How To Approach Selling a House in the Current Market

You may believe that selling your home is impossible in today’s market. You may feel powerless to the process. What could YOU possibly do to turn this housing market around?

There is no doubt that today’s real estate market is extremely difficult to navigate. However, we want you to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.

It is totally within your power to guarantee that your house will sell even in the current market.

How you ask? Let’s look at the simplicity of the famous Serenity Prayer and apply it to selling a home in today’s real estate market.

“Grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”

Accept the things you cannot change

The two main reasons that the housing prices have softened:
+ The current economy
+ The inventory of distressed properties (foreclosures and short sales)

As an individual homeowner there is no way for you to impact either of those two situations. The best think-tanks in the country are struggling to discover solutions.

Have the courage to change the things you can

There is not a vacuum of buyers in the market. There is a vacuum of homes a buyer in today’s market will purchase. Let us explain: could you sell your home today for $1? … $1,000 … $10,000? Of course you could. There are plenty of buyers in the market for a home they consider priced correctly. You have to decide what the correct price is for your home if you truly want to sell. If you want your house sold, you must list it at a price a buyer will pay for it. Not a buyer from 2006 but today’s buyer who has plenty of homes from which to choose.

It will take courage to sit with a real estate professional and honestly decipher the true value of your home. If you want to sell, you must have that courage.

The wisdom to know the difference

We all realize that the economic situation will take some time to correct. If we want to wait for prices to return to 2006 levels, we will probably have to wait for 5-7 years.

Look at the reason you decided to sell in the first place and decide whether the extra money you would get from the sale is worth that wait. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

This is where your wisdom must kick in. You already know the answers to the questions we just asked. You have the power to take back control of the situation by pricing your home to guarantee it sells. The time has come for you and your family to move on and start living the life you desire.

That is what is truly important.

Excerpted from Keeping Current Matters Blog, quoted with permission.

5 Real Estate Trends to Look For in 2012

Excerpts taken from Keeping Current Matters, Real Estate Web Site

Predicting trends during the most volatile housing market in American real estate history is no easy task. We strongly believe these are four real estate items we should keep an eye on in 2012:

1. Buyers Will Return

In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy.


2. Foreclosures Will Increase

The ‘shadow inventory’ of foreclosures which has been growing since the robo-signing challenges of late 2010 will finally be introduced to the market. Distressed properties sell at discounted prices. They will impact the housing values of the non-distressed homes in the area.

3. Prices Will Soften

As more and more foreclosures come to market, there will be greater downward pressure on the values of houses in the region. Foreclosures impact values of non-distressed properties in two ways:

■ They will eat up some of the buyer demand in the market.
■ They will impact the appraisal on ALL transactions in the area.

An increase in foreclosures will have a negative impact on values. This will cause more homes to be underwater.

4. Short Sales Will Increase

As mentioned above, we strongly believe that home prices will soften through at least the first half of 2012. Falling prices will force more homeowners into a position of negative equity. Negative equity is one of the triggers that cause people to strategically default on their mortgage obligations. If this happens, there could be an increase in the number of foreclosures. However, we predict that banks will take preventative measures which will help many of these homes avoid foreclosure by easing the requirements in the short sale process for both homeowners and real estate professionals

What are some of the bottom lines from all of this? Here is yours truly's best shot at his clearest crystal ball.

+ We will see a bottom in prices in PA in 2012. In fact, there are some indications this has already happened.

+ Once it becomes common knowledge that we hit the bottom and are on the way back up, there will probably be a mini panic of people jumping to get on the band wagon before it gets too far out of the station.

+ Now is the best time to buy a house that we have seen in the last 50 years, and that we probably will see for the next 50.

How many of these will come true? I will keep track and let you know.

Real Estate 2012: Many Positive Outlooks

Excerpts reprinted with permission from "KeepingCurrentMatters.com"

There is a growing belief among many experts that 2012 will be the year housing turns the corner and starts heading in a more positive direction. Whenever we write a post like this, we unleash the hordes of critics who say we are again wearing rose colored glasses or are puppets being controlled by the National Association of Realtors (NAR) and other industry groups.

It is for that reason that we want to share the beliefs of other organizations in this post.

Washington Post:

“Housing Market and Economy Showing Encouraging Signs.” For the complete article please go to

The Wall Street Journal:

“From Bottom Up, Signs of Housing Recovery”

USA Today:

“Housing Outlook is More Upbeat”

CoreLogic:

“CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.”

Freddie Mac:

“With the New Year comes a sense of cautious optimism. There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery.”

