Third quarter 2010 market update for Cape Cod Real estate
· Prices (median) Single Family homes have gone up by 8% YTD over 2009, but prices of houses are not going up-only higher priced properties selling in more quantities to pull median price ‘up’.
· Number of sales has dropped by 12% YTD from 2009
· Number of sales spiked (and peaked)in June 2010-Home Buyers tax credit incentive
· “New” normal. Need more reasonable priced housing to fuel recovery. Massachusetts leading in job recovery (Cape Cod less so), but need reasonably priced ‘homes’ for these buyers to stay here in Massachusetts
· Shadow inventory still concern-higher priced homes/condos set for foreclosure in next years if these higher wage earners don’t keep/get good jobs. Major impact on middle priced properties from $500,000-1,000,000
· Historic low interest rates will not last forever, but right now buyers are taking them for granted-as if low rates will last forever. When the rates do rise, there is serious concern for another tumble in housing prices-if buyers cannot afford to buy now with low house prices AND low mortgage rates, it is unlikely the economy will recover quickly enough to boost income to have buyers feel comfortable with larger monthly payments
Several points of information have come together to give some good statistics and perspectives for assessing the market at the end of the 3rd quarter of 2010.
The annual Massachusetts Association of Realtors convention just concluded last week, and with it came an address: The State of Housing in Massachusetts. On the panel were a variety of analysts and commentators (see notes below, if interested).
Massachusetts has had 8 months of median price increases, and prices seems to be ‘back up’ to 2003 levels (I believe they had been as low as 2001 levels in my observations at one point). We have, however, more properties on the market, as sales volume has fallen and more ‘new’ listings come on market.
We are getting ‘back to normal’ but it is the NEW NORMAL for real estate. We have very little inexpensive housing in Massachusetts, and the young Gen X and Gen Y buyers are not as interested in buying real estate just to own a home. Pricing must compel them to act, and if they don’t act, we could lose the young to other areas of country. Since this group is almost as large a demographic as the Baby Boomers, we need to entice them to buy here by offering housing that is affordable.
How is this important to Sellers on Cape Cod? We know our population is older here, and that might allow us to rest on our past success; however, within a few years, if we have no new influx of younger buyers, our houses might not find buyers even at the prices we have now. In other words, lack of demand could cause our housing prices to fall while other areas are rebounding.
We have the second home market buyers, and we have had positive results with sales in that segment. Buyers here too are value driven, as they tend to be older buyers, who may have lost substantial value in their investments and are concerned about buying ‘right’ in hopes that any real estate investment they make now will have an upside return. The properties that are getting the most traffic are on the lower price points. More expensive properties are selling, of course, but there are lots to choose from and the buyers are looking for the perfect house and negotiating aggressively if they find it.
Statistically, we know that median price has increased. Does that mean prices are going up? Unfortunately, it does not at this time-it means that there are more expensive houses that are selling this year than last year. Last year was coming off the devastation of the Mortgage Meltdown of August 2008, and the financial collapse of Fall 2008. In March of 2009, the stock market hit its lowest point, and investors were fleeing. We were pleased to see buyers come to the real estate market, but those Buyers were bargain hunters, and they were buying all the really low priced houses-low prices we are not seeing now. In other words, lots of really cheap bank owned inventory was available, and it was snapped up. We still have foreclosure properties and good values, but not as many at that extraordinary low level. Buyers are now buying houses that have a higher ticket price than those that were selling in 2009-hence the increase in the median price. That is good news-buyers are buying more expensive houses, but still reluctantly. With more to choose from, and with the foreclosures temporarily in a moratorium, buyers are likely to be even more value oriented. PRICE, PRICE, PRICE is key-no matter what price range, it is still the most important factor to creating urgency in buyers.
