South Shore Real Estate Update - August 2007

Year over year sales of single-family homes were flat during the 30 days ending August 15th at 408 homes sold. This comes after months of declines reaching over 12%. Looking at a longer period of time, total homes sold over the past six months is off about 6.5% from the same period in 2006 and down 22% since the same 6 month period in 2005. Unless the current mortgage crisis starts to spill over to the broader economy, I am hopeful that the past month's leveling out is the beginning of a turnaround and year over year sales volume will start to pick up. In my opinion, a few of the key pieces of strong rebound are already in place. These include stable average and median sales prices, shorter list-to-sale periods, and fewer homes for sale. In terms of market psychology, another key variable in determining the direction of the real estate market, buyers and sellers are starting to grow weary of the standoff. General consensus has been that sellers are willing to let their homes sit on the market without reducing the price; waiting for buyers to flinch. But things seem to be changing. Many sellers have told me that they feel a sense of relief rather than loss when their house is sold. Buyers, on the other hand, are starting to feel like they are getting good deals. Unfortunately, there is still a lot of fear of the future. Ominous signs of global catastrophes are all over the news. Realistically speaking, nothing has changed except buyer psychology, and thus, the volume of homes sold. Although sellers are getting less than they "want", they are buying into the same market. There are many positive statistics in Plymouth County. First, the number of homes on the market continued to drop in August. While still well above 2005, the inventory of single-family homes on the South Shore dropped year over year. Second, the number of days it takes to sell a home is getting shorter. Looking at sales over the past 6 months, the average time it took to sell a home was 5 1/2 months (163 days). Although that figure is longer than in 2006 by about 17%, it is DOWN 18.5% from the April 2007 high of 178 days or almost 6 months. Lastly, median and average single-family home prices have fallen less than most people think. Looking at the 6 months ended August 15th, the median price of a home in Plymouth County has fallen 3.3% since the same period in 2005 and less than 0.5% since last year. Median price is the exact middle of all sales and is susceptible to trends toward higher or lower priced homes. Average prices, on the other hand are down 1.5% since 2005 and 4.2% since 2006. Either way, we are talking single digit percentage declines over 2 years! Recent concern over expected ARM foreclosures and the effect on the secondary mortgage and derivative markets has yet to show up in pending and sold statistics. Higher-end towns like Duxbury, Norwell, and Cohasset, which have weathered the downturn a little better than others, stand to get hit the hardest. Conforming rates and those for well qualified buyers have remained relatively stable at around 6.6%, but jumbo mortgages (over $417,000) have jumped to more than 8%. Shopping around has never been more important and can significantly effect how much home you can afford. All in all, rates are still low on a historical basis. As always, knowing what is going on in the market and working with an experienced broker is critical to making the right buying or selling decision. Also, analyzing your own financial situation and making decisions based on your goals is just as important. Waiting for things to change can be just as hazardous as jumping too soon.