Has Real Estate Bottomed Out?
Have We Hit The Bottom?
To say that the Real Estate Market in the Northwoods has been heating up over the past couple months is kind of like saying Michael Jordan was pretty good in the fourth quarter. That is an understatement! For us Realtors who have been working through the toughest real estate market since the great depression, the past several months have been a very refreshing change. There were some signs even at the end of 2011. November and December were strong months based on the time of year. We have all noticed for many months that the calls have increased, web traffic has picked up, and responses to e-mails and mailings (like this one) are much greater.
Yet nobody wants to jump the gun and call a bottom. We have all been burned before thinking the bottom was just around the corner. Besides, there are still many bank owned properties out there and it sounds like more in the pipeline. Yet, let’s look at some of the numbers. . .
Sales (units sold) over the first quarter of 2012 are through the roof. They are better than they have been in over 7 years for single family homes. The average sales price is up for the first time since 2008. Nationally, the Pending Home Sales Index is now 12.8 percent higher than March of 2011. (if you would like to see charts with first quarter comparisons by property type over the past 7 years, contact a real estate agent.)
Good numbers. The type of numbers we have been waiting for. Although, looking at these numbers a little closer and we see that there really is only one segment of the market that is actually having the strong rebound these numbers suggest. That is on water, single family homes. The units sold are up almost 170% from last years’ first quarter and this is the best first quarter for units sold in over 12 years. Average price sold is up more marginally, 5.8% and are still down 31% from their 2008 1st quarter peak.
So you notice units sold are through the roof but prices aren’t really moving. Without prices moving, how can we really call this a bottom or the start of a rebound? If you have read my previous Newsletters, Market Updates, blogs or e-mails, you might recall what we said about the eventual recovery. Prices are a trailing indicator. When the market went down, units sold started to fall before prices. (Prices peaked in 2008 while units sold had peaked in 2006 and were down 40% in 2008) Prices hung in there while units sold were going down. It was only when the demand really came off that prices started serious moves down. Based on numerous experts, like Diana Oleck on CNBC, the recovery is going to go the same way. Units sold will increase first and only after significant inventory has been worked through and it is clear that demand is back, that will prices start making real moves up.
So are we there? Some would say the excellent weather this March is why these numbers have been so good. That could have some merit. March is a very large part of the successful first quarter numbers. Lake properties are the primary segment that is showing strength in units sold and typically in March the properties are still covered with snow and the lakes are still blanketed in ice. Yet we look at the numbers for the real story. If you look at the first quarter vs. the previous second quarters, you would find this first quarter still has more units sold than the past four 2nd quarters. So, as they say, “that dog don’t hunt.”
Like most dips; real estate, stocks, economies, or whatever, you only know where the bottom is when you are well off of it. So if you want to be right 100% of the time, you have to wait. But to me that is like the weatherman who tells me what the weather was like yesterday. Very accurate, but it doesn’t do me much good. If you are like me, you are looking for an opinion based on the information available (imperfect or incomplete as it may be). Well, for what it is worth, for the first time in 5 years, I am saying, we have hit the bottom and we are starting the recovery.