Patterson-Schwartz Real EstateNew Castle County, DE - Half Year Report
Here we are at the half way point of 2006. The real estate market today is much different than this time last year. The "hurry up and make an offer" syndrome is all but gone in most areas of New Castle County. (There's always an exception though.) The number of available homes on the market (see chart 1) has jumped by 39% since this time last year with the higher end of the housing market, homes priced $300,000 and above, accounting for 73% of the increase in inventory. In fact, the available supply of homes priced below $150,000 has actually declined by 2%.
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A quick look at total numbers of homes sold for the two periods would lead one to conclude that the entire market is off, as the number is down by 224 homes or 4.9%. But looking at the detail of our market activity by price range (see chart 2) tells a completely different story. The number of homes sold for $300,000 and above has increased by 4.6%, with sales of homes priced under $150,000 dropping by 23%. As noted in our prior market update, we believe that this price range is where consumers are more vulnerable to interest rate changes and the tightening of mortgage lending practices. There is also a continued shortage of homes available under $150,000. On the other side, there are still buyers for the higher priced homes. They now have more to properties to choose from and no clear urgency to buy.
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Properties are taking longer to sell (see chart 3)-nine more days on average than this time last year. That's 38 days on average compared to 29 days on average last year. This increase in time varies by price range. We are seeing increases across the board (with the exception of $750,000 to $999,999), but lower priced homes are showing less of an increase. Homes priced below $150,000 are taking about the same number of days to sell as last year. Again, this is the price range where the number of homes available for sale has decreased.
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The overall supply of homes on the market (see chart 4) is up-4.9 months of supply at the end of June 2006 vs. 2.8 months last June. Supply at various price points varies, as one would expect. Months' supply is a statistic that is used as a barometer of the market-supply vs. demand. At the present rate of sale, if no additional homes were listed for sale, it would take about 4.9 months to sell all the homes currently on the market. To put this in perspective, historically (see chart 5), over the last six years months' supply has averaged 3.4 months so we are seeing an upward movement that most would consider healthy for our market.
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So if supply is increasing and demand is decreasing then prices must fall-right? Wrong! We don't see this happening. The average sales price (see chart 6 ) of homes sold in June 2006 increased 7.2% to $266,000. The median sales price (see chart 6) of homes sold increased 6.5% to $245,000.
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As we have projected previously, the market is clearly in transition from a strong seller's market to a more balanced one, with the end result that buyers have more properties from which to choose. Properties are taking longer to sell, sellers are adjusting their pricing expectations and price appreciation is in the single digit range.