Increased Affordability Contributes to Gradual Market Stabilization throughout Greater Northern Virginia
By Jill M. Landsman, NVAR Communications Director
Now that 2nd quarter housing data is complete throughout Northern Virginia, the numbers are pointing toward improvement in the housing sector on several levels. To start, the average days on the market dropped for three consecutive months when compared to the same months’ DOM in 2008. In NVAR’s region, average sales prices have dropped 14 percent, with fluctuations occurring neighborhood by neighborhood, sometimes zip code by zip code.
The number of pending home sales, those contracts currently in the pipeline, increased in each of the three 2nd quarter months. This uptick may be attributable to the $8,000 first-time home buyer tax credit, which recently has been monetized at the closing table for FHA mortgage products.
While the year-to-date average price drop is 14 percent in Northern Virginia, the average 2nd quarter sales prices did post modest signs of improvement. These were: April = $405,514; May = $433, 257 and June = $451,354.
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In Greater Northern Virginia, the average decline in the year-to-date sales price is 18 percent. Hesitant buyers are choosing to take advantage of the historically low interest rates and the 2009 tax incentive, since such favorable buying conditions exist now and are not guaranteed in the future.
In addition to the regional factors at play that impact the local market, other indicators show signs that the market has bottomed out. Incremental improvements are documented in the following national news summaries.
Issues are:
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Housing Affordability
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Increase In Contracts Pending
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$8,000 First-Time Home Buyer’s Credit
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Consumer Confidence Index In June And Beyond
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Economists Oppose More Stimulus
Lower Prices Stimulate Buying
Adapted from Bloomberg.com, June 23, 2009
Reports of home prices continue to remain lower than those of one year ago, but sales are increasing. Bloomberg.com reports, “Sales prices of existing homes dropped 17 percent in May from a year before, spurring a second straight gain in purchases and helping reduce the nation’s glut of unsold properties.”
Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts said, “Improved affordability because of low prices and lower interest rates stirred some sales. As long as rates don’t rise substantially further from here, we could still stabilize in the housing market.” The June 23 Bloomberg report cited a May sales pace that was the strongest since October, and a gain that marked the first back-to-back increase since 2005.
The share of homes sold as foreclosures or otherwise distressed properties was about 33 percent last month, down from the 40 percent to 50 percent seen earlier in the year, according to NAR. First-time buyers accounted for approximately 29 percent of May sales, which was less than recent months, possibly due to an increase in family buyers at this time of year.
Pending Home Sales Record
Fourth Straight Monthly Gain
Adapted from Realtor.org, July 1, 2009
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.
….Lawrence Yun, NAR Chief Economist, pointed out, … “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
First-Time Buyer Tax Credit Is Working
The first-time buyer tax credit is also benefiting the market. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun said.
Existing-home sales should trend up through the end of the year, with normal local market differences. Yun said, “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”
The Conference Board Consumer Confidence
Index™ Retreats, ‘Less Negative’ Conditions Ahead
The Consumer Confidence Survey™ is based on a representative sample of 5,000 U.S. households. Says Lynn Franco, Director of The Conference Board Consumer Research Center: "After back-to-back months of strong gains, Consumer Confidence retreated in June. …. Looking ahead, expectations continue to suggest less negative conditions in the months ahead, as opposed to strong growth."
http://www.conference-board.org/economics/ConsumerConfidence.cfm
Economists Oppose More Stimulus
In the Wall Street Journal’s Economic Forecasting section, (07/10/09)
Wall Street Journal Staff Writer Phil Izzo reported that most surveyed economists thought that the Obama’s stimulus package “has provided somewhat of a boost but that the larger effect is still to come.”
He writes: …“Most economists appear content to take the wait-and-see approach, as on average they are expecting the just-ended second quarter to be the last in which gross domestic product contracts. They forecast growth rising more than 2 percent on a seasonally adjusted annualized basis in the first half of 2010. Meanwhile, the median forecast sees the end of the recession next month.” …
http://online.wsj.com/article/SB124708099206913393.html
June 2009 Regional Home Sales
Northern Virginia: June 2009
The Northern Virginia Association of Realtors® reports on June 2009 home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton.
A total of 2,169 homes sold in June 2009, a 14.16 percent increase above June 2008 home sales of 1,900.
Active listings decreased by 27 percent from last year, with 7,617 active listings in June, compared with 10,440 homes available in June 2008. The average days on market (DOM) for homes in June 2009 decreased by 14.46 percent to 71 days, compared with 83 days in June 2008.
Sales prices continue to remain lower than those realized last year. The average sales price in June fell by 7.42 percent from June 2008, to $451,354, compared with last June’s average of $487,549.
The median price of homes sold in Northern Virginia in June was $392,367, which is a decline of 5.68 percent compared with June 2008’s median price of $416,000.
The number of pending home sales in Northern Virginia in June shows an increase of 17.12 percent at 2,463 compared to 2,103 in June 2008.
Greater Northern Virginia: June 2009
Sales activity in Greater Northern Virginia (NVAR jurisdictions plus Prince William, Loudoun and the Greater Piedmont counties) for June 2009 shows a very slight increase from June 2008.
The number of Greater Northern Virginia region homes sold in June was 3,657, a 2 percent increase from June 2008’s total of 3,586 sales. Along with the increase in home sales for June, there was also an increase in the number of pending home sales, from June 2008’s 4,054 to 4,465 pending sales in June 2009, a 10.14 percent climb.
The average sales price of $382,980 in June 2009 continues to lag behind the 2008 average by only 6.91 percent. The June 2008 average sales price was $411,388.
Across Greater Northern Virginia, the number of listings showed a decrease from 2008 numbers, with 14,730 listings active, which is 34.54 percent less than this time last year, when 22,501 homes were available. The average DOM for a home sold in June 2009 was 75 compared with last year’s 99 DOM, a decrease of 23.88 percent.