MID YEAR REPORT

JUNE CLOSINGS ADD TO MAY GAINS

PENDING SALES REBOUND

COASTAL PROPERTIES SLIMED

FORECLOSURES 25% OF THE MARKET

 

• 492 homes were sold in June versus 480 homes May – A 3% increase over May and 94%  increase over January.
• Average home rose in June with the average price rising to $156,177 versus $151,135 in May – a 2% increase. Average sales price for 2009 was $157,935.00.
• The time it takes to sell a home remained constant at 95 days in June. Average time for 2009 was 93.2.
• Supply of available inventory remained flat at 11.52 months in June. Average supply for 2009 was 14.25 months.

SUPPLY: The supply of houses in the Mobile/Baldwin area remain extremely high. A 6-month supply is a good market, we’re over 11-months and have been higher. 5,500 houses with an average days on market at 126 is just too many. Half Empty.

FORECLOSURES-DISTRESSED PROPERTY: Foreclosures and distressed (short sale) properties are the buzz in the market. In June, foreclosures were 25% of all homes sold versus 6% in June of 2005. While foreclosures represent one-fourth of the homes sold only 1 out of 10 homes listed fall into this category. So 10% of the market is producing 25% of the sales. Half Empty.

BP: It will be years if not decades before we know the full effects of the BP disaster but as the spill approaches the 90 day mark some of the short term economic ripple effects are becoming evident. Like all other disasters on the coast, money is pouring in to overcome it's effect. Almost every sector of the economy not related directly to the water is getting a boost. Commercial real estate, hotels (non coastal), car rentals, car sales, construction, apartments, and many more have all experienced positive effects. The outside cash flowing into the coast will pump up the local economy over the near term, 6 months to 1 year, and by the end of the year if not sooner we will see a positive ripple effect on housing. While covered in oil this part of the BP disaster is adding water to the glass. If you want to drain the glass all the way empty just talk to Realtors who made their living from coastal properties. Their stories of 80- 90% cancellations in the days after the spill are just the tip of the iceberg that will sink the BP ship. No tourist, no vacation rentals, no restaurants, no groceries, no drinks, no gas, no boats, the ripple effects are unending. The Summer is the time for our coastal communities to store up for the lean winter months. Instead of storing up they are struggling to stay open. If they are struggling to stay open now think about where they will be in December, January and February. As it purely relates to real estate, thousands of condo owners use their Summer rentals to pay their mortgage payments for the year, no tourist no rent. How long will they last before a wave of BP forced foreclosures roll in across the coast? Start multiplying this effect to everyone who has anything to do with the coastal tourism business. Do the same exercise for the seafood industry and others effected by the spill and it gets pretty ugly. Frankly 20 billion is not near enough and it should be a slap in the face to those on the coast affected by the spill. To put it in historical perspective lets look back at Katrina. For a 1 day event State Farm paid $9 billion in claims. That was one company, for one day, $9 billion. BP is responsible for everyone’s claim, not just for 1 day, not just until they get it capped, not just until they get it cleaned up, they are on the hook for everyone until tourism and seafood return to their pre-spill levels. Back to lessons from Katrina, New Orleans is not back to pre-Katrina levels and it’s 5 years later. So how deep is the BP hole? Let’s go back to Katrina again, the Federal Government spent approximately $200 billion. $200 billion and they weren’t responsible for EVERYBODY. But $200 billion would bankrupt BP, exactly. One of two things and maybe both is getting ready to happen, BP as we know it will not survive or whole bunch of folks are getting ready to get screwed. BP is working on selling off assets and looking for equity partners, that’s a good sign for the coast because they need the cash. On the other hand we have reports from the Realtor committee dealing with BP they have put non-rental real estate claims on hold. Either way you look at it appears BP realizes it needs cash and lots of it. Did I drain your glass? While the numbers look bad, there is a part of the equation I’ve left out, something you can’t put a number on, the people of the Gulf Coast. Rebuilding from disasters is a way of life on the Coast and it is our people that I believe will fill the glass back up.” Tommy Praytor, President, Praytor Realty, Co., Inc.

MAY SALES KEEP PACE-TROUBLE BREWING

• 480 homes were sold in May versus 465 homes April – A 3% increase over April and 90%  increase over January.
• Average home prices fell sharply in May with the average price falling to $151,135 Versus $168,601 in April – a 10.4% decrease. Average sales price for 2009 was $157,935.00.
• The time it takes to sell a home dropped 1 day to 95 days in May versus 96 in April- a 1% decrease.  Average time for 2009 was 93.2.
• Supply of available inventory fell to 11.49 months in May versus 11.65 in April. – a 1% decrease. Average supply for 2009 was 14.25 months.

