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Central Kentucky Market Statistics: The Recovery Part 13

May 18, 2011

By Mike Wheatley

Welcome to the May edition of the Recovery series, formally known as the Hangover. The Kentucky Bluegrass is growing at a record rate with the spring rains, and the real estate market for Central Kentucky houses continues to gain momentum as well. Our official monthly market report for April 2011 has been released by the Lexington Bluegrass Association of Realtors®, and here is my take on the numbers, what they mean, and where we are headed.

The three main categories I focus on are pending sales, total inventory numbers, and average sales price. Pending sales for the month of April came in at 664 representing a slight increase over February numbers and 4 consecutive months of increased pending sales! Pending sales numbers look horrible when compared to the same month last year, which was the deadline month for the Federal Tax Credit. The Tax Credit artificially inflated sales and sales prices. From this point forward, we will be looking at historical numbers not artificially influenced by the tax credits. Inventory numbers, while still very high, are up 4% from both the previous month and the same month last year. We still have an 11 month supply of homes which is about triple what we would like to see in a balanced market. Inventory levels will continue to rise throughout the year until around September, when they typically begin dropping off again. Average sales price for the month was down about 3% from March 2011 and April of last year. I don’t see the 2 to 3% bounce in average price as significant and in fact indicates we have reached a plateau of stability in our local market values. The ratio of final sales price vs. list price remained basically unchanged when compared to the previous month, and when compared to the same month last year.

Most of the trends I’m seeing indicate a “glass half full” outlook for our market. There is one cloud on the horizon that I’ve noticed in the past few months. As the number of bank owned sales and short sales continue to increase, they are forming a much broader base of comparable sales for our market. When I look at closed sales for the past 3 to 6 months in any particular neighborhood, it’s not uncommon in some areas to see these “distressed sales” comprising 50% of the data available. What does this mean? Appraisers use historical sold data to justify sales prices for lenders so if this trend continues, property values will be impacted at some point. This something I will be watching closely in the months to come.

The market in a nutshell: values are steady, supply is high, great homes priced right will sell quickly. If you bought a home during the peak of the market (2005-2006) and you have to sell now, it could be worth less than you paid.

Below is a summary of some of the key indicators for our local market:

Kentucky Market Statistics

As always, my goal is to provide accurate, timely information on our local market. Feel free to call or email with any questions or comments. Should you have friends or family in need of a real estate pro, please pass my name on to them.

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Central Kentucky Market Statistics: The Recovery Part 12

May 3, 2011

By Mike Wheatley

Welcome to the second edition of The Recovery series, formally known as The Hangover. The spring market for Central Kentucky homes continues to gain momentum, and there are several encouraging trends. Our official monthly market report has been released by the Lexington Bluegrass Association of Realtors®, and here is my take on the numbers, what they mean, and where we are headed.

The three main categories I focus on are pending sales, total inventory numbers, and average sales price. Pending sales for the month of March came in at 652 representing a 25% increase over February numbers, representing 3 consecutive months of increased pending sales! Inventory numbers, while still very high, are up 7% from the previous month, but actually lower than the same month last year. We always see inventory levels rise throughout the year until around September, when they start dropping off again. Average sales price for the month was up slightly from February 2011 and about the same as the same month last year. The average sales price figures continue to indicate we have reached a plateau of stability in our local market values. The ratio of final sales price vs. list price remained basically unchanged when compared to the previous month, and when compared to the same month last year.

The bottom line story is the same as last month and will continue to be the same throughout this year: we still have way too many homes on the market but homes that are priced right and in great condition will sell, just not as quickly as we want. As we continue through the first quarter of the year, I will put less focus on the how this year’s numbers compare to last years’, as it isn’t a fair comparison. I want to focus instead on trends we are seeing in our current market. Once we get through April, it will be interesting to see how we compare to last year-I expect the numbers from May going forward will look more and more impressive when compared to the previous year’s numbers.

Below is a summary of some of the key indicators for our local market:

Kentucky homes - Market Statistics

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Central Kentucky Market Statistics: The Hangover Part 11

March 18, 2011

By Mike Wheatley

Welcome to the latest edition of The Hangover Series as we roll into our spring market in Central Kentucky. In the spirit of being optimistic, I think I’ll change the name of the series to the Recovery…this hangover has lasted long enough! Our official monthly market report has been released by the Lexington Bluegrass Association of Realtors, and here is my take on the numbers, what they mean, and where we are headed.

The three main categories I focus on are pending sales, total inventory numbers, and average sales price. Pending sales for the month of February came in at 518 representing an 11% increase over January numbers, representing 2 consecutive months of increased pending sales of Central Kentucky houses! Inventory numbers, while still very high, were basically stable from the previous month and just a little higher than the same month last year. We always see inventory levels rise throughout the year until around September, when they start dropping off again. Average sales price for the month was up about 7% from January 2011 and up about 6% from the same month last year. The average sales price figures continue to indicate we have reached a plateau of stability in our local market values. The ratio of final sales price vs. list price remained basically unchanged when compared to the previous month, and was down slightly when compared to the same month last year.

