Market Trends--Video Blogcast

Attached is a link to a short video blogcast discussion Tippecanoe County market statistics.  It's short...only two minutes in length.

November Residential Sales Information

The Indiana Association of Realtors released its November 30th year to date residential sales data for the state.

The Data

Taken at face value, the numbers are not encouraging.  State wide, year to date unit sales are down by 6.4% compared to 2009 and by 13.8% compared to 2008.  Unit sales for November  were 29% below 2009.

The statistics for Tippecanoe County resemble the report for the state, but are a little more encouraging.  Year to date unit sales are 4.8% below 2009 and November was 21% below November of 2009. 

What the Date Means?

Taken at face value, the numbers are not encouraging.  However, when you dig a little deeper, they are not surprising or as troublesome!  The powerful Federal income tax credit program to motivate first time home buyers launched in early 2009 was originally scheduled to expire on November 30, 2009.  The program was extended in mid-November to June 30, 2010.  However, by the time the extension was announced, the Realtor community had cued up a long line of closings in the last two weeks of November in order to meet the deadline.  So, the weeks and months leading up to the first expiration date were very good real estate months in the midst of a real estate recession.

Now that the federal home buyer tax credit has fully expired (6/30/10), we are experiencing a traditional market without the favorable enhancements of a very successful federal stimulus program.  In July, August and September, the transition was very difficult.  The summer months were uncharacteristically slow.  There is no doubt that the extended June 30, 2010 expiration of the tax credit accelerated a large handful of summer buyers (and perhaps 2011 buyers) into the first half of the 2010. 

When the year closes, I anticipate we will see a year that consists of three distinct pieces.  Portions of the first half of the year were characterized by strong sales activity and periodically multiple offers on a property.  The third quarter was very slow, measured by buyer activity (showings, open house activity and written offers).  The fourth quarter is rebounding. Are we emerging from the recession, it is hard to say?  What I can state with confidence is we are clearly emerging from the post tax credit slumber in the third quarter.

Reasons for optimism!

We are seeing a lot of positive signs in the current market place and on the horizon. First of all, we continue to enjoy fine interest rates. The recent slight movement upwards has proven to be a reminder that these rates will not last for ever and serious buyers need to take action.  Second, the buyers we are working with are more serious.  Our relationship between showing activity and offers written has improved.  I don't think there are as many "lookers" in the market as earlier.  That being said, many of our buyers are "looking for a deal" and sellers are not of an equal temperament.  Our negotiations are often long and tiring.  However, for the reasonable and persistent, many great opportunities are coming together.  Finally, the quality of the homes on the market is strong. We have fewer homes listed by "sellers" who are testing the market.

All of these factors cause us to have strong optimism as we prepare to celebrate the holidays and enter 2011 with a full tank of gas.

September Existing Home Sales Numbers.

The Indiana Association of Realtors has released its September, 2010 existing home sales statistics for the state and each county.  The numbers continue to reflect the softness the markets have experienced since the close of the Federal home buyers tax credit on June 30, 2010. The program was incredibly successful in nurturing demand, especially at the first time home buyer level, where the size of the credit was most attractive, and in all likelihood, accelerating some Q3 and 4 2010 demand into the first half of 2010. 

Closed unit sales for the state in September dropped by 17.6%, compared to September, 2009.  However, year to date sales were even with last year, demonstrating the success of the tax credit.  Likewise, pending sales in September (a barometer for October closings) were down by 21.%, but only off by 1.4% on a year to date basis. 

A more encouraging measure, in particular when assessing the future health of the market, is the number of months supply of home sales in inventory.  On a statewide basis, the number of months dropped from 12.0 and 12.1 months in September 2008 and 2009, respectively, to 10.3 months in September, 2010 (a significant14% decline).

The Tippecanoe numbers parallel the State numbers and other peer communities.  Unit sales for the month of September were 19.0% below last year, compared to a 20.5% decline in Marian County and a 22.5% decline in Monroe County.  Year to date units sales in Tippecanoe County are off by 2.0%.  Values are holding steady. The average year to date sale price in Tippecanoe County is 0.4% above last year.

It is still difficult to accurately predict when the local residential market will permanently emerge from this nationwide recession.  However, a few factors are becoming increasingly clear. 

1.  Our industry benefited from the Federal tax credit and accelerated some late 2010 sales into the first half of the year.   We are currently paying the price for the benefit we enjoyed earlier.

