This is another in my ongoing series of articles on what is happening to house prices in Delaware county.
National and regional trends tell only part of the story. While our area is certainly affected by those larger trends, just like politics, all real estate is local. This article focuses on single family house sales in Nether Providence Township (NP).
NP has actually been one of the areas that has shown more price retention than a lot of Delaware county, as measured by the average resale price of a single family house. Like most of the rest of our area, resale prices peaked in 2006 at $380,0452. That was an increase of 13% from 2005 and was the third year out of the most recent four in which prices showed double digit increases.
Here is a "Gee Whiz" number for you. From 2002, when the average resale price was "only" $244,342, the average resale price increased to the above mentioned $380,452 in 2006. That is an annual average increase of 13.5% (ah for the good old days, if you are an investor or a seller). Since the average increase in home prices is 3%, that was obviousle not sustainable, but I digress.
After prices peaked in 2006, NP actually was quite resistant to the overall regional price decrease in 2007. Average resale price declined only by about 1% in that year, before taking a negative hit of -11% in 2008.
Resale prices actually recovered slightly in the last two years, coming up to an average of $350,653 in 2010. (Ain't that a surpris though?)
Taking the longer view, prices have "only declined" by about 8% since the peak in 2006. Small consolation if you could have gotten $400,000 for your house back then and can expect $32,000 less now; but that is a lot heathier than some other parts of our area.
However, average resale price is only part of the picture, especially if you are a seller. Another measure of market health is the number of houses that are selling and how long does it take to sell.
All statistics are imperfect, but taken together they will give the best picture we can find. In NP, every year from 2001 through 2007, there were between 140 and 154 resales reported by our local Multiple Listing Service. Starting in 2008, those numbers were 104, 109 and 93. That is about a 30% reduction in annual sales, a big number by anyone's definition.
Another indicator of market health is the average Days on Market. That is the average number of days that a property was listed for sale before an agreement was finalized. In 2010 that was 112 days. In 2006, the last of the "Good Old Years", that number was 49. In other words, we have seen over a 100% increase in the amount of time it takes to sell a house.
However, for every cloud there is a silver lining. As much as this has been bad news for sellers and investors, it has been good news for buyers. The combination of soft and declining prices plus record low interest rates has resulted in an amazing window of opportunity for buyers. For those who are waiting for the market to bottom out to buy, my advice is to buy now. If you wait for evidence that we are at the bottom, you will have missed it.
If anyone would like more specific information, please give me a shout at DelcoRealEstate@Gmail.com. You can also try the old fashioned way by phone at 484-574-4088.
Thursday, April 28, 2011
Monday, April 18, 2011
BEHIND ON THE MORTGAGE? HELP IS AVAILABLE FOR YOU
As the economic slowdown seems to go on and on forever, more and more homeowners are feeling the pinch of trying to keep up with their monthly payment. As of today, there are 3,838 houses listed for sale in Delaware County. 257 of these are "Short Sales" (about 7%) which means that the sellers have too little equity in the property to pay off the mortgage when they sell.
The bad news is that this trend seems to be increasing. The good news is that help is available and that lenders are willing to work with homeowners and their agents to work out a settlement. More good news (for buyers at least, is that Short Sales can be a chance to buy a house at a significant discount to the market.
Many homeowners feel that there is no choice between keeping up their payments and declaring bankruptcy. Actually, they do have significant leverage with their lenders, for these reasons.
If a homeowner decides to just leave and "Give the house back to the bank", his or her credit rating takes an enormous hit that sticks with them for years. Banks do not like it either, because the foreclosure process is long (14-18 months in PA),it costs them a lot of money and the average foreclosure sells for only 59% of the normal value.
If however, the homeowner approaches the bank and lays out the case for a short sale, the average sale price for that situation is 81% of the normal value. That is 22 percentage points. On a house that is worth $300,000 in today's market, that is a difference of about $66,000 in more money to the bank. Other positives for the lender are that the whole short sale process costs a lot less and it can be done a lot faster. While neither a Short Sale nor a Foreclosure is a good thing for the lender, the Short Sale is a lot less damaging.
Not all situations are candidates for a Short Sale, but a lot of them are. If you think that you might qualify or if you know someone who might, you or they will be relieved to know that help is available that can get you out from under a real bad situation. However, this is not something that you should try on your own. You need the help of a trained and able Realtor to help you through the process.
If you would like to learn more about Short Sales, please send me a confidential email at DelcoRealEstate@Gmail.com or make an equally confidential phone call to me at 484-574-4088.
The bad news is that this trend seems to be increasing. The good news is that help is available and that lenders are willing to work with homeowners and their agents to work out a settlement. More good news (for buyers at least, is that Short Sales can be a chance to buy a house at a significant discount to the market.
Many homeowners feel that there is no choice between keeping up their payments and declaring bankruptcy. Actually, they do have significant leverage with their lenders, for these reasons.