Below is a summary of some of the key indicators for our local market:

Kentucky houses - Market Statistics

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The Hangover Part 10

February 11, 2011

By Mike Wheatley

One month is in the books for 2011 and this is the latest edition of The Hangover, my analysis of the Central Kentucky real estate market of Bluegrass homes. Don’t look now, but is the Hangover finally over? Our official monthly market report has been released by the Lexington Bluegrass Association of Realtors®, and here is my take on the numbers, what they mean, and where we are headed.

Bluegrass homes

The three main categories I focus on are pending sales, total inventory numbers, and average sales price. Pending sales for the month of January came in at 456 representing a 43% increase over December numbers. While December is historically slow, it is encouraging to see this much Pending activity despite the regular snowfalls we received. Inventory numbers, while still very high, were basically stable from the previous month and just a little higher than the same month last year. Average sales price for the month was down a little over 12% from December 2010 and down about 6% from the same month last year. This is bad news, right? I don’t think so. I think it represents the return of the first time homebuyer to our market, which has been a key to our market recovery since the expiration of the tax credit. The ratio of final sales price vs. list price didn’t change drastically, so the lower average sales price does seem to represent stronger activity in the lower priced homes.

Bottom line: we still have way too many homes on the market but homes that are priced right and in great condition will sell, just not as quickly as we want. As we continue through the first quarter of the year, the pending sales numbers will look horrible, but remember those numbers will be compared to the first quarter of 2010 when our market was artificially stimulated by the tax credit.

Below is a summary of some of the key indicators for our local market:

Bluegrass homes

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The Hangover Part 9

January 20, 2011

By Mike Wheatley

Welcome to 2011 and the latest edition of The Hangover, my analysis of the Central Kentucky housing market. It’s a new year, and the final numbers are in for 2010, undoubtedly one of the most challenging and interesting markets I’ve lived and worked through since becoming a Realtor® in 1993! Our official monthly market report has been released by the Lexington Bluegrass Association of Realtors®, and here is my take on the numbers, what they mean, and where we are headed.

A New Year for the Kentucky Housing Market

The three main categories I focus on are pending sales, total inventory numbers, and average sales price. The headlines always report on our market in terms of sales closed, and of course that’s an important number, since it doesn’t matter how much property sells if it never closes. However, looking at closings is like looking in the rear view mirror…that’s an indicator of past activity, sometimes as far back as a year. Pending numbers give me a better feel of what’s happening now…how many buyers are out in the marketplace. Inventory numbers are also an important indicator of how the market “feels”, both to the consumer and to real estate professionals. I think it contributes to the overall market mood…when I hear customers or clients say things like “there seem to be a lot of for sale signs up in my neighborhood”, what they’re really saying is “will my house ever sell?”, or if they are a buyer, they might be thinking “what’s the rush?”. Finally, average sales price is just an indicator to me of market stability, although other factors, like the tax credit, can manipulate this number.

Overall, the local market was worse in several ways compared to 2009…sales units were down, dollar volume closed was down, inventory and supply numbers were up, days on market were up, etc. The average sales price of Lexington homes was up, mainly as a result of the tax credit pushing most first time buyers to the first three months of the year, and then that buyer evaporated for the rest of the year. It is a sliver of good news though, and we will take what we can get! Many parts of the country would love to trade places with us with respect to our market conditions.

Lexington homes

What does 2011 hold in store? I’m expecting a market that looks much like 2010. The key factor will be when the first time buyer returns to our market, we will see the trickle up effect improve all price ranges. What’s keeping them away? Huge inventory levels, continued low interest rates, and lending policies that have swung way too far to the conservative side. The first two items combine to create absolutely no sense of urgency…why rush when the choices and the deals just get better and better? Lending policies do not need to return to the insane days of “no documentation” or “low documentation” loans, but they do need to relax from where they are now. The first quarter sales numbers will look horrible, but remember those numbers will be compared to the first quarter of 2010 when our market was artificially stimulated by the tax credit.

I am frequently asked about the foreclosure situation and how it affects our market of Lexington homes. While some specific neighborhoods have been battered by high foreclosure rates, overall, our local area and the state as a whole still falls way below the national average in the number of foreclosures taking place, but there are more than ever in our marketplace, with no apparent end in sight. Foreclosures affect our inventory levels and ultimately our average sales prices, and will continue to do so. While many of these properties don’t compete with other listings as a result of their inferior condition, I am seeing more and more foreclosures and/or short sales come to market in average or above average condition. They are not just the physically distressed properties like they once were.

