Existing home sales declined on the heels of strong gain in September as uncertainty and economic concerns increased in October.  Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions.  The affordability conditions are favorable, but buyers need confidence.  Thus, the housing stimulus is critical to encourage more buyers to reduce the inventory and stabilize home prices.

                                               Change from                   Change from

                                                Sept to Oct                  Oct. 07 to Oct. 08

Existing home sales                   -3.1%                              -1.6%

Single family home sales           -3.3%                          unchanged

Condo & co-op sales                 -1.8%                              -12%

Though sales are down slightly and they have been volatile month to month, the overall trend since July has been a slight improvement.  Click here to view the Sales-US graph.

Total housing inventory at the end of October slipped 0.9%, representing a 10.2 month supply.  However, new construction was down 40.1% year over year, which will help keep inventory down.

The national median existing-home price was $183,000 in October, down 11.3% from a year ago.  However, there is a downward distortion from the large number of distress sales at discounted prices.  Click here to view the Prices Year-Over-Year graph.

Northeast:

Existing-home sales decreased 1.2% from September to October and are 9.8% lower than a year ago.  The median price has decreased 9.8% from October 2007.

West:

Existing-home sales dropped 1.6% from September to October, but are 37.5% higher than October 2007.  The median price is down 27.0% from a year ago.

South:

Existing-home sales declined 3.2% in October and are 10.2% below a year ago.  The median price is 5.8% lower than October 2007.

Midwest:

Existing-home sales fell 6% in October and are 9.1% below October 2007.  The median price is 6.7% down from a year ago. Source: National Assoc. of Realtors 11/24/08.

Asking prices for homes across the country fell 2.9% August through October.  Listed property inventories declined in 23 of 26 markets.  Widespread inventory declines have continued for many months, but, as demonstrated by declining prices, the pace of supply contraction has not kept up with the falloff in demand. Source: Altos Research & Real IQ 11/7/08.

Forecasting the Future of Home Prices

Economists surveyed by the Wall Street Journal say that home prices won't hit bottom until the second half of 2009 at the earliest and some say the downward trend will continue until 2011 or 2012.  After that, they may rise again, but not as fast as they have in the last decade.

William Wheaton, a professor of economics and real estate at MIT, says he expects house prices to increase at a rate roughly 1% point higher than inflation over the long run.

Celia Chen, director of housing economics at Moody's Economy.com, is more optimistic, expecting home values to rise an average of 4% per year over the next couple of decades.

Demographer William Frey predicts that growth will continue in coastal and Southern cities while populations in the rustbelt areas like Michigan, Ohio, Western Pennsylvania and Upstate New York will continue to decline.

The unknown is the impact aging baby boomers will have.  Though retirees in the past have often headed for warmer and suburban areas, they have also tended to confound expectations.  They could stay put, move to urban areas for the cultural life or move near friends or family.  Source: The Wall Street Journal, James R. Hagerty 12/2/08.

Sellers

When we look at the percent appreciation in 5 year increments, one can see that 2000-2006 was an anomaly and could not be sustained.  Click here to view the Appreciation graph.  During those years, home pricing compared to real wages significantly inverted.  Click here to view the Real House Prices and Wages graph.  Source: Of Two Minds Blog 10/08.

Foreclosures have been adding to inventory and will continue to do so as the ARM products reset.  The effects of the foreclosure market have resulted in 12 states going from a situation of appreciation to depreciation in the second to third quarter of 2008.  Click here to view the Where Prices are Going map.

Establishing an initial listing price is critical in today's market.  While sellers may be focused on prices realized during the peak of the boom, buyers are looking for bargains.  If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25-30% below its peak bubble value.  Source: Money Magazine 5/12/08.  To see the amount of depreciation from the peak in 20 major metropolitan areas, click here for the Case-Shiller Graph.  However, the cities most off their peak had outstanding appreciation at the peak and were still a good investment if one bought before 2005.  Click here to view the Good Investment Table. 

Look at your area's inventory vs. sales, i.e., absorption rate or months in inventory = (current inventory/sales for the year) /12 months.  Then use this guideline:

Months in inventory            Pricing

1-2                                                                             dbl digit appreciation

3-4                                                                             single digit "

5-6                                                                             the norm

7-8                                                                             single digit depreciation

8-9                                                                            double digit "

Historically, during housing busts, existing home prices fall for 5 to 7 years – so expect to start looking for the bottom in the bubble areas in 2010 to 2012 or so.  Source: CalculatedRisk.com 8/12/08.

