January 2008
It’s beginning to look as if the chickens may be coming home to roost, after all. After a good bit of complacency about our market versus the coastal ones, we experienced a sharp 47% drop in sales in the upper third of the market (those homes over $220,000), in December. While sales year to date are down a very modest 2% over 2006, the last six month’s figures are off by 10%, indicative of a worsening market. Indeed in May 2007, the six month’s figures were ahead by 7% of last year’s.
Further indications of a slowdown: year-to-date median selling prices are down 2% from 2006, while preliminary figures for December show a 6% decrease from December 2006.
Lest we become too discouraged, consider the following: Because of our relatively modest cost of housing, the huge majority of mortgages in this area are for less than $417,000—the maximum amount for a “conforming” mortgage, that can be purchased and bundled by Fannie Mae or Freddy Mac. In the expensive sectors of the national market, however, a mortgage of less than $417,000 would be the exception, not the rule, and must be resold through such discredited devices as CDOs.
Conforming mortgages are currently priced at 6.25% while non-conforming loans are 7.75%. A $417,000, 30-year loan at 6.25% has a monthly payment $2,568, while a 7.75% loan for the same amount costs $2,967 per month. This $420 per month difference would fund $68,200 in additional loans at 6.25%, thus incurring an intrinsic penalty of almost $70,000 on expensive housing! Small wonder that the market is going to Hell in the expensive market sectors.
More=More favorable to seller
Less=Less favorable to seller |
| | Last Month | This Month |
| Inventory vs. 1 year ago | More | More |
| Month's supply vs. 1 year ago | More | Less |
| Days on market vs. one year ago | More | More |
| Past 6 month's sales vs. 1 year ago | Less | Less |
| Past 6 month's average month supply vs. 1 year ago | Less | Less |
| Sales to date vs. 1 year ago | Less | Less |
| Mortgage rate vs. past 3 month's avg. | More | Neutral |
| Past quarter median price vs. 1 year ago | More | More |
| Long range trend | Less | Less |
| Short range trend | Less | Less |
As Always, Stay Tuned,
Dick Beers, CRS
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