to be bidding wars and homes selling for thousands over asking price. What happened?!?!   (Now, I know there are agents out there who are having a fabulous Spring and Summer.  I’m just pointing out that the numbers suggest a different trend.)

Well, I honestly think it was the brutal winter we had. It forced Buyers to the sideline and effectively killed the Spring Selling Season. Essentially, the Spring Selling Season never happened and inventory began to pile up as Buyers went into Summer-mode.  Now, typically we will see a bump in Buyer activity once Summer is over and school starts, again.

Hopefully, that will be the case this year, too. What are your thoughts on how the 2014 market is playing out?

 

The Coyle Group’s team of Philadelphia appraisers is a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing appraisals.  If you need a guest speaker at your next sales meeting, please give us a call.  We would welcome to opportunity to speak to your group and field any appraisal related questions you may have.  For more information please visit our website at www.TheCoyleGroupLLC.com  You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

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What Philly Agents Are Saying About 2014

As a Philadelphia Real Estate Appraiser, I know what trends I’m seeing day-to-day in the neighborhoods of Philly. However, I thought it would be fun to ask some area Agents what their thoughts were on a couple of issues. Below are the questions I asked along with some of the responses from some of the Philadelphia region’s top agents.

1. How would you describe the Spring market in Philadelphia Metro area so far? and where do you see it going for the remainder of 2014?

2. What do you think has the greatest influence on the market right now…Inventory? Interest Rates? Buyers back in the market?

 

The Coyle Group - Mark WadeMark Wade

Center City Condos

www.CenterCityCondos.com

I hear a lot of talk about the up’s and down’s of today’s market. And what most Realtors are witnessing is multiple offers, properties selling at or above asking    price and a decreased “days on market” statistic.

For the majority of the Center City market, there are more buyers than available inventory and the shift in that relationship will give rise to actions that we see more of today than we would have even six months ago- such as multiple offer bidding. I just encountered three offers on the same home in one day and that home had sat idle for almost two months.

Also becoming common are full asking price offers or even over asking price offers. I think it makes sense (many buyers see the time as being right to snag a condo out of the clutches of others and are therefore willing to put their best foot forward). I am now telling my buyers that IF they see a home they want – do not hesitate to go in quick and strong. Because nothing is more painful than a bidding war. Good for sellers, not so much for buyers.

Lastly, Realtors I speak with also confirm that they are seeing a decrease in the “days on market” calculations. Many homes are selling within days, even hours after being listed for sale

I think the biggest influence today is the lack of overall inventory.

 

The Coyle Group - Dan CaparoDan Caparo

Coldwell Banker Preferred

Vice President
www.DanCaparo.com

Although we had a setback in sales due to the harsh winter for the first quarter for 2014 the spring real estate market has arrived and is brisk for buyers and sellers alike.   Our Real Estate market is built around school year more so than the seasonality of the warmer months – they just happen to go hand and hand.   People like to have their children finish school at their current district and start fresh with a new one by September.   There is a considerable inventory shortage in our regional marketplace and well-priced homes don’t last for more than a week.  I still find that price points of $800K+ are moving along in a more healthy fashion but still not to the level of the under $800K markets.

A housing shortage has a great impact followed by the continued challenges of mortgage financing and our tight money policy.  As the mortgage market opens up and loosens its restrictive barriers and other investors [in addition to Fannie / Freddie] enter the home finance market we will see continued improvement in unit sales volume and appreciation.  I believe that rates shouldn’t be a problem until they begin to reach 6%+ because at that point we will see affordability issues.

 

The Coyle Group - Matt DonnellyMatt Donnelly

Coldwell Banker Preferred

www.donnellyrealestategroup.com

BUSY! Any properties hitting the market that are priced right, move in ready, and in a semi-desirable location are going under contract within 3 weeks on the market. With rising interest rates and more consumers being approved for mortgages I expect 2014 to remain a hot market. Buyers are ready to purchase but need to act quickly because there is a lack of inventory of good, saleable listings.

There are plenty of buyers in this market, and interest rates are still historically low. The greatest influence right now appears to be lack of inventory. We need more sellers!

 

The Coyle Group - Frank DefazioFrank DeFazio

Berkshire Hathaway HomeServices Fox & Roach, REALTORS
www.CenterCityTeam.com

The spring 2014 market is off to a hot start likely due to the pent up demand from a frustratingly cold winder and fears about potentially rising interest rates.  Demand continues to outpace supply and so we are seeing a lot of multiple bids and escalation clauses which is driving home sale prices up. As long as inventory is low and demand is high prices will continue to increase, which is great for sellers but not for buyers.

 Low inventory. Agents have been pounding the pavement for listings since January of 2013 but demand is strong and homes that are priced well and move in ready continue to sell in days, often with multiple offers.  Builders have taken note and new construction inventory is coming towards the end of the summer but for now low inventory continues to cause feeding frenzies and high competition among buyers.

