Summer officially arrives this week.  Fortunately, the last few days of Spring actually feels like Spring.  Hopefully, you made it through the torrential rains without too much trouble.  We certainly have had some interesting weather.  Most of us have probably been keeping a close eye on the weather forecast to see what’s next.  It sure sounds a lot like what we’re doing with the national and local real estate markets.    For the first five months of 2008, we have watched closely to see what’s happening today, and listened intently to what the experts are saying about what to expect tomorrow.  We do know one thing for certain.  Both nationally and locally, home sales are down.  

On the national level, existing home sales in April were down 17.5 percent from April 2007 sales figures, although there was an increase in the number of markets that showed sales gains from a year ago.  In the Midwest, existing-home sales were down 6 percent from March and 19.7 percent from April 2007.  Home sales are expected to increase slightly over the next couple of months, and continue to improve in the second half of this year as more buyers are able to access affordable mortgages.  The Pending Home Sales Index, which is based on contracts signed, rose 6.3 percent from March to April, but remains 13.1 percent lower than April 2007.  Regionally, in the Midwest, the index jumped 13 percent from March to April, but still remains 13.1 percent lower than April 2007.  On a positive note – by the fourth quarter of this year, nationally, existing home sales are expected to increase by 15.4 percent over second quarter levels.

New-home sales are now projected to fall 31.7 percent to 529,000 in 2008 before rising 12.5 percent to 595,000 next year. Housing starts, including multifamily units, are estimated to drop 27.2 percent to 987,000 this year, and slip another 0.6 percent to 980,000 in 2009.  All of these new estimates reflect a downward adjustment.   

In addition to the drop in sales, the national median existing-home price for all housing types (single-family, townhomes, condominiums, and co-ops) was $200,700 in April, down 8.5 percent from April 2007.  This is in line with the expected 8.4 percent decline in the first half of this year.  The median existing-home price is expected to begin stabilizing in the second half of the year, before rising 4.4 percent next year to $213,900.    In the Midwest, the median price was $159,100 in April, down 2.9 percent from April 2007.  According to Lawrence Yun, the National Association of Realtors’ chief economist, rising construction costs will provide less room for price cuts on new homes.  The median new home price is expected to decline 3.1 percent to $239,500 in 2008, and then rise 5.4 percent next year to $252,400.

To stir the pot, mortgage interest rates are fluctuating daily, with increases dominating.  As we reported in our last newsletter, in February national and local mortgage rates reached 4-year lows.  At the end of March the national average for a 30-year, conventional, fixed-rate mortgage was 5.97 percent.  At the end of April it was 6.18 percent.  Near the end of May, the rate had dropped to 6.08 percent.  Last week, speculation that the central bank could reverse its rate-cutting campaign later this year to keep inflation in check drove the rate up to 6.32 percent.  Last week, national averages also rose from 5.65 percent to 5.93 percent for a 15-year fixed rate mortgage, from 5.06 percent to 5.09 percent for a 1-year adjustable rate mortgage (ARM), and from 5.51 percent to 5.70 percent for a five-year ARM.

Just as mentioned in our last newsletter, daily reports of growing inflation continue to be of concern to market experts.  Inflation (as measured by the Consumer Price Index) is now projected at 3.6 percent in 2008 and 2.4 percent next year.  The continued advance in crude oil futures prices, now at $134 per barrel, will certainly have a negative impact on current estimates.  Although the full extend of the damage from the flooding in the Midwest is presently unknown, it is expected to be significant, and will certainly lead to higher crop costs.  The ripple effect will extend to many aspects of our economy, further increasing the likelihood of accelerated inflation.

So, as always, what does this mean for us in Macon County?  The first five months of 2008 show that the national market decline has reached us here, albeit on a smaller scale, although there is no rational explanation or justification as to why.  The vast majority of the issues that caused the market to collapse in many areas of the country simply do not exist here.  It is most likely an issue of more local buyers, sellers, and experts finally buying into the hype, without validating the issues on the local level.  According to Decatur Association of Realtor statistics, the number of REALTOR®-led home sales in our area from January-May declined by 16.59%, while our average list price ($109,757) increased .07%, our average sales price ($103,493) decreased by 1.14%, our average sales price % of list price (94.29%) decreased by 1.14%, and our average days on market (112 days) increased by 5.2 days, when compared to January-June of 2007. 

So, are we in a seller's or buyer's market here locally?  Again, it depends on your individual situation, although signs are seriously leaning towards a buyer’s market.   It is important to understand that if you are making a lateral move in the market (similar home) or moving up in the market (larger home) you are going to do no worse than break even.  If you are looking to downsize (smaller home) you may not do as well.

Over the past couple of weeks, the majority of local lenders increased 15-year fixed mortgage rates (now ranging from 5.875 to 6.25 percent) and 25-30-year fixed mortgage rates (now ranging from 6.375 to 6.75 percent) by .5 percent.  These rates are already above the 6.3 percent maximum that was forecasted for later this year.  However, even with the latest increases, low interest rates and affordable homes still make now a great time to buy.  With 756 homes on the market in our area at the end of May there are certainly nice homes available.  Homes on the market that are in selling condition and appropriately priced are selling, and often selling fast.  Even though the definite threat of increasing inflation, the ever-present mortgage rate roller coaster, and the increase in the local unemployment rate when compared to last year may convince some potential buyers to remain on the sidelines, there are still many buyers taking a new or second look at the real estate market searching for properly maintained and priced homes. 

With all of the national real estate news that you see or hear on the TV, on the radio, on-line, or in the newspaper, it is more important than ever to examine and understand what’s happening at the local community and neighborhood level.  As a home buyer or seller should check with a REALTOR® for local expertise on what’s going on in your own area because conditions can vary considerably from one neighborhood to the next. 

As always, it’s best to work with a professional to determine pricing, timing and best value, whether you are buying or selling; whether you are a first-time buyer, or a seasoned home-buying and -selling veteran.  If you would like my team's assistance with the purchase or sale of a property, please give us a call.  Who do you know that is thinking about moving and could use our services?  Our team of experts would love to help them as well.  It is our pleasure to assist you with your most precious investment.  Your satisfaction is our success.

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