2009 Second Quarter Update

Another quarter goes in the books, and it was kind of a mixed bag as far as news on the local real estate front goes. When I started breaking down the quarter, two things jumped out at me in a big way, so let's get right after those two things, and then I'll entertain and amaze you with a few interesting factoids about the quarter's activity.

First big news item: After a very robust first quarter in terms of sales volume, we saw a steep decline in the number of units sold compared to the same quarter in 2008. We had 76 total sold units for the quarter, which was down 27.6% from the 105 units that we had in 2Q 2008. I've been touch on this in my Monday Morning Numbers posts for a little while. I think that this is in great part due to a lower inventory level. I can't track a number for it, but from observation and talking to the other agents in town, I can tell you that buyer activity hasn't slowed down. Heck, I'd bet that there were more offers written in this quarter than have been written in any quarter in recent years. It's just that so many properties get tons of offers. I think that the slowdown in the number of sold units owes more to thin inventory than anything.

Second big news item: Click here for an updated price per square foot chart. After 6 consecutive quarters of what can only be described as freefall, our prices are virtually unchanged for the second quarter in a row. This is huge, in my opinion. We had a couple of relatively flat quarters back in 2007, but things were a little different then, and the buyer activity wasn't nearly as strong as it is now.

A few disjointed observations on the second quarter:

REO's comprised 55.3% of the sold units. This is down from 67.1% in the first quarter, and is probably a result of fewer foreclosures coming on the market. We're going to start seeing a few more REO listings coming on the market, so I expect that number to return to the 65% range in the coming months.

Short sales continue to take a bigger percentage of the market, with 17.1% of the quarter's sales. This is up from 14.6% in the first quarter, and is the highest it's been in this cycle.

The "Wow!" of the quarter for my money: 21.1% of our sales in the quarter were cash deals. 22.4% were conventional financing, 39.5% were FHA, and 17.1% were VA. Yes, you math geeks, I know that adds up to 100.1%. It's a rounding thing.

The median days on market for sold units remained unchanged from 1Q at 29, and the median escrow period was nearly unchanged at 42 days. This isn't news to anybody working in this market. Truth be told, that 29 DOM number is actually a little surprising. Anymore it seems that when a property is still on the market after two weeks, we figure that something is amiss. Even short sales are getting sold quickly with multiple offers these days. Crazy stuff.

Are we finally at the bottom? Maybe. My best guess is that barring further catastrophic meltdown in our economy, we're probably as low as we're going to be, give or take a couple of percent. But the thing is, I expect us to be at the bottom for a long time, probably a year or more, before we start to see prices appreciate again. We're probably heading into an inflationary period and somewhat higher interest rates, and that's going to affect affordability. We're also going to continue to see distressed sales dominate our market for the foreseeable future. I think those factors will dampen recovery. I don't expect a return to peak prices anytime soon, maybe not for years.