2.  There is good reason to believe that in spite of the completion of the tax credit and the temporary moratorium on foreclosures issued by some large banks, we are beyond the bottom of the recession and are on the gradual road to recovery.  Overall conditions are not getting worse.

3.  Employment numbers are slowly getting better rather than worse.

4.  Interest rates are at a historic low.

5.  The level of existing housing inventory is moving toward a more balanced level.

Will these factors lead to a quick recovery?  Probably not, but they are all important building blocks upon which a permanent recovery can be build.

For a complete set of numbers, please visit the Indiana Association of Realtors link.

2010 Professional Standards Award: Olga Jeffares

Each year, the Lafayette Regional Association of Realtors (LRAOR) presents its Professional Standards Award to one if its members who "upholds high principles, is faithful to the laws and regulations, the Code of Ethics, and the furtherance of principles of good real estate practice among brokers and the general public."  It is one of most distinguished awards the Association gives each year.  The 2010 award winner is Olga Jeffares, from our office.

Olga joined our company in 1984 and has consistently been a respected leader within the local real estate industry.  She has been active with the LRAOR Forms Committee and the International Center in West Lafayette.  Better Homes and Gardens (our former franchisor) and Coldwell Banker have both recognized Olga for her annual sales volume and she won the Coldwell Banker Shook Marilyn F. Wilson Award for customer service in 2009.  She is well liked and respected by all of us.

We all tip our cap to Olga for the well deserved recognition the LRAOR has bestowed upon her

July Residential Sales

Tippecanoe County Courthouse

As I have written earlier, the residential real state market across our country was favorably impacted by the first time home buyers tax credit created by Congress in early 2009 and expanded to include "move up" buyers in November, 2009.  In order for a buyer to qualify for the tax credit, an accepted offer on a home had to be in place by April 30, 2010 and the transaction had to close by June 30th.  As it turned out, Congress extended the close date deadline to September 30, 2010 after the close of business on June 30th.  [Note:  the inefficiency of Congress at times causes one to scratch their head and wonder why]

We had a strong sense that a meaningful portion of our demand this winter and spring was driven by the tax credit, but it was hard to quantify. As the April 30th deadline to have an offer accepted approached, the local market reached almost a frenzied pace. Many Realtors worked late nights in the weeks preceding April 30th.  It was wonderful!  As we feared, on the days and weeks that followed April 30th, the number of showings and accepted offers dropped noticeable compared to last year, especially for it being so early in the year.

Now that we are more than one month beyond the initial closing date deadline for the tax credit, we can measure the number of closed units with and without the benefit of the tax credit. The numbers are pretty incredible. Year to date residential unit sales through May 31, 2010 in the Greater Lafayette area were 19% ahead of the same period last year.  However, that is when the fun began to end.  Residential unit sales in June were 12% below last year and July was 32% below July, 2009.  On a year to year basis, year to date sales through July are 3% below last year.

We are currently in a slow season, measured by showing activity.  However, what we are experiencing now is not uncommon for the back to school season. We usually see a bump in showing activity and Open House attendance after Labor Day.  Let's wait to see what happens in September.  I'll report back

Life after the Home Buyers' Tax Credit

When I last wrote, I commented that it has been hard to quantify the impact of the Federal Home Buyers' Tax Credit Now that we have sales numbers, it's easier to measure. The results are very exciting.

Overall, sales volume in the Greater Lafayette residential market area through 4/30/10 were up by 38% from the same period of 2009. As I suggested in my prior post, the increase in activity was not equally spread across all price points. Although designed to assist home buyers at a multiple of price ranges, the value was found to be the highest among first time home buyers. Sales volume below in homes priced below $150,000 was up by 64%. On the other hand, volume between $150,000 and $300,000 was only up by 13%. But the important work in that sentence is "up". A very interesting occurrence took place in the market between $300,000 and $450,000, where volume rose by 80%. That is amazing.

On a more troublesome note, the softness in demand in houses priced above $450,000 continued to be slow. Sales volume in the first four months was 88% below the same period in 2009. Take a look at the link I created that shows the quality of homes for sale above $450,000.
Homes for sale above in Lafayette/West Lafayette above $450,000.

In the weeks that followed the 4/30/10 expiration of the tax credit eligibility, we saw a significant decrease in the number of showings of our listings. This is comes as no large surprise. There is no doubt that the attractive terms of the tax credit accelerated some demand that might have occurred otherwise later in the year. However as a group of real estate professionals, we would be remiss if we did not remind all members of our community that now, more than ever, is an excellent time to purchase a new home.