Fannie Mae:

“The housing sector will likely take incremental steps forward in 2012 …according to economists at Fannie Mae.”

What does it all mean? Well like any forecast, the only thing we know for sure is that it is WRONG. We do not know if it is wrong on the high side, wrong on the low side, wrong early or wrong late. But, the significant thing is probably that after years of Gloom and Doom, a lot of people who make their livings forecasting real estate trends are turning bullish.

Will it happen, time will tell. My read is that the consensus is that we will hit bottom sometime in the first half of 2012.

There are some signs that this is already happening in our immediate area. For example, inventory of houses in Broomall, zip code 19008, priced from $250,000 to $350,000 is about 3 months (10 houses selling each month and 32 for sale). In Springfield, zip code 19064, in the $175,000 to $250,000 price range, there is about a 4 month supply (30 houses for sale, selling 7-8 a month). That is getting back into seller market territory. (Under 5 months of inventory is defined aas a seller's market where there are more buyers than sellers and there is upward pressure on prices).

Will that continue or are we just seeing some statistical anomalies. Time will tell, but I think we are about to turn the corner.

Where are House Prices Headed in 2012

There is no shortage of opinions as to where home prices are headed in 2012. From Clear Capital’s expectation that prices will show a ‘slight uptick’ this year to Fitch’s projection that prices ‘will fall another 13 percent’, there seems to be no consensus as to where real estate values are headed. How can there be such a disparity of opinion among industry experts? Prices are determined by the relationship between supply and demand and there are many unanswered questions regarding both of these components.

Questions about Demand

Will this be the year that the 5.9 million adults between the ages of 25 and 34 that are still living with their parents decide to purchase a home of their own?

With mortgage payments lower than rent payments in the majority of the country, will first time buyers finally decide it makes more financial sense to buy rather than rent?

Will the baby boomers take advantage of the great deals available and start purchasing vacation and retirement homes?

Will investors continue to purchase large quantities of distressed properties?

Will hedge funds negotiate a deal with the banks for bulk purchases of foreclosures?

Questions about Supply

Will 2012 be the year that builders again increase inventories of newly constructed homes?

Will baby boomers put their primary residences up for sale and relocate to their retirement destinations?

Will 2012 be the year that the shadow inventory of foreclosures finally makes its way to market?

If prices depreciate, it will force more homes into a negative equity situation. Will this create another surge in short sales and foreclosures?
Will the government put together a plan to convert large numbers of foreclosures into rental properties?

Bottom Line

With so many unanswered questions regarding both the demand for housing and supply of properties, it is very difficult to determine where prices will be at the end of the year. We suggest you contact a local real estate professional to help you determine where values are headed in your area.

Real Estate really is a local proposition and conditions vary a lot from market to market. If you have a question about house prices and the direction in your area, I can help. Just give me a call at 484-574-4088 or email to John@JohnHerreid.com

Above body reprinted with permission from Keeping Current Matters.

SOME MORE PERSPECTIVE ON HOW WE GOT INTO THIS ECONOMIC CRUNCH

This is another in a series of blog posts in which I intend to excerpt and expand upon portions of a recent book, "Reckless Endangerment".

The authors of this book investigate and take apart the various factors that led to the current recession or depression (you pick the term) in the real estate market.

From 2000 through 2006, the average price of a single family house in Delaware County increased by 61%. (From $160,000 to $257,000 as per MLS, Trend). Since then we have had a market correction that has driven the average resale price down by 27% nationally. In Pennsylvania, the average decline since 2006 has been 13% (Freddie Mac, 05/11).

One of the predictable results of that kind of a decline is a glut of houses on the market. As per MLS Trend, in Delaware county, there are 4,103 single family houses for sale as of June, 2011. Back in the height of the good old (or was it really) seller's market, the inventory of single family houses was around 1,600. Wow, a 256% increase in inventory. No wonder prices are down.

One other indicator of stress in the housing market is the rate at which single family houses are either 90+ days behind in mortgage payments or in foreclosure. According to CalculatedRiskBlog.com, the rate for Fannie Mae purchased loans was under 1% until late 2007. Since then, in 2010, it spiked to a heretofore unheard of 5+%, a five fold increase.

Along with this glut has come the now all too familiar litany of high unemployment, declining incomes and immense pain on the part of a lot of people.

What caused this dramatic shift and all of the corresponding misery? More on that in the next blog post which will be out next week. Suffice it to say, it came about because lenders made way too many easy loans, with standards that were way too lax.

