It's that time again - time for our third quarter market activity extravaganza. Try not to let the excitement overwhelm you... I joke about that, but I'll freely confess to being a total geek for this kind of stuff. So I hope that you at least find it informative.
The last quarter was a little surprising to me in a couple of aspects. Overall, we saw a lower level of sales activity, and what would appear on the surface to be a trend toward lower prices. I don't necessarily think that the overall numbers here are telling the whole story, though. We'll get into that shortly.
As I have for the past few quarters, I'm breaking this down into two segments - statistics that come from combined data of the two
MLS services that I use - my primary
Lompoc Valley Association of Realtors (
LVAOR)
MLS and the Central Coast
MLS - make up the first part, and then I move to data derived exclusively from
LVAOR.
Looking at the combined numbers, we had 102 total sales of single family residential units (houses and condos) in our market last quarter. That represents a decrease of about 12% from the same quarter in 2009, and a decrease of about 23% from the red-hot second quarter. We don't usually look at volume from one quarter to the next because sales volume tends to be seasonal. But in the past couple of years, the seasonal norms have gone right out the window in our market. And it's worth noting the large drop in activity after the expiration of the
home buyer tax credits.
Prices dipped in the third quarter after seeing a bit of a rally in the second quarter, as you'll see from the
updated Price Per Square Foot chart. This is one of the data points that I'm a little hesitant to take on its face this time around. From being on the inside of this market, I can tell you that the idea that we dropped 6.7% of our value last quarter just doesn't ring true. When I look at individual areas, I see some of them that actually appear to be appreciating in value slightly. I think that there are a couple of factors affecting the overall number. First, when we have fewer total sold properties, it's easier for things to get skewed one way or another. Even with a high volume quarter like we had in the second quarter this year, we're not exactly turning over huge numbers. So there's some room for error, both high and low, with that number. Second, I think that what we saw last quarter was also in part due to the types of properties that were selling. When I break it out and look at it property by property, it appears that we had a few more fixers sold last month than we had in the second quarter. And it appears that we didn't sell as many of our nicer, newer properties this quarter. Bottom line, I'm not seeing enough here to make me think that we're in a down cycle again on price.
Looking at the distressed property numbers, it looks like the numbers have shifted a little bit, but not necessarily in the way that I would have anticipated.
REO's accounted for 44.1% of our third quarter sales, up a bit from 34.8% in the previous quarter. Short sales dropped off to 18.6%, down from 23.5% in the second quarter. That leaves non-distressed sales as 37.3% of our market, down slightly from 41.7% in the second quarter. I'm a little bit surprised that we aren't seeing more short sales at this point, and I'm kind of at a loss to explain why that is. It might be that because we've been seeing more non-distressed listings that buyers are opting for those listings first. But sort sale listings haven't exactly exploded either, accounting for only 23.6% of new listings that came on the market in the third quarter, down slightly from 25.8% in the second quarter (that's an
LVAOR only number if you're keeping score). I keep expecting that because we have so many homeowners in negative equity positions, and banks trying a little harder to cooperate with - and even encourage - short sales, that we'll see a noticeable increase in these listings. It seems to be slow coming, but I'm still convinced that we are going to see a short sale dominated market in the not-too-distant future.
Now we're into the
LVAOR-only part of the program. When I look at how properties are being financed, things shifted a little bit, but not significantly. 23.6% of our sales were financed with conventional loans, 38.2% with FHA loans, 19.1% VA loans, and 19.1% cash. That cash number continues to amaze me. We have investors all over this market, which should probably tell you something about values.
Market times edged up slightly to a median of 24 days in the third quarter, and escrow periods edged up a little bit as well to 46 days. Given the drop in sales volume, I thought that we'd see a little more of an uptick in market times. Not so much, it turns out.
Another statistic that doesn't quite jive with the decline in overall prices is the percentage of units selling at or above the asking price. We saw an increase in those, up to 66.3% in the third quarter. If we were truly seeing a downturn in prices, I would fully expect to see that drop. But we still have a competitive market, and while it doesn't feel quite as frenzied as it was earlier this year, we still apparently have some competition among buyers.
Looking ahead, I expect that we'll continue to bounce around pretty close to our current price level for a while longer. Price recovery is likely to be slow unless we get a significant spike in high-pay employment in our area. But on the flip side, I don't think we have much more room to go down in price, and with interest rates being at the
lowest level since 1951 (holy
moly!) I can't imagine that we aren't going to see some increased activity. In fact, we may already be seeing some signs that our volume will improve. Our pending listings have edged up in recent weeks, which should translate to a bit of an increase in sales volume in the next quarter. We'll see how that pans out in about three months.
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