• Interest rate are very attractive.
• Our major employers are calling employees back to work.
• The Lilly to Evonik sale is complete and jobs are saved.
• There is an abundance of well priced homes for sale.
• Greater Lafayette continues to be a national leader in the stability of property values.

There is still more than enough time to identify and purchase a home before the 2010/2011 school year begins.

P.S. The Barn is at Historic Prophetstown in the Prophetstown State Park.

Spring in Residential Real Estate

We have made it through another winter and are enjoying the good weather and final days of the Federal Home Buyer Tax Credit program. The current program provides up to an $8,000 federal income tax credit to eligible first time home buyers and up to a $6,500 credit for eligible non-first time home buyers. In order to qualify, an accepted offer must be in place by April 30th and the sale must close by June 30th. Our office is very busy. Many agents are working late into the evening and often seven days a week.

It is hard to truly measure the impact the program has had on demand, but most of us would suggested it has been considerable. Year to date unit sales of existing homes in Tippecanoe County through March 31st are 17% higher than the same period last year. However, as I have mentioned in other writings, the strong demand has not been enjoyed by all price points. Here is a break down of 3/31 year to date unit sales in Tippecanoe County by price range compared to the timeframe last year.

1. Unit sales of home price less than $200,000 grew by 21% from 214 to 260.
2. Unit sales of homes priced between $200,000 and $400,000 grew by 4% from 44 to 46
3. Unit sales of homes priced above $400,000 dropped by 40% from 5 to 3.
4. Total unit sales grew by 17% from 263 to 309

These numbers would indicate that: 1) the middle price and upper price ranges are still soft and 2) the Federal Tax Credit is driving demand in the typical first and second time home buyer price ranges. It will be interesting to learn in early May what happens to our demand after the first eligibity deadline has passed. We are all hoping that the natural momentum of spring buyers season and the pleasant weather will support much of the demand we are enjoying. I'll report back in mid-May and report what we find.

2009 Awards

Last Tuesday, Coldwell Banker Shook hosted its annual awards breakfast at the Holiday Inn. Our featured speaker was Mayor Tony Roswarski, who gave an interesting overview of the many capital projects the city embarked upon in 2009.

After Mayor Roswarski's comments, the 2009 awards were announced. The company had a very impressive year, during what was one of our country's more difficult years in residential real estate. The company ended the year with a commanding 22.4% of the market and 43.4% for properties above $300,000. Amongst its friends in the Coldwell Banker community, Coldwell Banker Shook was the number one office in the state and the largest office in its size category in the Northern Region, one the three geographic Coldwell Banker regions.

Coldwell Banker National is proud to present awards to its top sales across the country each year. Many of the Coldwell Banker Shook agents earned these national distinctions. 2009 national award winner from Coldwell Banker Shook are as follows.

INTERNATIONAL STERLING SOCIETY

Julie Runner-Boyce
Jan Dowell
Kathryn Oreovicz
Dolly Poston-Zollars

INTERNATIONAL DIAMOND SOCIETY

Individual

Cheryl Butcher
Olga Jeffares
Sherry Peck
Kelly Schreckengast

Team

Corbin-Flock Team

Brenda Hatfield Team

Mary Holtz and Kent Brewer

The Junius Group

INTERNATIONAL PRESIDENT’S CIRCLE

Kathy Lafuse
Leslie Weaver

In addition, we learned that Kathy Lafase was the number one Coldwell Banker agent in the state.

The breakfast was adjourned by the company's management sharing how proud it is of the entire sales staff and the loyal and dedicated staff of administrative and management professionals that hold the organization together. Before leaving the breakfast we played a short, but rousing game of trivia.

2009 Real Estate Report

My cousin and business partner, Steve Shook, and I have recently completed our annual real estate report. It is an indepth study of the what occured in the Tippecaone County commercial and residential real estate markets in 2009 and a set of projections for 2010.

If you are interested in a copy of the report, please send me your emial address and I'll forward you a copy in the form of a Word document. My email address is cshook@shook.com.

A tip of the cap to RPAC

It isn't often that a fundraiser is fun, but the Lafayette Regional Association of Realtors held a "fun" fundraiser last Thursday for its Realtor Political Action Committee (RPAC). Before I tell you about the event, let me tell you about RPAC. Our national trade association, the National Association of Realtors (NAR), is one million member strong and has one of the most meaningful and respected governmental affairs activities, both in Washington and Indianapolis.