“May closings kept pace with April and even added a little, we expect closings to continue to be strong through June. Buyers trying to take advantage of the tax credit must close by the end of June. There may be some carry forward to July with closings that didn’t make the deadline but after that the picture gets a little murky. We have been tracking pending sales, a pending sale is when a contract is accepted but not closed, by month. Pending sales normally take 30-60 days to close, what goes in pending this month is a good indicator as to what will close 30-60 days from now. In the month of May pending sales tumbled 46% from April. We expected some fall off after the end of the tax credit but almost half is a drastic reduction. This level of pending sales would indicate closed sales in July would be in the 300 area versus 480 in May. Additionally, we will lose contracts already in the pipeline because of the new Fannie Mae regulation that effectively eliminates FHA or VA financing on Fannie Mae foreclosures with the right of redemption outstanding. To put the icing on the negative cake, Realtors working coastal properties are already reporting losing contracts to the oil spill and the forecast for a market that was just coming off life support is back in ICU. The financial effects to employment in the recreation and seafood industry are devastating. But as they say, one persons disaster is another persons opportunity. If there is hope for this market over the short term it appears to be bubbling up out of the Gulf of Mexico. BP and the people who are coming to work the spill are spending money. BP has already purchased an office building on Michael and Downtowner, $2.4 million, and has leased 40,000 square feet at Brookley at a short-term rate that was almost double the normal market rate. Hotels are reporting higher occupancy rates while apartment managers are seeing increased rentals from companies and individuals that are here to support BP. While home sales have not yet seen a ripple effect from the spill, the single-family rental market is brisk. By the end of the year, if not sooner, the increased employment and money being spent in the area from the spill will put Buyers back in the market. Since they can’t seem to clog a pipe in 2 months, it would appear that the people looking for short-term housing will be here for some time. As a point of reference the Ixotoc spill in the Gulf of Mexico in 1979 took 290 days to stop and it was only in 500 feet of water. The jury is still out on the long-term effects from the spill. How long will it take Buyers and Renters not to see the oil on the beaches long after it’s gone? How long will it be before diners see “Gulf Shrimp” on a menu as a delicacy again? How long can BP foot the bill for this disaster?.” Tommy Praytor, President, Praytor Realty, Co., Inc.
 

FEBRUARY SALES UP 24%

PRICES DROP TO BELOW KATRINA LEVELS

 

• 311 homes were sold in February versus 251 in January – A 24% increase over January. February 2009 Sales 322 homes.
• Average home prices declined in February again with the average price declining to $141,788 versus $144,736 in January- a 2% decrease. Average sales price for 2009 was $157,935.00.
• The time it takes to sell a home rose 16 days to 100 days in February versus 84 in Januray- a 19% increase.  Average time for 2009 was 93.2.
• Supply of available inventory fell seasonally in February. At the end of February there was a 16.76 months supply of homes, in January it was 20.33 – an 18% decrease. Average supply for 2009 was 14.25 months.

JANUARY 2010 HOME SALES KEEP PACE WITH 2009

NUMBER OF HOMES ON MARKET DECLINE

• 249 homes were sold in January versus 346 in December – A 28% decrease from December-however an 8% increase over January 2009.
• Average home declined in January with the average price declining to $144,736 versus $158,090 in December- an 8% decrease. Average sales price for 2009 was $157,935.00.
• The time it takes to sell a home dropped 8 days to 83 days in January versus 91 in December- a 7% decrease.  Average time for 2009 was 93.2.
• Supply of available inventory rose sharply in January. At the end of January there was a 20.38 months supply of homes, in December it was 14.86 – a 27% increase. Average supply for 2009 was 14.25 months.

“As expected January home sales were off significantly from December. The seasonal drop from December to January has become a regular occurrence on the Gulf Coast. However, this year’s drop was less than last years and January, 2010 sales were 8% higher than January, 2009. January, 2010 sales mark the 4^th consecutive month that home sales were higher than the previous year. Our research indicates the last time this happened was during the Katrina era. With the homebuyer tax credit expiring on April 30^th, the market over the near term would seem to have room for growth. February closed sales could be affected by the extreme weather conditions of late December and early January. The average home price declined in December with the follow through closings of first time homebuyers. Sellers are still averaging close to 95% of their list price, which indicates less expensive homes are selling. With the new existing homeowner tax credit in place we expect the average sales price to move higher in 2010. In November of 2009 83% of the homes sold were under $200,000, in January it was down to 78%. If that trend continues we could finally be seeing some move ups in the market. Available inventory was a mixed bag in January; we’re up to a 20.38-month supply of homes, which is a direct correlation to the lower number of sales in January. The good news there is we reduced the number of listings in the system by almost 300 homes. We are still holding with the idea that sales will start soft in 2010 and build forward.” Tommy Praytor, President, Praytor Realty, Co., Inc.