However, was it because of the "Greedy Bankers and Wall Street Sharks" who
"Took Advantage of Government De Regulation to mess up the economy? That is the basic line that has been pushed by most of the major media in this country.

However, as I think you will see, the answer is Not Really. It was caused by deliberate policies of our federal government interfering in and, in effect, over regulating the loan market.

I would welcome your comments and thoughts.

WHY ARE WE IN THE DUMPER THAT WE ARE IN, OR, "THANK YOU AGAIN FEDERAL GOVERNMENT"

There have been a number of critiques written about how greedy bankers, deregulated financial markets, capitalism run amok caused the current economic holes in which we find ourselves. A few brave souls have also hinted around the edges that maybe, just maybe the federal government through it's sponsorship of Fannie Mae and the repurchase of mortgage debt from private lenders had a huge part in the debacle. Now there is a new book on the subject called "Reckless Endangerment" that blows the lid off Fannie's real role in causing all of this world wide pain and suffereing.

More about this in a future blog, but here is a quote from a July 1 column by George Will.

The 1977 Community Reinvestment Act pressured banks to relax lending standards to dispense mortgages more broadly across communities. In 1992, the Federal Reserve Bank of Boston purported to identify racial discrimination in the application of traditional lending standards to those, Morgenson and Rosner write, “whose incomes, assets, or abilities to pay fell far below the traditional homeowner spectrum.”

In 1994, Bill Clinton proposed increasing homeownership through a “partnership” between government and the private sector, principally orchestrated by Fannie Mae, a “government-sponsored enterprise” (GSE). It became a perfect specimen of what such “partnerships” (e.g., General Motors) usually involve: Profits are private, losses are socialized.

There was a torrent of compassion-speak: “Special care should be taken to ensure that standards are appropriate to the economic culture of urban, lower-income, and nontraditional consumers.” “Lack of credit history should not be seen as a negative factor.” Government having decided to dictate behavior that markets discouraged, the traditional relationship between borrowers and lenders was revised. Lenders promoted reckless borrowing, knowing they could off­load risk to purchasers of bundled loans, and especially to Fannie Mae. In 1994, subprime lending was $40 billion. In 1995, almost one in five mortgages was subprime. Four years later such lending totaled $160 billion.

As housing prices soared, many giddy owners stopped thinking of homes as retirement wealth and started using them as sources of equity loans — up to $800 billion a year. This fueled incontinent consumption.

Fannie Mae became, the authors say, “the largest and most powerful financial institution in the world.” Its power derived from the unstated certainty that the government would be ultimately liable for Fannie’s obligations. This assumption and other perquisites were subsidies to Fannie Mae and Freddie Mac worth an estimated $7  billion a year. They retained about a third of this. (John Herreid comment, translation - they passed about 2/3 of this debt onto bankers, who probably should have known better, but didn't. However, if Fannie and Freddie had not made it possible for the loans to be made, this "Investment Bundle" would not have been made possible)

Morgenson and Rosner report that in 1998, when Fannie Mae’s lending hit $1 trillion, its top officials began manipulating the company’s results to generate bonuses for themselves. ...... Fannie Mae’s political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the homeownership mania, and spread “charitable” contributions to housing advocates across the congressional map.

By 2003, the government was involved in financing almost half — $3.4 trillion — of the home-loan market. Not coincidentally, by the summer of 2005, almost 40 percent of new subprime loans were for amounts larger than the value of the properties.

“Reckless Endangerment” is a study of contemporary Washington, where showing “compassion” with other people’s money pays off in the currency of political power, and currency. Although Johnson left Fannie Mae years before his handiwork helped produce the 2008 bonfire of wealth, he may be more responsible for the debacle and its still-mounting devastations — of families, endowments, etc. — than any other individual. If so, he may be more culpable for the peacetime destruction of more wealth than any individual in history.

Morgenson and Rosner report. You decide.

georgewill@washpost.com


Now, here is another tidbit you might find interesting.

If the Fannie/Freddie policies of pressuring lenders to make loans "... appropriate to the economic culture of urban, lower-income, and non traditional consumers" really had an impact, one could logically expect that the impacts of these policies would be greatest in states where there was more opportunity to implement these policies and lesser in states where the opportunity was smaller. Well lo and behold, there is a recent report from our federal government that gives us some insight into just that.

A recent Freddie Mac summary of 5/4/2011 showed Home Price changes by state from June 2006 through March of 2011. According to Freddie, the national average home price decline was -27%.

Taking a swath through the Middle of our country shows the following price changes by state: North Dakota, +11%; South Dakota, -1%; Nebraska, -7%; Kansas, -8%; Oklahoma, -4%; Texas, 0%.

