Winter lull signals opportunity for potential sellers
Last week the shorter-term two-year Treasury note yield was
higher than the longer term 10-year Treasury note yield.
”
So what?
”
you say. Well, this has historically been a recessionary
bellwether. It implies investors do not have faith in long-term
economic strength. However, in this case we see that the Fed fund
rate has increased 3.25% since June 2004. Naturally, the 2-year
note moved up with it, because it is also short-term. But the
10-year note held steady because the Fed rate hikes were seen to be
a way to fight inflation, and foreign demand for this long-term
paper is strong. So
…in a nutshell…the economy remains strong and there seems no
indication that a recession is in the cards for 2006.
The California housing market is in its off-peak season. The
median price of a single family home in September was $543,980,
down 4.4 percent from the current record of $568,730 that was set
in August. For the past 12 years there has been an
August-to-September decrease, signaling that the market has moved
into the off-peak period of September through February. However,
there was a 17.3 percent increase compared to the September 2004
median of $463,630. So it was down for the season, but up for the
year.
Winter lull signals opportunity for potential sellers
Last week the shorter-term two-year Treasury note yield was higher than the longer term 10-year Treasury note yield. “So what?” you say. Well, this has historically been a recessionary bellwether. It implies investors do not have faith in long-term economic strength. However, in this case we see that the Fed fund rate has increased 3.25% since June 2004. Naturally, the 2-year note moved up with it, because it is also short-term. But the 10-year note held steady because the Fed rate hikes were seen to be a way to fight inflation, and foreign demand for this long-term paper is strong. So…in a nutshell…the economy remains strong and there seems no indication that a recession is in the cards for 2006.
The California housing market is in its off-peak season. The median price of a single family home in September was $543,980, down 4.4 percent from the current record of $568,730 that was set in August. For the past 12 years there has been an August-to-September decrease, signaling that the market has moved into the off-peak period of September through February. However, there was a 17.3 percent increase compared to the September 2004 median of $463,630. So it was down for the season, but up for the year.
Market activity throughout 2005 was robust. According to California Association of Realtors (C.A.R.) posted figures, September 2005 had the fifth highest monthly sales figure on record. Sales rose 2.9 percent over the August 2005 sales figure of 632,240 and advanced 3.9 percent compared to September 2004 sales of 626,210 homes. Year-to-date sales were 3.7 percent higher than the same period a year ago. It looks as if 2005 will surpass the annual record of 624,740 sales established in 2004.
We real estate agents, locally and around the state have seen rapidly increasing inventories during the past couple of months. This observation has triggered concerns that a slowdown in sales lies ahead. C.A.R. recently examined trends in the unsold inventory index and in listings to determine whether this perception could be verified by market data.
The unsold inventory index stood at 3.3 months as of September. This represented a slight increase over the August figure of 2.9 months and slightly higher than the September 2004 index of 3.0 months. Inventories have averaged roughly 3 months for most of 2005, well below the historical long-term average of 6.4 months.
The unsold inventory index has shown little upward movement since the start of the year, but statewide listings have generally risen throughout the year. Listings have risen over the past 2 years since reaching record low levels in 2003. Listings on a year-to-date basis in 2005 are more than 50 percent higher than in 2003, but remain 20 percent below a long-run average compiled since 1982.
Whoa, doggies! Is the increase in listings a sign of a down turn in the market? Generally speaking, price appreciation is tied to inventory levels. Prices go up as the inventory goes down. So perhaps the upswing in listings will stop the rapid rise in housing prices we’ve seen for the past few years unless it is offset by an increase in sales. It is too early to know for sure. However, economic and market indicators are expected to remain favorable in the coming year. Even if 2005 turns out to have been the market peak, 2006 promises to be a strong year as well.
Let’s look at what our market has done in the past week. In San Benito County, the inventory is up to 166 available single-family properties. We find seven new listings. Three were nine homes entering into sales contracts, three with a release clause. There were 9 closed escrows. Expired listings removed 15 homes from the market, while an additional 4 were either canceled or withdrawn.
Southern Santa Clara County saw 15 new listings, and 22 closed escrows. There were 8 sales contracts, again 3 with a release clause. Expirations totaled 15, cancellations 4, and one home was withdrawn. Inventory stands at 251.
If you are considering selling your home in 2006, you might want to think sooner rather than later. The inventory historically will be at its yearly low now, meaning you’ll have less competition than later in the year when the season is at its peak. In years past, sellers wanted to wait in anticipation of price increases, but the days of extreme price appreciation appear to be over for the time being. Of course, no one has a crystal ball! Life happens while we make plans and predictions, right?
Call your real estate agent and discuss your options. The days of merely sticking a sign in the ground and waiting for multiple offers is over. This is not the time to save money when selling, but to find the best and brightest to maximize the appreciation you have realized in what is probably your single largest financial investment. There are many more issues involved in the sales process now. Make sure the strongest negotiator is sitting on your side of the table.
And be kind to your Realtor!