What’s the good news? Interest rates have ticked up a little but still are very low, making this one of the greatest buying opportunities of all time. The retail spending numbers from Christmas seemed to indicate a little more consumer confidence, at least until the Visa bill arrives this month! Also, despite worse than normal weather locally, open house traffic has been strong for this time of year…throw in a couple of decent weekends weather wise, and we could see folks come out the woodwork!

Here is the Pending Sale chart with the December 2010 number:

Market Statistics - Click to Enlarge

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When is a Hangover No Longer a Hangover?

November 5, 2010

By Mike Wheatley

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

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The Hangover, Part 7

October 1, 2010

By Mike Wheatley

Interest Rates Continue to Remain at Historic Lows Creating Tremendous Buyer Opportunities

Welcome to the latest edition of The Hangover, my analysis of our local Kentucky real estate market.

The September market report has been released from our local Lexington Bluegrass Association of Realtors, and there are a couple of encouraging indicators to report!

First, the inventory number dipped below 7,000 units,
and the number of Pending sales, while still the lowest September in quite a few years, showed a rally in the second half of the month to close at 488 units. Also, our year to date closings are still slightly ahead of 2009 as far as total sales volume…we have closed nearly 1 billion dollars in residential real estate since January 1st. Also, interest rates continue to remain at historic lows, creating tremendous buying opportunities.

Finally, the average sales price is holding steady compared to 2009
which is encouraging…seems that depreciation has leveled off, and never
was a huge issue locally.

On the down side, while the supply of homes did dip below 7,000, the actual
months of inventory increased to nearly 15 months, which means it would
take 15 months to sell all of the current homes we have available, if we
didn’t add a single new listing to the supply during that 15 month period.
Historically, a 3 to 6 month supply of homes has been considered a healthy,
balanced market.

Going forward, it will be even more difficult to know where we really are
market-wise, as the previous year numbers will be impacted by last year’s
tax credit that required closings prior to 11-30-09, and the 2011 numbers
will be impacted by comparing to the 2010 numbers that of course were
affected by this year’s tax credits. It will be difficult to determine
a recovery is happening until we are well into it. We will be working
our way through uncharted waters in the upcoming months.

October through December are historically fairly quiet sales months as we
roll into the holiday season. However, January and February can actually
be pretty good sales months, as there always seems to be a little pent up
demand from people not wanting to make a move over the holidays.

The following has been updated to reflect the actual numbers from September:

Pending Bluegrass Home Sales by Month

As always, please feel free to call or email with any additional questions you may have. My goal is always to provide accurate, professional real estate advice.

Mike Wheatley, REALTOR
Milestone Realty Consultants
859-533-2646 Cell – “Feel Free to Text”
MWheatley@MilestoneKy.com
Choosing the right Realtor DOES make a difference!

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The Hangover, Part 6

September 10, 2010

By Mike Wheatley

The latest national chatter seems to be the debate over whether the government should walk away from supporting the housing market and let it “crash” or continue to assist with various types of federal support…what do you think? I think locally our market has been flat since late 2006 or early 2007, so if there was any over pricing locally, I feel like we’ve absorbed that over the last four years. I think the longstanding supports such as the interest tax deduction and the FHA insurance program should continue, and didn’t seem to contribute to the downturn we’re in now. I’m not convinced that the more recent tax credits have contributed anything toward a real estate recovery.

August is now behind us,and “the market’ continues to trudge along. The actual pending numbers for July came in at 540, continuing the trend we started in May, with Pending sales down each month about 30-35% from the previous year. My projected Pending sales for Central Kentucky real estate in August is 550 (the official LBAR August report has not been released yet). If that number holds true, our year to date Pending sales will be down 325 sales compared to the same period in 2009, despite the record breaking March and April sales. Active listings on the market, as of today, are 7022 residential listings, which is approaching record breaking, but not in a good way! As previously reported, the effect of higher inventory is usually more pressure on pricing, as sellers anxious to move their homes try to make their home stand out in the marketplace, usually through price reductions. The inventory number I would like to see would be in the 3,000 to 4,000 unit range…more of a balanced market. We currently have a 12 month supply of homes on the market, which means it would take 12 months to sell all of the current homes we have available, if we didn’t add a single new listing to the supply during that 12 month period.

Kentucky real estate

I had the opportunity recently to hear a great sales trainer provide his insight on our current market conditions. He focused mainly on the factors that motivate today’s buyer. He was able to quantify what I’ve been telling people for quite some time…people in the market to buy today are there for specific reasons…people are no longer buying for the fun of it like they did 5 or 6 years ago. His simple formula was this: when a buyers’ current dissatisfaction with their current home along with the promise of the great things that come with getting the new home exceed their fear and cost of making the move, then they’ll make the move. The bottom line is people have to have very specific motivating factors to be in the market, and these factors are usually very personal. Things like low interest rates or seller paid closing costs are not enough to inspire people to make a change. As I meet people every week and try to understand why they’re in the market for another home, they really do have very specific needs…accommodating a growing family, a change in employment, marriage, divorce, etc.

