Southern Chester County, PA - Half Year Report

In comparing the Southern Chester County, PA real estate market as of June 30, 2006 to the same time last year it's easy to make conclusions, given a 16% decline in new contracts and a 17% increase in the number of homes available for sale-or is it?

To really understand what's happening in a real estate market one needs to look further into the details-the mix of housing, new construction versus resale and the various price ranges. In Southern Chester County, there are more homes available for sale (see chart 1) priced $300,000 and above versus this time last year. New construction is abundant in this price range, representing 32% of the homes available. The availability of homes priced under $300,000 has actually declined by 24%, with roughly 130 homes available for sale.

Currently, buyers of homes priced above $500,000 are the drivers of this market in terms of new contract activity (see chart 2) as of June 30, 2006 compared to last year at this time. This price range is off 6%, or just ten properties, compared to the 18% decline, or roughly 110 properties, in homes sold for less than $500,000.

As in most real estate markets today, properties are taking longer to sell (see chart 3), six more days on average than this time last year. That's 56 days on average now compared to 50 days on average in 2005. We're seeing increased marketing time across most price ranges, with the exception of homes priced below $150,000. There is a significant decrease of 34 days in this price range, but this represents only 16 sales and there are few homes for sale in this price range.

The overall supply of homes on the market (see chart 4) is up - 10.8 months of supply at the end of June 2006 versus 6 months last June. Historically (see chart 5), the months' supply of homes has averaged 6 months. We will be watching to see if this upward trend continues. As mentioned above, new construction has a significant impact on the number of homes currently available for sale - months' supply decreases to 8.8 months versus 4.8 last year, when we exclude new construction. Supply at the various price points varies, as one would expect, with homes priced at $700,000 and above representing most of this increase. Months' supply is a statistic that is used as a barometer of the market-supply versus demand. That is, at the present rate of sale, if no additional homes were listed for sale, it would take about 10.8 months to sell all the homes currently on the market.

With homes taking longer to sell and supply increasing, some may conclude that falling home prices will follow. We don't see this happening. In fact, the average sales price (see chart 6) of homes sold in June 2006 increased 7% to $440,000. The median sales price (see chart 6) of homes sold increased 5.6% to $376,000.

What the numbers point to for the Southern Chester County market is a slow down in the pace of sales, as indicated by the growth in supply. There is a lot of new construction priced above $300,000, and little for buyers looking to purchase anything under $300,000. It is still an attractive market for buyers who are seeking homes priced above $500,000.

(All reports presented are bas


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