Thanks for reading the latest edition of “The Hangover”, my analysis
of the Central Kentucky real estate market. Although our official
monthly market report has not been released by the Lexington
Bluegrass Association of Realtors, I have analyzed the numbers
to provide a sneak preview.
When is a hangover no longer a hangover? Maybe after 6 straight months
of the market experiencing a pounding headache? That’s where we are…it
seems we have some chronic issues to deal with. Monthly Pending Sales
numbers still lag well behind the numbers of previous years, and in
October, the year to date closings will finally drop below where we
were one year ago, both in number of units and total sales volume in
dollars. The cushion in sales provided by the tax credit in the first
quarter has finally gone flat, as every month since May has lagged well
behind previous year’s numbers.
One bright spot is the inventory levels continue to drop. We should be
around 6616 Active Bluegrass homes when the report is released. However, the
inventory isn’t dropping due to an uptick in sales. Rather, they are
dropping mainly as a result of people taking their homes off the market.
I would compare it to the employment numbers we receive, when we hear
that unemployment is hovering around 10%, yet there are thousands of
other employable people who have simply given up searching for a job,
so the true number of unemployed would be higher than the stated
percentage.
I expect we will see the inventory numbers continue to decline through
the end of this year as this is historically the time of year when
people are reluctant to put their homes on the market. The bottom line
is that our inventory is still around 15 months,which is way above
where we would like to see it.
Moving forward, what will break us out of this slump? I wish I knew,
but whatever it is, it doesn’t appear that housing will lead the
economic recovery this time. We seem to be in the “chicken and egg”
phase of recovery, with each sector looking at the other saying
“you go first”. I think the single largest obstacle to the real
estate recovery is the foreclosure situation. While in Kentucky
it is still a small percentage of the total market when compared
to other states, the impact of foreclosures on inventory levels and
values has been significant. Looking at the calendar of upcoming sales
through the Master Commissioner, it doesn’t appear that it’s getting
better anytime soon.
Is there any good news out there when it comes to real estate??
Yes! Interest rates still are at historic lows, making this one of the
greatest buying opportunities of all time. My friends in the rental
business tell me their business is booming,with occupancy rates at all
time highs. How long before those folks get tired of paying someone
else’s mortgage and get into home ownership? Also, new construction
prices are still essentially at 2006-2007 levels, so even if you have
a house to sell and aren’t crazy about the price it will bring, you
have to remember that you’re also purchasing something at essentially
the same price you could 4 or 5 years ago. Maybe you don’t gain as much
on your sale, but you’re not paying more than you should on the new
purchase either.
Here is the Pending Sale chart with my projected number for October 2010:
As always, my goal is to provide accurate, timely information on our
local market. Feel free to call or email with any questions.
Mike Wheatley, REALTOR
MWheatley@MilestoneKY.com
859-533-2646
