2009 Third Quarter Update

Where does the time go? I woke up one day a week or so ago and realized that this year is over 75% gone. Yikes. At least that means that we're getting football now...

What that means for this blog is that it's time for an update on what happened in our market in the third quarter of 2009. Starting with this quarter, I have a little bit of a change in the data source for at least some of the stats that will follow. A few weeks ago I joined a secondary MLS. I had started to see more and more properties over the past several months that were selling outside of the Lompoc Valley Association of Realtors MLS. We were increasingly needing to scour sites like realtor.com for listings for our buyer clients. The vast majority of these homes were listed in the Central Coast Regional MLS (CCRMLS). So in an effort to get better access to listings for our buyers and to better expose our listings to a larger pool of agents, I ponied up and paid for another MLS membership.

CCRMLS is a regional MLS that combines listings from 7 different local associations on the Central Coast. We do see a lot of crossover in Lompoc listings that are in both MLS systems, but I found that this year we've been seeing about 5 sold units a month in Lompoc that are only listed in CCRMLS. The big bulk of these sales are REO properties listed with out of town agents. This is a significant enough number that I need to track these sales as well, at least for quarterly reports. The weekly numbers are going to remain LVAOR MLS only for now - it's just too cumbersome to try to combine these every week. For the purposes of this report, all numbers are combined between these two MLS systems unless otherwise noted.

So with that piece of boring technical business out of the way, let's get to the numbers. We saw a total of 116 sold units in the third quarter of 2009. This is a drop of about 7% from the same quarter in 2008. It looks a little better in terms of volume than it did in the second quarter. Year to date, we're down about 8% in total sales (combined MLS data), but the number of total listings has dropped by about 27% (LVAOR only).

Prices remained remarkably stable as well as you can see from this updated Price Per Square Foot Chart. Note that I went back and updated the previous data with CCRMLS data, so some of the numbers have changed very slightly from the previous charts that I've published. I've said this previously, and I'll say it again here for the record: I think we're at the bottom of this market cycle. And I think that we'll be relatively flat in terms of prices for at least another year.

The mix of our sales remains very heavily tilted toward distressed properties. 65% of the sales in the third quarter were REO's, and 10% were short sales. REO sales continue to account for a much higher percentage of sales than they do of total listings - around 50%. The short sale number here is somewhat surprising to me, down from 17% in the second quarter. It'll be interesting to see if that was a statistical hiccup, or the beginning of a trend.

Looking at how buyers are paying for their purchases, we saw conventional financing make a bit of a comeback in the third quarter, accounting for 32% of the sales. FHA and VA dropped a bit of their market share at 34% and 13% respectively, and cash purchases were very close to the second quarter numbers with 19% of the sales (these are LVAOR only numbers). The cash buyers are probably nearly all investors, and I think that increased investor activity might also account for some of the increase in conventional financing.

As should be expected in a low inventory/high buyer activity market, we continued to see short market times for properties. The median days on market for our sold units dropped a bit to 26 days from 29 in the previous quarter. Escrow periods remained very close to the second quarter with a median of 41 days.

Looking ahead, a lot of what happens over the coming months is going to depend a lot on what happens with REO inventory. If it continues to come on at the current pace, we'll likely see our inventory shrinking. This could nudge our values up a little bit, but the key in any real price appreciation will be affordability. I've said before that prices dropped well below the point where we had buyers back in the market in a big way, and I think that we found affordability in our entry level market 20% ago. Does that mean that our prices will rebound to a 2Q 2008 level anytime soon? Probably not. I still think that at some point we'll see some more REO inventory. But if our inventory shrinks much more and interest rates stay in the 5% range, we might get a bit of a moderate bump. Stay tuned.