Although our lobbying efforts are going to be noticeable due to the size of our membership, our real strength comes through the grass roots nature of our businesses, the breadth of home ownership in the United States ("the American dream") and the critical nature of real assets in the success of most commercial enterprises. RPAC certainly uses its monies to support elected officials who support the norms of private property rights, our real value comes in unique quality of information we can aggregate through our individual MLS's. In Indiana, our local Realtor Associations have agreed to share "sold" information with our state trade association (the Indiana Association of Realtors) to create a real property data base. In the most recent quarterly, we began to release monthly information about statewide and county trends in residential real estate.

Last week, the organizers of our local RPAC fundraising efforts, led by Maggie Stark of our office, hosted "Dancing with the R's" at the Outpost. Patterned off of the TV show, six Realtor members of the Lafayette Regional Association of Reatlors took dancing lessons from Arthur Murray's and competed in a dance competion. The 2009 dancers were Eddie Gallegos, Penny Mattingly, Lisa Godby, Ryan Parker, Deb Talbot, Brett Leuken. All of the dancers were great. They demonstrated courage and finesse. I give all six of them credit for being the center point of a great fundraiser. Everybody had a good time and lots of money was thrown at RPAC.

Home Value Statistics

In its 2009 second quarter publication, the Federal Housing Finance Authority reported Greater Lafayette ranked number 7 among the nation's 296 largest MSA's in the year to year change in home values. According to the government report, the average home value in the second quarter in Greater Lafayette was 2.25% greater than the second quarter of 2008. Personally, I believe this number is optimistic, but the relative ranking of 7 among 296 is encouraging and believable.


Interestingly enough, in reviewing the 25 largest MSA's, only three had a positive year over year change and of those three, two were less than one percent (Denver and Pittsburgh) and the third was 2.90% (Houston). The most troublesome changes in value were in Merced, CA (-27.15%), Las Vegas (-26.21%), Vallejo, CA (-23.75), Miami (-22.53%) and Medesto, CA (-22.53%).


Of the 296 MSA's, the only communities ranking ahead of Greater Lafayette were Spartanburg, SC (3.48%), Amarillo, TX (2.67%), Fort Smith, AZ (2.55%), Houston (2.42%), Macon, GA (2.33%) and Lubbock, TX (2.27%). Here is how the other major Indiana cities fared:


City: % change, rank

Anderson: -1,82% 98
Bloomington: 0.40%, 50
Columbus: -0.45%, 95
Elkhart: -2.36%, 142
Fort Wayne: 0.08%, 70
Gary: -2.79%, 152
Indianapolis: -1.24%, 119
Kokomo: -1.72%, 135
Michigan City: -0.03%, 73
Terre Haute: -3.18%, 160


Although the relative condition of the Greater Lafayette residential market is reason to be thankful, it is not time to break champagne, noise makers and balloons. We are still experience nervous buyers, inconsistent demand, on-going foreclosures and frequent short sales. However, our numbers are not getting worse, our supply of new and existing homes for sale is better matched with local demand compared to one and two years ago and there is every reason to believe we are much closer to the end than the beginning. Have faith.

A softening in demand?

I reported to you earlier in the spring a delightful pop in buyer demand. We began to notice the increase in March and it continued through most of May. I define a "pop" as when measurements in demand compare favorably to the same time frame in the prior year.

We noticed the improvement first in showings, next in accepted offers and it manifested itself in closed sales. During the same period in time, we noticed a decrease in the number of homes for sale in Lafayette and homes for sale in West Lafayette. Once again, we found this encouraging....a reduction in what was clearly an oversupply of inventory.

Regretfully, shortly before Memorial Day, we saw a bit of a reversal, specifically a slip in our showing activity. Written offers dropped slightly in June (compared to last June) and we anticipate closings in July will be below July, 2009. On a year to date basis, closed units sales in the Lafayette area are down by 13% from the same period of time last year.

It is always hard to speculate what causes increases and decreases in sales activity, but in this case, it was in all likelihood driven by 60 basis point increase in fixed rate mortgages in May. According to Freddie Mac statistics, the average fixed rate mortgage rose from 4.86% in May to 5.42% in June. However, this is not all gloom and doom. The average fixed rate in June is still 90 basis points better than the 6.43 average in June, 2008.

