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First-Quarter 2010 Review - Southern Chester County, PA Housing Market

Despite the area winter storms, buyers returned to the Southern Chester County market during the 1st quarter of 2010 as new contract activity ended up 26% (40 units) ahead of this time last year. Sold properties ended the quarter down slightly; 5 units or 4%.  Average home prices show an increase of 10% although with so few transactions for our analysis the average will be skewed by the high end transactions that settled in the quarter that were absent in the 1st quarter 2009 (chart 1).  Consumer confidence is slowly growing and savvy buyers are 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 Southern Chester County provides us with further insight. The change in average home prices within each township and borough speaks more to the variety or mix of housing that is available than it does to a market correction. For example, W. Marlborough Township shows a price increase of 3624% - one property sold in the 1st quarter of each year; in 2009 it was a 2 acre parcel with a tear down, in 2010 it was an estate on 50 plus acres.  Certainly as in most markets a pricing correction has taken place – with so few transactions though the data can be somewhat misleading (chart 2).

SUPPLY vs. DEMAND

Market conditions vary within this 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 Southern Chester County, homes priced $400,000 and below account for 65% of the market activity this quarter compared to 75% in the same quarter last year.  As a potential home buyer, you can gain an understanding of this area by looking at supply, demand and months’ of inventory in the 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 an 11% 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) declined 7% from this time last year although it did move up over 100 days during the last two months of the quarter.

Finally, homes are selling with reductions from the original list price often referred to as “listing discount” (chart 6). The improvement 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 decreased 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 50% increase in new contract activity compared to March 2009; buyers are seeking to take advantage of the home buyer tax credit that expires on April 30, 2010 and low mortgage rates that are expected to rise to 6% by year end.

Overall these indicators point to the expected slow 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. For analysis purposes, Southern Chester County includes Avondale Borough, Birmingham Twp, E. Marlborough Twp, E. Nottingham Twp, Elk Twp, Franklin Twp, Kennett Square Borough, Kennett Twp, L. Oxford Twp, London Britain Twp, London Grove Twp, New Garden Twp, New London Twp, Newlin Twp, Penn Twp, Pennsbury Twp, Pocopson Twp, U. Oxford Twp, W. Marlborough Twp, W. Nottingham Twp)