 

I’d like to thank Mark, Dan, Matt and Frank for their insights.  I find it interesting that they all cited “low inventory” as being the greatest influence on the Philadelphia 2014 real estate market.   I couldn’t agree more.  This market is quickly turning into a text book Sellers Market.  We all know when inventory is low and demand is high, prices will rise.  That’s good for everyone…except maybe Buyers.

The Coyle Group’s team of Philadelphia appraisers is a leading provider of appraisals for Estate/Probate, Divorce, Bankruptcy, Tax Appeal and Pre-Listing appraisals.  If you need a guest speaker at your next sales meeting, please give us a call.  We would welcome to opportunity to speak to your group and field any appraisal related questions you may have.  For more information please visit our website at www.TheCoyleGroupLLC.com  You can also contact The Coyle Group at 215-836-5500 or appraisals@coyleappraisals.com

 

 

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What is an Absorption Rate?

The Absorption Rate measures the relationship between a real estate market’s supply and demand.  The total number of available homes (inventory = listings and pending sales) is divided by the total number of homes sold in the previous month.   The resulting number represents the number of months it would take, at that same pace, to sell the entire inventory of homes.  It this does not take into count the number of houses which will eventually come on the market in addition to those already for sale.

Knowing your area’s Absorption Rate (AR), can help you track trends.  Understanding your market and where it is headed is very important for both sellers and buyers.  It allows buyers and sellers to understand better why some homes may sell faster than other and to develop effective pricing strategies.

Calculating an AR is not difficult but you will need access to the following information:

  • How many listings are currently on the market in a given area? Be sure to include both active and pending homes.
  • How many homes sold last month?

Once you have those numbers, you will need to:

  • Add the number of Active/Pending Listings together
  • Multiply the number of homes Sold Last Month by 12.  Then, divide that number by 52 for the weekly number of homes sold.
  • Then, divide the number of Active by the number of sold per week
  • This will give you the weekly AR.  For a monthly AR simply divide the weekly AR by 4.

Here’s an example for Montgomery County.  In November 2011 there were 554 settled sales.  Currently, there are 4,481 active listings and 230 pending sales.

Listings + Pendings = Actives

4481 + 230 = 4711

Homes Sold  X 12 = Annualized Sales

554 X 12 = 6,648/52 = 127.85 Week

4711 / 127.85 = 36.84 Weeks

36.84 Weeks / 4 Weeks per month = 9.21 months of inventory

The result is an Absorption Rate of 9.21 Months.  What this really means is that it will take 9.21 months for the market, at the current rate, to absorb the current inventory of homes.  This assumes that no new homes will be added to the existing inventory.

One good thing about absorption rates is that they can be tailored to specific neighborhoods and price ranges. So how can an absorption rate study assist buyers and sellers?

Narrowing an absorption rate study to a certain type of home, in a specific neighborhood, at a particular price point, enables a buyer or seller to first determine the nature of their local market (is it a buyer or sellers market) and then establish a listing or offer price, accordingly.

For instance, in Lower Merion, the overall AR for the township is 8 months.  However, if we take a look at the luxury market within Lower Merion (homes over $2MM) we see a very different picture begins to appear.  The luxury market currently has a 44 month inventory.  Meaning if you have a luxury home in Lower Merion, it could take over 3.6 years for you to sell it.  This could be a problem for someone who needs to sell quickly.  In this case, having the AR could prompt the seller to rethink their asking price.

Once we know the AR, we can determine what kind of market we are in.  That information can then be used by sellers to price their homes more effectively and hopefully reduce days on market.  For buyers, this information can help you determine if you are in a Buyers or Sellers Market and to structure your offer, accordingly.

Buyer’s Market: Over 7 months of supply
Balanced Market: 5 to 7 months of supply
Seller’s Market: Less than 5 months of supply

The AR is not the only thing you will need to determine a market’s condition.  Specific property features, condition, location and of course price will typically be more important in determining how fast a property will actually sell than any statistical formula.

If you have any questions about Absorption Rates or need assistance calculating the AR for a specific market or property type please feel free to contact us through this blog or email us at appraisals@coyleappraisals.com

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Inventory Levels

Inventory levels in the Philadelphia housing market are up over January 2010.  The latest data TReND MLS reports the following:

County Available Units Months of Inventory
Philadelphia 8,138 9
Montgomery 4,829 8
Bucks 3,421 8
Delaware 3,367 9
Chester 3,361 9

* Calculations based on single family dwellings as of 02/14/2011

These numbers basically tell us that if no more homes were listed for sale as of today, it would take 8 or 9 months to sell off the current inventory of homes.  This is an over-supply.  When there is an oversupply in the real estate market this puts downward pressure on pricing. 

Back when the market was on fire in 2004-2006, it was not uncommon to see inventory levels in the 2-3 month range.  In some areas, there were months that the levels went under 2 months.  Homes were selling the day that they went on the market.  This was a classic example of undersupply.  An “in balance” inventory is generally viewed as being between 3-6 months of supply.

It will be interesting to see how inventory levels are affected as the Spring Selling season begins.  Traditionally, Spring is the time when Sellers list their homes.  So we may see an uptick in inventory as new listings hit the market.  The question is, will the Spring Buyers be there to soak up the inventory?

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