This report is provided by Jeffrey Otteau of the Otteau Appraisal Group who also authors a series of widely followed quarterly market reports on the New Jersey real estate market. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey.
I have known Jeff for many years and consider him one of the leaders in the real estate appraisal profession. He has taught me a lot about quantitative real estate market analysis.
DECLINING HOME SALES CONTINUE TO BE A DRAG ON THE HOUSING MARKET
The slowing pace of home sales continued in November as Contract-Sales fell to the lowest level since the housing recession began in 2005 and ran 18% below the prior month’s pace. Also noteworthy is that Unsold Inventory fell for the 3rd straight month and now stands at 64,000 homes, as compared to 72,000 in August. While this inventory reduction would otherwise be a positive sign for the housing market, the current reduction is driven by weak market performance leading would-be sellers to defer their selling plans until Spring and also causing home builders to further slow the pace of new construction. Thus, the continuing decline in Unsold Inventory provides further evidence that the bottom of the current housing recession has not yet arrived. As a result the ongoing decline in home prices will extend into 2008, suggesting that ‘waiting until Spring’ is an unwise decision for home sellers hoping to maximize selling price. Given that home prices continue to decline and that the pace of future price increases will be slow and gradual once the housing recovery begins, home prices are unlikely to recover to 2005 levels until Spring of 2014. As a result, Right Pricing! to current market levels is the smart strategy for sellers. For the next segment on our Right Pricing! Strategy, register to attend our 2008 Spring Workshop Series coming soon.
Switching to the buyer’s perspective, Spring 2008 will present a unique opportunity that has never before occurred in the housing market,namely lower home prices AND low mortgage interest rates. This is because home purchase activity is traditionally tied to interest rate levels such that low interest rates typically increase sales pace and prices while reducing Unsold Inventory. The next 6 months will therefore present a rare combination of low interest rates, lower homes pricing and a wide selection of homes being offered by motivated sellers. We’re all likely to look back five years from now and conclude that 2008 was a time when Smart Buyers took advantage of this unique opportunity by locking in both low prices and low interest rates. I’m reminded of the axiom that the right to sell is when everyone else is buying, and the right time to buy is when everyone else is selling.