If a homeowner decides to just leave and "Give the house back to the bank", his or her credit rating takes an enormous hit that sticks with them for years. Banks do not like it either, because the foreclosure process is long (14-18 months in PA),it costs them a lot of money and the average foreclosure sells for only 59% of the normal value.
If however, the homeowner approaches the bank and lays out the case for a short sale, the average sale price for that situation is 81% of the normal value. That is 22 percentage points. On a house that is worth $300,000 in today's market, that is a difference of about $66,000 in more money to the bank. Other positives for the lender are that the whole short sale process costs a lot less and it can be done a lot faster. While neither a Short Sale nor a Foreclosure is a good thing for the lender, the Short Sale is a lot less damaging.
Not all situations are candidates for a Short Sale, but a lot of them are. If you think that you might qualify or if you know someone who might, you or they will be relieved to know that help is available that can get you out from under a real bad situation. However, this is not something that you should try on your own. You need the help of a trained and able Realtor to help you through the process.
If you would like to learn more about Short Sales, please send me a confidential email at DelcoRealEstate@Gmail.com or make an equally confidential phone call to me at 484-574-4088.
Monday, April 11, 2011
MOVE UP NOW OR WAIT FOR RECOVERY? IT IS PROBABLY A DIFFERENT ANSWER FROM WHAT YOU MIGHT THINK
A common dilemma today is the homeowner wondering if it makes sense to sell in todays market and make that move up to a better house or wait until the market recovers.
Logical question, and the initial gut reaction is, "Man the value of my house is way down. I have to wait." However, when you look at the cash flows of making the move now and the estimated cash flows of waiting five years, the answer is a little bit surprising. Bottom line is that if you have enough equity in your house to cover the cost of moving up, you are smart to make that move right now. Of course if you are upside down and owe more than your house is worth, that is another story (and the subject for another blog which will be coming up shortly).
How in the world can that be you ask? Most of the answer lies in the extremely attractive interest rates for home mortgages, which are at historic lows right now. (4.5%, no points vs historical rates of 6.5% or more)
To explain further, please see below. Here are the planning assumptions that are behind the numbers.
Planning Assumptions
+ House prices decline for one more year, recover starting in 2012 and increase thereafter at the long term historical rate of 3% a year.
+ Home mortgage rates are at 4.5% in 2011.
+ Home mortgage rates increase to 6.5% by 2016.
+ Down payment of 20%
Under those conditions, if a house can be sold for $270,000 today and the sellers move up to a house that costs $450,000, their new Principal and Interest payment would be $1,824 a month.
If they wait until 2016, it is true that the selling price of their house will have increased up to $295,036. However, the price of the house to which they move up will also have increased, up to $491,727.
Their monthly payment after the 20% down payment will have increased to $2,486 a month. That is an increase of $662 a month or $7,948 a year.
Why is that so? Well, the increased mortgage amount accounts for about 25% of the increase, but the change in interest rates accounts for 75%.
What is the lesson? If you have enough equity in your present house to finance the move up, there will never be a better time to do it than today.
Another cash flow drawback of waiting for five years is that the amount of the 20% down payment will also have increased by, in this example, $8,345.
If you would like to explore these possiblities for your own situation, just give me a shout at 484-574-4088 or email to DelcoRealEstate@Gmail.com
Thanks for listening.
Logical question, and the initial gut reaction is, "Man the value of my house is way down. I have to wait." However, when you look at the cash flows of making the move now and the estimated cash flows of waiting five years, the answer is a little bit surprising. Bottom line is that if you have enough equity in your house to cover the cost of moving up, you are smart to make that move right now. Of course if you are upside down and owe more than your house is worth, that is another story (and the subject for another blog which will be coming up shortly).
How in the world can that be you ask? Most of the answer lies in the extremely attractive interest rates for home mortgages, which are at historic lows right now. (4.5%, no points vs historical rates of 6.5% or more)
To explain further, please see below. Here are the planning assumptions that are behind the numbers.
Planning Assumptions
+ House prices decline for one more year, recover starting in 2012 and increase thereafter at the long term historical rate of 3% a year.
+ Home mortgage rates are at 4.5% in 2011.
+ Home mortgage rates increase to 6.5% by 2016.
+ Down payment of 20%
Under those conditions, if a house can be sold for $270,000 today and the sellers move up to a house that costs $450,000, their new Principal and Interest payment would be $1,824 a month.
If they wait until 2016, it is true that the selling price of their house will have increased up to $295,036. However, the price of the house to which they move up will also have increased, up to $491,727.
Their monthly payment after the 20% down payment will have increased to $2,486 a month. That is an increase of $662 a month or $7,948 a year.
Why is that so? Well, the increased mortgage amount accounts for about 25% of the increase, but the change in interest rates accounts for 75%.
What is the lesson? If you have enough equity in your present house to finance the move up, there will never be a better time to do it than today.
Another cash flow drawback of waiting for five years is that the amount of the 20% down payment will also have increased by, in this example, $8,345.
If you would like to explore these possiblities for your own situation, just give me a shout at 484-574-4088 or email to DelcoRealEstate@Gmail.com
Thanks for listening.