I think September will be a key month for us. If sales make a turnaround, then I think that will indicate that we have made the turn and the Hangover is ending. If they continue in that 30-35% downward trend, then I think we’re looking at that continuing through the end of the year, and our next opportunity for a turnaround will be January 2011. Stay tuned!

The following has been updated to reflect a more accurate projected figure for August 2010:

Pending Sales by Month
	January	February	March	April	May	June	July	August	September
2010	555	610	909	1143	522	575	540	550
2009	472	551	677	809	894	807	772	761	759
2008	713	743	804	860	863	800	732	754	650
2007	801	748	981	1091	1023	883	893	814	644
2006	718	742	1089	1029	1090	1100	932	980	746
2005	763	875	1044	1039	1023	1158	1028	986	925
2004	699	731	975	981	931	925	996	803	755
2003	440	632	850	936	963	990	971	804	660
2002	540	642	607	781	857	669	690	745	647

Here is the entire July LBAR Marketing Report.

Please feel free to call or email with any additional questions you may have. My goal is always to provide accurate, professional real estate advice.

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Hangover, Part 5 – What’s the New Normal?

August 6, 2010

By Mike Wheatley

Here we are in the first week of August, and I’m happy to report that the July Pending home sales started showing signs of life during the second half of the month. As of July 15th, it looked like we were headed for a 425 Pending month, but it appears the actual Pending sales for July will be closer to 550. While this number is still below previous July numbers, I am encouraged that the market seemed to rally slightly during the final half. The factor I mentioned a couple of weeks ago as a concern is coming to fruition. Active Bluegrass homes on the market, as of today, are 7115 residential listings, back in the neighborhood of the record breaking inventory levels we experienced in July through September of 2007. As I reported last time, the effect of higher inventory is usually more pressure on pricing, as sellers anxious to move their homes try to make their home stand out in the marketplace, usually through price reductions. The inventory number I would like to see would be in the 3,000 to 4,000 unit range…more of a balanced market.

I think the big question we face for the rest of the year is, “what is the new normal?”. We’ve been under the influence of some sort of tax credit for 18 months now, and I think everyone agrees that 2004 through 2006 were definitely not sustainable, so its difficult for anyone to project where we should be with our sales figures. I wonder what the numbers would have looked like for the past year and a half with no credits out there. Maybe the numbers we are seeing now represent the new normal…only time will tell. I can say that from a sales perspective, today’s buyer is more cautious, more educated than ever, and generally in the market for a specific reason. The days of buying a home just for the fun of it (and we really did see that in ’04-’06) are gone. Record low interest rates and record high inventories are still not enough to ignite this market. We need a little help from other sectors of the economy, and most of the experts see the employment numbers as the key to a true sustainable recovery.

The following has been updated to reflect a more accurate projected figure for July 2010:

Pending Bluegrass Home Sales by Month

*July 2010 projected based on current data available through 8-06-10.

Please feel free to call or email with any additional questions you may have. My goal is always to provide accurate, professional real estate advice.

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The Hangover Part 4

July 15, 2010

By Mike Wheatley

Halfway through the month of July now, and no huge surprises with the June actual numbers and the preliminary July numbers are showing that the market malaise continues. The one number that stands out to me is the number of Active Bluegrass homes on the market, which was 6842 on June 1. This is becoming the “elephant in the room”…we hit all time highs in July through September of 2007, when Active listings exceeded 7000 for the first time in our history. I expect to see us hit that level again in July of this year, as Pending sales continue to lag behind seasonal averages. The effect of higher inventory is usually more pressure on pricing, as sellers anxious to move their homes try to make their home stand out in the marketplace, usually through price reductions.

In the short term, my personal experience has shown that the last 2 weeks of July and the first 2 weeks of August have been a very quiet time for sales activity. I think people use that time to get in their last getaways of the summer before the kids get back in school.

On a positive note, interest rates continue to stay at or near historic lows. The impact of these lower rates is so much more significant than the tax credits that were offered, but for some reason, the public doesn’t seem to recognize that. The quick gratification of an $8,000 check from the government is more appealing than saving tens of thousands over the life of the loan. Here’s what I mean:

The following has been updated to reflect the actual numbers for June, and a projected figure for July 2010:

*July 2010 projected based on current data available through 7-15-10.

As always in this type of market with lots of supply, it is crucial for sellers to be priced right and have top notch condition. Buyers have so many choices today, and buying decisions can be based on what might seem like insignificant factors.

Please feel free to call or email with any additional questions you may have. My goal is always to provide accurate, professional real estate advice.

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