I guess this is more evidence to show that we have reached the bottom of our local real estate recession and are bouncing up and down. I do not believe we have begun the final and steady road to real estate recovery. We look forward to the second round of buyers that will be generated by the $8,000 first time home buyers credit (the folks whose houses were sold to the first time buyers, who are now have become buyers without a house to sell) and the economic strength that is yet to come from the unspent Federal stimulus money.

Recent modest increase in fixed rate mortgages

I've shared in some earlier posts that in March, 2009 we began to experience a favorable trend in buyer activity. It was not just a seasonal increase, but an improvement compared to the same time frames in 2008.

Initially, our company saw an increase in the number of showings scheduled on our listings (I am not able to measure showings scheduled on listings with other companies, but I am confident the experience of others was similar ours). Next we saw an increase in the number of earnest money checks we collected (an indicator of an accepted offer...again, I can only measure those collected within our own office, but I sense our competitors enjoyed the same experience). Specifically, the number of earnest money checks collected in March, April and May exceeded the number collected in the same months in 2008. Finally, April residential unit sales throughout the market (not just at our company), exceeded April, 2008.

In late May, we began to notice a lull in activity. Specifically, in the last two weeks of May and in the first week of June, the number of showings we scheduled on our listings were measurably less than the same weeks in 2008. However, the situation improved last week when the number of showings was only 5% below 2008. In my mind, the change in the level of buyer activity ties almost exactly to the increase in fixed rate mortages we say in the middle of May. Fixed rate mrtgages rose by 50 to 75 basis points in less than two weeks.

Let's put this in perspective by looking at the history of 30 year fixed rate mortgages over the last year and a half.

Month - - - - - - - - - - - - - - - - - - Average 30 year fixed rate mortgage*

Jan, 2008 - - - - - - - - - - - - - - - - - - - - - - -5.77%
Feb, 2008 5- - - - - - - - - - - - - - - - - - - - - -5.87%
March, 2008 - - - - - - - - - - - - - - - - - - - - -6.62%
April, 2008 - - - - - - - - - - - - - - - - - - - - - -6.54%
May, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.56%
June, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.88%
July, 2008 - - - - - - - - - - - - - - - - - - - - - - -6.94%
Aug, 2008- - - - - - - - - - - - - -- - - - - - - - - 7.00%
Sept, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.65%
Oct, 2008 - - - - - - - - - - - - - - - - - - - - - - -6.85%
Nov, 2008 - - - - - - - - - - - - - - - - - - - - - - 6.69%
Dec, 2008 - - - - - - - - - - - - - - - - - - - - - - -6.01%

Jan, 2009- - - - - - - - - - - - - - - - - - - - - - - -5.80%
Feb, 2009 - - - - - - - - -- - - - - - - - - - - - - - -5.83%
March, 2009 - - - - - - - - - - - - - - - - - - - - - 5.66%
April, 2009 - - - - - - - - - - - - - - - - - - - - - - -5.48%
May, 2009 - - - - - - - - - - - - - - - - - - - - - - - 5.49%
June 16, 2009 - - - - - - - - - - - - - - - - - - - - - 5.94%

Source: HSH Associates, Financial Publishers (Pompton Plains, NJ)
*The rates are an average of conforming and jumbo mortgages from 2,000 lenders surveyed weekly.

I can't help but believe that the reduction in buyer activity around and after the Memorial Day holiday was driven by the jump in fixed rate mortgages. However, when put into prespective our current interest rates are nearly 70 basis points below the level we saw last Thanksgiving and a full point below August, 2008.

Let's hope ,as US consumers we can quickly become accustomed to the "new normal" interest rates and recognize they are still at a level that is far below what we have seen in the last decade.

Strong April Sales

Although it is too early to measure May homes sales in its entirety (some closings late in the month take a week to get posted), the results for April are encouraging. Tippecanoe County single family home sales in the first three months of the year did not compare favorably to the same months in 2009. I guess that should not come as a surprise. Retail sales over the holidays were muted and unemployment numbers continued to increase in the first quarter.

However, as I reported in earlier posts, we began to see a measurable increase in the number of showings scheduled for our listings in early March. More specifically, in most of the weeks since early March the number of showings scheduled were equal to or greater than the same week in 2008. The favorable showing activity culminated in 154 closed sale in April, compared to 147 in April, 2008.

I recognize this is a short trend, but it is another piece of evidence that we have found the bottom of the residential market in central Indiana and are beginning the slow path to climb out of the trough.