David Welch

I just received the annual report of Orlando/Orange County Convention & Vistors Bureau, Inc. (CVB), and I have to say their projections for this year look good. Let me start by saying that 2005 was just an off the charts kind of year for us here in a lot of ways. Job growth was at a pace double that of the rest of the state, and Florida lead the nation. Of course home sales were at a frantic pace, and builders actually could not keep up with demand. On top of that our commercial real estate market was going gangbusters too. Tourism was not to be outdone. That year we saw 49.4 million people come to Orlando. That is not a typo or a statewide number - Orlando had about a million extra people here each week just passing through. We have had a couple of down years in tourism compared to 2005, but 2006 and 2007 were still in the top three or four years we have ever had. The CVB is expecting 2008 to come very close to 2005 numbers with projected visitations of 49.2 million with about 2.9 million being internation guests. These numbers are important to our local economy because about one in four residents works in the tourism industry.

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Pending contracts are continuing to climb and are approaching 2,900 total contracts as of this morning. New contracts this month are nearly 1,350 which looks good for another improvement in that number over last month. There are just over 600 closed sales so far this month, with a median sales price of $215,000. We should see better sales numbers this month, but possibly another slight decrease in the median price. Inventory remains fairly steady, while I believe the number of pre-foreclosure and bank owned properties is down a little bit. I have not been tracking this number closely, but as of today there are 4,322 in either pre-foreclosure, foreclosure or bank owned status. That makes up almost 16% of all the active listings. Just over 30% of the pending sales are in one of these categories. This is probably the biggest reason the median price has continued to float down.

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If you have not noticed by now, let me clue you in on something about me. I love numbers! I remember my dad saying figures lie and liars figure, but numbers and statistics can really give us insight into what is going on in our market places. I have always been big on tracking the inventory, and pending sales numbers. It is the basic economics of supply and demand that drive real estate sales.

Our inventory was down at the end of March, but only by a little less than 2%. The main thing I have seen with our inventory is that the buildup stopped back toward the end of last summer. We have been fairly steady since then. The inventory of new homes, however has dropped significantly since the fourth quarter of 2006. When that number gets low enough, we will see a decline in the resale inventory as well. Homes that are currently rented will convert back to being for sale when sales begin to pick up. This will keep our inventory up for a while, but I just don't know how long since the rental numbers are not as well known. Builders will begin building again, but they need to start making a profit, so they should not be undercutting resales as much on "to be built" homes. I don't see them negatively impacting the resales any time soon.

Pending sales are making a fairly dramatic rise here in Orlando. Back at the beginning of January I measured the total pending sales at about 1,500. This morning when I checked on the MLS there were 2,805 contracts pending. That is about an 87% increase in contracts in about three months. The other number I look at now, because of the impact of foreclosures, short sales and the mortgage issues, is new contracts. One of the reasons total contracts are building up is because transactions are taking longer to close. While foreclosures make up only about 15% of our listing inventory they account for about 25% of the sales. Many of these are just taking longer to close, so the property remains pending longer. Mortgage lenders are being more cautious, and guidelines are more stringent so loans are taking longer to close. Also, the new FHA limits being raised to over $350,000 in the Orlando market means that about 75% of the listing inventory can be purchased with an FHA loan. These loans tend to take just a little longer to close as well. Because of these factors, I like to see what new contracts are doing. More good news! January new contracts were around 1,200, February was about 1,500, March hit over 1,700 and so far in April we stand at 941 for the first two weeks. The first two weeks of March I counted 729 new contracts so April is up 29%.

I know every market is different, but keep this in mind. Orlando tends to be one of the last markets effected and one of the first to improve. It must be the great weather? As people are able to sell here, they will be able to buy there wherever that may be.

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The official March numbers are finally out. Sales were 1,080 up from February's 951 but still off March of 2007's 1,779. The median price is down from last year as well $220,000 compared to $240,000. Inventory was down from February by 512 homes. These are pretty much the same as my numbers, although I look at inventory a little differently. Here is an interesting statistic - twice as many homes over $1 Million sold in March as in February.

The rich get richer, because they buy when it is a great time to buy. This is a great time to buy.

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There have been some not so great reports about real estate both nationally, and for the state of Florida in the last couple of days. Specifically the pending sale index is way down. Orlando is a bright spot when it comes to pending sales. This is such an important indicator because pending contract eventually turn into closed sales. Back in January pending sales was down around 1,200 and this morning they are up to 2,620. Historically, I have seen between 60% and 70% of new contracts close in a given month. In March there were just over 1,700 new contracts and just over 1,070 closed sales which is about 62% close rate.

The mortgage mess and resulting stricter guidelines has slowed closing down a bit, but deals are closing. Mortgage rates continue to be very favorable at just below 6% on any given day, but that could change radically if we see inflation numbers come in higher. Prices have also come down fairly significantly, and I see them down maybe a little more this month. I don't think they will fall more than another 5%. Based on our median price of $220,000, I calculated that another 5% drop in prices would be offset by a 50 basis point increase in interest rates. Most lending people I have spoken with, feel that a half point rise in mortgage rates is very likely in the next few months. I just want to reiterate that right now is the time to buy. Inventory is high, rates are low and sellers are motivated.

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