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.

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.

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.

What a great time to be a first time homebuyer

I think it would be safe to say that within the 20 years that I've been involved with residential real estate, this is the best period of time I've experienced to be first time home buyer.

• Interest rates are attractive,
• credit is still available to those who have paid their bills on time,
• the FHA loan program offers responsible terms for low down payment loans,
• there is a wide variety of homes to choose from,
• the Greater Lafayette market has not suffered from a "free fall" in property values like we have heard about elsewhere, and most importantly,
• The American Recovery and Reinvestment Act of 2009 authorizes a direct income tax credit to first time home buyers equal to 10% of the purchase price of the home, not to exceeded $8,000.

The tax credit is an amazing opportunity and it is simple. Anybody who has not owned a home as a principal residence in the last three years and closes on the purchase of a new or existing home as their principal residence between 1/1/09 and 12/1/09 is eligible. Once you have closed on your home, you can amend your 2008 income tax return and apply for a refund equal to the tax credit amount or apply the tax credit to your 2009 income tax liability.

There are only two "catches" to the program that I can see. 1) The size of the tax credit is reduced for buyers who have income in excess of $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. 2) Home buyers who use the home as their primary residence for less than three years are subject to a recapture of a portion of the tax credit. For those who live the primary residence for more than three years, there is NO recapture of the tax credit!

For those who are interested in learning more about the program, Coldwell Banker Shook, in conjunction with three local lenders, is conducting several First Time Home Buyers Seminar. They will be offered two more times this spring:

-Tuesday, March 31st, 6:30 at the Tippecanoe County Library -- Klondike Branch (corner of Lindberg and Klondike Roads, or

-Wednesday, April 29th, 6:30 at the Tippecanoe County Library -- Downtown Library.

Each session will last about one hour. They will be very informal. Registration is not necessary.

If you have any questions about the tax credit, shoot me an email and I will do my best to get you an answer (cshook@shook.com).

Charlie

P.S. As I wrote this post, the men's basketball team lost a great game to UConn in AZ. To Matt Painter and the Boiler basketball team, thanks for a great year and helping us remember what student athletics is all about.

Spring is breaking loose!

The trends in residential real estate in Tippecanoe County are encouraging. We see it within our office and I hear if from my colleagues in other local brokerage offices. My "back of the envelope" forecasting tools are primative, but pretty reliable.

1. The number of showings scheduled on listings within our company for three of the last four weeks was above the number of showings scheduled during the same weeks last year (note: the number of properties listed on 3/10/08 and 3/10/09 are within a few properties of each other).
   
2. The cumulative number of earnest money checks received on accepted offers within our office in March is measurably above the cumulative number received at the same point in March last year.
   
3. With the exception of last Sunday, when we experienced stormy weather, Open House traffic has been, by and large, strong.

These may seem like small victories, but they are the types of grass roots activities that are necessary for the market to take off. Let's see if the activities begin to manifest themselves in a strong upsurge of pending sales and, eventually, closings.

I'll keep you posted...

Charlie

Fishermans' Warf