Buyers

Waiting for the absolute bottom to hit before buying puts you at risk of missing it and getting caught up in a market on the upswing.  Source: MSN Real Estate 5/13/08.  Resist trying to time the bottom, it's harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low.  Source: Money Magazine 5/12/08.

Despite big losses in some areas of the country, the majority of markets continue to show growth in home value over the last five years.  According to the third-quarter survey released by the Federal Housing Finance Agency, out of 292 metropolitan markets, 273 showed positive net home values in the last five years.  Only 19% were negative.  Source: The Washington Post Writers Group, Kenneth Harney, 12/6/08.

During the years 2005 to 2008, monthly mortgage payments on median priced homes were significantly above rent on an equivalent house.  They are now about the same, so building equity on a home makes more sense than paying rent.  Click here to view the Homes for Working Families graph.  Click here to view the graph of The PMI Value of Homeownership for an example of return on equity at approximately 7% appreciation per year.  Have you made that much from your securities?  Source: PMI October 2007.

Mortgage Market

Freddie Mac released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 5.47 for the week ending December 11, 2008.  Last year at this time, the 30-year FRM averaged 6.11%.

The National Association of Realtors research indicates that an interest-rate reduction of just 1% could result in as many as 840,000 additional home sales.  That could further reduce the inventory of homes by as much as 20%.  In the last week, we have seen dips below 4.5%.

WILMINGTON & NC

North Carolina is expected to decline by 0.2% this year, according to John Connaughton of the University of North Carolina Charlotte.  But in the second quarter of 2009, growth should start again, with the gross state product advancing by 1.4% on annualized, inflation-adjusted basis.  He forecast economic expansion of 2.5% in 2009 with a net gain of 51,200 jobs.  He projected the strongest employment growth in services, real estate and finance and wholesale trade.  Source: Triangle Business Journal 12/9/08.

The Tar Heel State grew by 180,820 people from July 2007 until July 2008, the third-highest population growth behind Texas and California.  North Carolina had the fourth-highest rate of population growth in the country during that time, growing by 2%.  The three states adding people faster were Utah, Arizona and Texas.  From the 2000 census to July 2007, New Hanover, Brunswick and Pender Counties grew about 19%, while the statewide rate was 12%.  Source: Star News 12/23/08.

According to the Federal Housing Finance Agency, Wilmington experienced an appreciation gain of 62.1% over the last five years.  This was the fifth highest in the nation.  Source: The Washington Post Writers Group, Kenneth Harney, 12/6/08.

November 2008 Multiple Service Listing Report

Data pulled 12/14/08

Listing Inventory

The current inventory has 5,494 single family homes listed, a 158 unit decrease from October.

Monthly Average Sold Price

The monthly average sold price is down 1.6% from last month, down 8.1% from November 2007 and down 7.8% from year end 2007.

Average Sold Price Year to Date

Our 12 month (12/1/07-11/30/08) rolling average ($254,090) is behind last year ($273,492) by less than 7.1%.

Median Sold Price

The median sold price for November is $194,000.  This is a 3% decrease over last month.

Monthly Units Sold

The number of sold homes in November is down 39.8% from last month.  Looking at a rolling 12 months, the number of sold units year over year is 4,758 units compared to 6,623 last year at this time, a decrease of 28.2%.

Market Absorption Rate

The number of homes sold in November, 213, divided by the current listing inventory, 5,494, gives us a 25.7 month supply of single family homes.  However, the low sales volume in November greatly affects this calculation.  We would need monthly sales of over 950 units to get us back under a 6 month supply.

List to Sold Price Ratio

The average list price of sold properties is $269,954 and the average sold price is $252,331 for November which gives us a 93.47% ratio.

Data by Zip Codes for Q3 2008:

CAROLINA & KURE BEACH

There are currently 592 single family homes for sale, a 21 unit decrease over November.

The average list price of $526,051 is a decrease of .03% over November 2008.

The average sold price for November of $278,152 is a decrease over last month of 15.9%.

Comparing the first 11 months of 2007 to the first 11 months of 2008, the average sales price is down 11.5%.