Contrast that with the more densly populated states like: California, -45%; Florida, -49%; Minnesota (right next door to the Dakotas), -31%; Georgia, -31%; Nevada, -59%; Oregon, -32%; Washington, -24%.

HMMMMMM!!!! Like one prominent news network says, We Report, You Decide"

Another Snapshot of Price Changes, How Bad Is It (Or Is Not)?

Behind all the gloom and doom about house prices, there are cold, hard numbers to document what is going on. I took a look at some of those numbers for Delaware county to try and get a more factual handle on house price changes from 2006 through 2010.

This time I did it by school district. I looked at resale prices (not new construction) of a 4 bedroom, 2 full bath, 0-1 half baths, single family house with a basement, garage and central air. Here is what I found out.

Garnet Valley School District:

+ 2006, 70 houses sold, average price of $485,773
+ 2010, 48 houses sold, average price of $458,022
+ Differences, Sales down 31%; average price down 5.8%

Marple Newtown School district:

+ 2006, 42 houses sold, average price of $477,367
+ 2010, 42 houses sold, average price of $412,302
+ Differences, Sales were unchanged; average price down 13.6%


Radnor School District

+ 2006, 47 houses sold, average price of $740,100
+ 2010, 27 houses sold, average price of $568,561
+ Differences, Sales down 43%; average price down 23.2%

Wallingford Swarthmore School district

+ 2006, 32 houses sold, average price of $434,996
+ 2010, 19 houses sold, average price of $405,174
+ Differences, Sales down 41%; average price down 6.9%

Rose Tree Media School District

+ 2006, 48 houses sold, average price of $472,848
+ 2010, 36 houses sold, average price of $440,221
+ Differences, Sales down 25%; average price down 7.0%

So, what does it mean? As usual, like my dad used to say, figures do not lie - but sometimes liars figure. Not trying to lie here, but the trends are more uneven than you might expect.

Some Overall Conclusions:

+ Common belief is that more expensive houses have taken a bigger hit. This is backed up by the price decline in Radnor, -23.2%
+ Sales Volume is down everyplace, again the more expensive Radnor area took the biggest hit at -43%.
+ Although the overall percentage price declines are not in wipe out territory, if your house was worth $500,000 in 2006, even the smallest price decline area was 6-10%. $30,000 to $50,000 feels like a real big hit to your bottom line, especially if you borrowed to the maximum and took out a big home equity line of credit. Unfortunately, that is where a lot of home owners find themselves right now.

Would appreciate your thoughts and comments.

HOUSE PRICES IN OUR AREA, WHAT DO THE TEA LEAVES SAY NOW?

As new economic data become available, it is possible to try and read the tea leaves and divine what is going to happen to house prices over the next year or so. This is my shot to do just that. Thanks for reading and I hope that it makes sense.

First a little background. It is generally understood that house prices peaked in our area (and in most of the country) in mid to late 2006. That means we have been in a downturn going on five years now.

According to CNN Money, prices kept declining until April of 2009, at which point they began to recover. A few pundits felt this was the bottom. However, the national number dipped again and hit a new low in February of 2011.

Further, numbers of foreclosures are still accelerating. According to the OCC and OTS Mortgage Metrics Report of 3/20/11, forclosures in process nationwide were 1,290,253 in the fourth quarter of 2010. That is up by 19.6% from the same quarter a year earlier.

According to the same report, new short sales are up by 30.3% from a year earlier, although the pace is down a little from the third quarter of 2010.

One nice thing about history is that at least you know where you have been. With respect to forecasts, the only thing you know for sure is that you will be wrong. You never know if you will be wrong early, wrong late, wrong high or wrong low - just that you will be wrong. However, knowing about general directions in advance can be real helpful in making plans, so here goes.

One of the factors driving real estate price declines across the country has been the number of foreclosures and short sales. California, Nevada and Arizona have been cited as worst examples of the basket cases in real estate. However, the S&P Report of 4/20/11 shows that many areas in those three states are projected to be clearing up their backlogs in from 18 to 36 months. On the other hand, many areas in SE Pennsylvania are projected to need between 72 to as much as 120 months to clear the backlog. If true, that would say that we are in for a long spell of working off excess inventory which will keep prices low.

Reuters News Service in February stated, "...economists now expect home prices will fall 2.3 percent in 2011 and then begin a slight recovery in 2012..."

David Stiff, chief economist of Fsserv said this in February, 2011. "Large supplies of foreclosed properties will continue to be the biggest downside risk for home prices..."

