Are Prices Starting to Rise?

As with many things, prices are local--very local. In addition, price indices are rarely apples-to-apples comparisons.  They usually take prices on one date and compare them to prices as a whole on another date.  For example, the Case-Shiller Index actually takes the total sales of all the property in a city and compares it to the total value of the property sold in that city in an earlier period, to calculate the rise or fall of real estate values over a period of time.  That means that it's hard to know what would happen to one specific property when it got sold or resold.

In the current market, sales are being driven by first-time homebuyers and are strongest at the low end of the price spectrum.  Overall, prices are flat or still falling slightly, although this does lag in time, due to reporting delays.  However, we are beginning to see appraisal problems again, which had not been occurring in recent months.  That indicates that prices are rising, thereby pushing up sales prices above levels of past reported sales, which are used by appraisers to calculate value.

What's the bottom line?  Prices at the lower end are being squeezed by supply and demand factors, and are probably heading up.  Higher-end sales are still waiting for that phenomenon to take place.

Activity Abounds

Finally, spring has sprung, and the real estate market has responded.  I hear stories every day about listings that have sold in one day, listings that have not sold for two years and now have two offers in one week, listings that    are having showings right and left, and buyers that are finally moving off the fence.

The market continues to be driven by first-time homebuyers, and there are still people moving here from other places that are choosing to rent before buying, but the activity is clearly on the upswing, and there is much more of a sense that things are beginning to recover.  While we have more inventory than many other regions of the country, even we are seeing quick turnover in some neighborhoods and price ranges.  For instance, Guilford still has 275 homes on the market, which is a 50% increase over last year, but houses are selling quickly there when they come onto MLS.  East Rock in New Haven has 30 houses for sale, but one of our agents just sold one in a single day.

Have you been waiting for the market to turn so that you could buy or sell?  Have you been waiting for prices to bottom out?  Have you just been waiting?  Wait no more.  The time is now!

Today's Register Article on Home Sales

Today's business section has an article reporting that unit sales are down, but prices are "inching" up. This may surprise people, but it's important to remember how these statistics are compiled, and that's by adding all the sales in one time period and comparing them to all the sales combined in another time period. That's not an apples-to-apples comparison, unless by chance the same house sold in both periods, and you just looked at that sale.

With so many properties on the market, and the lagging state of the real estate industry, only the best homes are selling. By that, I mean the ones that are priced compellingly and are in close to pristine condition. There are some exceptions, especially in areas that are in demand and have less inventory, but in general only the "good" buys are selling.

What does that mean for sellers? Don't assume that your home is worth more than it was last year, and don't assume that you can price it aggressively. One of the most striking changes in the real estate field over the past 25 years is the amount of market knowledge available to, and often absorbed by, buyers. They know what your home is worth, and they aren't--except in the rarest of circumstances--going to pay more. If your house stands out, in price, location, appearance, or condition, you have a better chance of selling it. Those are the home sales showing up in the statistics. Adjust your expectations accordingly!

Waterfront Statistics

Since I've been blogging about prices and trends in New Haven compared with its suburbs, I was prompted to look at the shoreline statistics. Since we've been talking about the upper end of the city market, we checked sales of waterfront property since the beginning of the year. Taking Branford, Guilford, and Madison, a dozen homes on the water over $1 million (which we assumed meant all but an anomoly) sold in the first six months of 2010. They stayed on the market anywhere from one day to over 600 days, and none sold for the full listing price. The lowest listing to sales ratio was 62%, although most I calculated were in the 85% range, with only a couple selling at over 90% of the listed price. One was in Branford, three were in Guilford, and the rest were in Madison.

While this is an exceptionally low number of sales in that period of time, it does tend to confirm the idea expressed in earlier pieces that the City of New Haven is outperforming other high-end areas. The surprising thing about this particular comparison is that waterfront is the ultimate example of location, location, location. The most frequent comment on its primacy as an investment choice is that "they're not making any more of it". When even that theory fails to prompt sales, especially during a time when the traditional hoped-for investment bankers are doing well enough to buy waterfront summer homes, there's cause for real concern about the economy. Let's hope that the next quarter shows a different result.