Tuesday, April 5, 2011
Sales Still Struggling in Our Area
Market Report: Residential Home Sales Fall 3% in February, in our Area
Statistics are courtesy of MLS Trend and KCM.com
Residential sales activity for southeastern PA, southern New Jersey and Delaware dropped 3.8% in February 2011 compared to a year ago, according to statistics generated by MLS Blue. There were 2,785 sales reported in February 2011, compared to 2,896 in February 2010.
Two counties saw increases in sales activity, with the highest percentages in Chester County, PA (24.4%) and Mercer County, NJ (20.3%).
Of the remaining counties, the highest percentage decreases in sales were Salem County, NJ (25.0%), Montgomery County, PA (11.6%), Delaware County, PA (11.4) and Gloucester County, NJ (10.1%).
Sale Prices Decrease Slightly
Average sale prices decreased 2.3% when comparing numbers from February 2011 to February 2010. Overall, average sold prices increased in 5 counties.
The highest increases were:
• Delaware County, PA – 9.0%
• Philadelphia County, PA - 4.1%
• Montgomery County, PA – 3.5%
The highest decreases were:
• New Castle County, DE – 16.7%
• Kent County, DE – 16.4%
• Chester County, PA – 10.1%
Two counties saw higher median prices. Camden County, NJ led the way at 15.6%, while Salem County, NJ had the largest decrease at 21.8%. Bucks County, PA was unchanged.
Pending Sales Drop by 11%
Pending sales in February 2011 decreased in 10 counties compared to February 2010. Sales were 3,959 in February 2011 and 4,462 in February 2010.
The highest increases were:
• Kent County, DE – 25.3%
• New Castle County, DE – 20.3%
• Salem County, NJ – 11.1%
Individually, the highest decreases were:
• Camden County, NJ – 21.4%
• Bucks County, PA – 20.8%
• Philadelphia County, PA – 19.6%
Inventory at the end of February 2011 stood at 48,025 an increase of 2.8% from 46,671 in February 2010.
Comment from John Herreid: The inventory increase is another data point that shows we still have a lot of work to do to get out from under the inventory bulge that is the basic driver of soft and decreasing prices in our area.
Another large part of the inventory overhang problem, as per KCM.com, is that we have about an estimated 10 months of inventory across PA that is distressed , meaning it is heading for either a Short sale or Foreclosures. Short sales typically sell for about 81% of the full value of the property; foreclosures sell for about 59%. If you are interested in seeing what short sales and foreclosures are available in your area, please contact me at delcorealestate@gmail.com.
Statistics are courtesy of MLS Trend and KCM.com
Residential sales activity for southeastern PA, southern New Jersey and Delaware dropped 3.8% in February 2011 compared to a year ago, according to statistics generated by MLS Blue. There were 2,785 sales reported in February 2011, compared to 2,896 in February 2010.
Two counties saw increases in sales activity, with the highest percentages in Chester County, PA (24.4%) and Mercer County, NJ (20.3%).
Of the remaining counties, the highest percentage decreases in sales were Salem County, NJ (25.0%), Montgomery County, PA (11.6%), Delaware County, PA (11.4) and Gloucester County, NJ (10.1%).
Sale Prices Decrease Slightly
Average sale prices decreased 2.3% when comparing numbers from February 2011 to February 2010. Overall, average sold prices increased in 5 counties.
The highest increases were:
• Delaware County, PA – 9.0%
• Philadelphia County, PA - 4.1%
• Montgomery County, PA – 3.5%
The highest decreases were:
• New Castle County, DE – 16.7%
• Kent County, DE – 16.4%
• Chester County, PA – 10.1%
Two counties saw higher median prices. Camden County, NJ led the way at 15.6%, while Salem County, NJ had the largest decrease at 21.8%. Bucks County, PA was unchanged.
Pending Sales Drop by 11%
Pending sales in February 2011 decreased in 10 counties compared to February 2010. Sales were 3,959 in February 2011 and 4,462 in February 2010.
The highest increases were:
• Kent County, DE – 25.3%
• New Castle County, DE – 20.3%
• Salem County, NJ – 11.1%
Individually, the highest decreases were:
• Camden County, NJ – 21.4%
• Bucks County, PA – 20.8%
• Philadelphia County, PA – 19.6%
Inventory at the end of February 2011 stood at 48,025 an increase of 2.8% from 46,671 in February 2010.
Comment from John Herreid: The inventory increase is another data point that shows we still have a lot of work to do to get out from under the inventory bulge that is the basic driver of soft and decreasing prices in our area.
Another large part of the inventory overhang problem, as per KCM.com, is that we have about an estimated 10 months of inventory across PA that is distressed , meaning it is heading for either a Short sale or Foreclosures. Short sales typically sell for about 81% of the full value of the property; foreclosures sell for about 59%. If you are interested in seeing what short sales and foreclosures are available in your area, please contact me at delcorealestate@gmail.com.
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