Radar Logic reported in March, 2011, "The supply of homes for sale and potentially for sale is very large relative to demand, and it continues to be fed by high rates of mortgage defaults and foreclosures. At the same time, demand for houses is constrained by tight lending standards. Unfortunately, delcining home prices are likely to exacerbate these challenges to the housing market"

I could quote more of the same, but you get the idea. My bottom line and what I am advising people is this:

+ If you absolutely need to sell, sell now. This is as good a time as you will probably have in the next two years.

+ If you can afford to stay in your present house for two years or more, it may be best to do that.

+ However, you really need to consider what you will do if you sell. It could be that the low mortgage rates and prices will help you to make up more in your next purchase than you will lose in selling now.

Where is the bright side you ask? - it is a fantastic time to buy. Prices are soft and going lower; mortgage interest rates are at historic lows. If you have equity in your house and want to move up, now is a great time.

How can a seller make use of these current trends? Well if you need to sell, now is probably the best time that you will have in the next couple of years. If you can wait for more than two years to sell, my advice would be to do it. I certainly hope that prices will be better by then. Of course, if somebody had asked me two years ago if prices would still be going down, I would have said probably not.

Not an easy set of trade offs to manage, but it can be done. If anyone would like some help in that or has another related real estate question, please feel free to email me at delcorealestate@gmail.com or call me at 484-468-1306.

Would appreciate your thoughts and comments.

House Prices in Nether Providence Real Estate, What is Really Happening

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.

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.

What is Really Happening to Home Prices in Aston Township?

The main purpose of this blog is to analyze and publish local real estate statistics that shed some light on what is really going on in the local real estate market.

Recently I took a look at what has happened and is happening to the price of a single family house in Aston Township, Delaware County. Some of what I found may surprise you.

First of all, it is a common belief that home prices hit a peak in 2006 or 2007 and have declined since then. That is generally true, but the magnitude of the change is kind of surprising.

For example, just ten years ago in 2000, the average price of a single family house in Aston Township was $143,602. By 2007, that climbed to and peaked at $268,635. That is an average annual increase of 9.3%, which is high and unsustainable in the long term. The average longer term annual increase in house prices in the United States is about 3%.

The common belief is that that real estate prices have collapsed since then, but is that really true?

Please check out the below (Courtesy of Trend, MLS).
• The re-sale price of an average single family house in Aston increased every year from 2000 through 2007.
• Total increase was 87% from 2000 through 2007.
• In general, house prices doubled in most of Delaware County from 1996 through 2006.
• Since prices peaked at $268,635 in 2007, they came in at $247,725 in 2008, $240,269 in 2009 and $222,497 in 2010.
• That is a decline of 17.2% since the peak. Not fun for a seller, but a long way from the 50% declines that are real in places like Florida and California.
• By way of comparison, a "normal" real estate price correction is in the area of 10-20%.
• Bottom line, Aston Township has seen pretty much of a normal price correction.

Does this mean that we have gone through the decline and that prices are now ready to rebound? Well, probably not, and for these reasons.

It is well established that prices of any item are driven by supply and demand. The result of supply and demand is how much inventory we have.

The more inventory, the weaker the market and the more downward pressure on prices. (Just think of the after Christmas sales or inventory liquidation sales).

If we have less inventory of anything, demand tends to be up (other things being equal) and there will be upward pressure on prices.

In Real Estate, we have the following definitions:

• Seller Market, 1-4 months of inventory, More buyers than sellers and there is upward pressure on prices.
• Balanced Market, 5-6 months of inventory, about an equal number of buyers and sellers and prices are stable.
• Buyers Market, 7 months or more of inventory, more sellers than buyers and there is downward pressure on prices.

Back in the good old days (if you were a seller) of about 2003 through 2007, there were an estimated 2-5 months of inventory in Aston Township. There was upward pressure on prices and they peaked in 2007.

Starting in 2008, inventory levels increased to about 6.8 months. In 2010, there was an estimated 9.9 months of inventory at the end of the year. That exerts a downward pressure on prices.

Stated differently, there is a unsold inventory that has to be worked off before we can expect to see rising prices again. As per the real estate forecasting service at KeepingCurrentMatters.com, we can probably expect to see about one more year of declining prices, followed by a recovery starting sometime in 2012.

Locally, in places like Aston Township, when inventory levels get back to under 4 months, we should be able to see rising prices once again. Until then, it is a great time to buy.

If you would like more specific information about what has happened to house prices in the immediate area around your house, just let me know and I will be glad to develop it for you.