Sal Sedita

First-Quarter 2010 Review - Kent County, DE Housing Market

Although “old man winter” disrupted just about every business, the 1st quarter of 2010 ended with an increase of 27% in the number of sold properties compared to this time last year. In addition, 18% more properties went under contract in the first quarter of 2010 than in the same quarter last year. Home prices have declined by 7%, and the number of homes for sale declined 13% (chart 1).  Buyers have begun to return to the market taking advantage of the affordable supply of homes for sale, low mortgage rates, and the extension and expansion of the home buyer tax credit.

MARKET OVERVIEW

Looking at the local markets within Kent County provides us with further insight. Pricing declines range from 2% in Felton to 40% in Hartley. Most of the markets experienced an increase in sales as a result of these pricing adjustments. Pricing increases are noted in Frederica, Houston, and Marydel although with so few transactions in these areas the data is easily distorted by low or high dollar transactions (chart 2).

SUPPLY vs. DEMAND

Market conditions vary within our geographic area and also within price points. A good barometer of market conditions is months’ of inventory which indicates how long it will take to sell the existing supply of homes at the current sales rate. Generally speaking, in a balanced market there is approximately five to six months’ supply of inventory.  A supply of less than five to six months generally favors sellers; there are more buyers in the market than homes for sale. Above that level, market conditions may be more favorable for buyers; there are more homes for sale than there are willing and able purchasers.  In Kent County, homes priced below $200,000 account for nearly 60% of the sales activity compared to 50% in the same quarter last year. As a potential home buyer, you can gain an understanding of today’s market by taking the pulse of the area and price range in which you would like to purchase (chart 3).

MARKET BAROMETERS

In addition to supply and demand, economists follow three other housing market indicators to assess the direction and overall health of the market: the number of new listings coming on the market; the average number of days it takes a home to sell; and the sales price as a percentage of the original list or “asking price.”  

For the first three months of 2010, there is a 15% decrease in the number of newly listed properties (chart 4) when compared to this time last year. This helps with absorption and is a positive trend for this area.

The average days on market prior to sale (chart 5) remained unchanged from this time last year and hovers between 100 to 115 days from month to month.

Finally, homes are selling with reductions from the original list price often referred to as “listing discount” (chart 6). The stabilization of this indicator suggests that sellers are listening to the market when setting their list price -  the gap between buyer and seller during price negotiation has not increased from this time last year.

Buyers have returned to the market – as listing prices have declined, sales have increased (chart 7).  March 2010 saw a 30% increase in new contract activity compared to March 2009; buyers are likely seeking to take advantage of the home buyer tax credit that expires on April 30, 2010 and low mortgage rates that expected to rise to 6% by year end.

Overall these indicators point to the expected slow road to recovery of our local housing market. If you are a seller, setting a realistic list price for your property is critical to a sale in today’s environment. If you plan to purchase a home, know that mortgage rates are expected to rise so waiting for prices to fall may end up costing you more.
 
At Patterson-Schwartz, we have helped people buy and sell in every kind of market. We welcome the opportunity to provide you with the guidance and strategy necessary to successfully navigate a real estate transaction in today’s environment.

(All reports presented are based on data supplied by TReND MLS. TReND MLS does not guarantee nor is it responsible for its accuracy. Data maintained by the MLS may not reflect all real estate activities in the market. Information is deemed reliable but not guaranteed. Data is as of 4/13/2010)