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Market Conditions

Far and away the Number #1 question I am asked is, “Marsh where is the housing market headed?” or some variation thereof.  While I am have always freely given my advice when asked, often contradicting the conventional wisdom (see housing bubble and burst), I have been encouraged to more widely disseminate my views.  Contrary to the typical prognosticators in the industry, I perform valuations and market analysis daily.  I have my ear to the ground and can recognize pivot points before they are revealed in the national press.  Perhaps more important is that my analysis is focused on the Tampa Bay market only.  I do not pretend to know what is going on in Las Vegas, I know what is going on here.

What has been most striking over the last several months is the sharp decline in housing inventory and months of supply.  It is very clear that home sales are far out pacing new supply which is driving the average price of a home up sharply.  Example from Pinellas County: Since January monthly sales have increased 35.5% to 1,958 units, while current inventory has dropped 28.1% over the same time period, with the resulting effect being a whopping 47.7% drop in the months supply of inventory.  The inventory for Pinellas County has dropped to 5.8 months, the lowest in over the four years that I track.

The chart above provides some interesting perspective.  Notice the spike in months of inventory at the beginning of each year and not surprisingly a noticeable decrease in the average sale price that follows shortly thereafter.  As the Spring buying season takes hold there is a pattern of the inventory decreasing and a corresponding sale price increase.

Pinellas County has put in its multi-year low in February and while I would expect prices to trend up through the summer and early fall, it is a little to early to call this the bottom until we can get some year over year comparison, however the continue absorption of the housing inventory from 26,067 units in July 2007 to the current multi-year low of 11, 880 in June 2011 (a 54.5% reduction) is a very positive sign for the stabilization of the housing market.

Keep in mind that the National Association of Realtors reported that Florida’s “shadow inventory” ranks No. 1 in the nation with 441,461 homes statewide and that Fannie Mae has extended its timeline for completing foreclosures from 185 to 450 days.  RealtyTrac has also reported that the average time to complete a foreclosure in Florida is now 619 days!  While the debate rages if and when these homes will reach the market, there is no doubt that an increase in inventory will have a direct negative affect on housing prices.  When combined with the historic low mortgage rates that are far more likely to increase than decrease, increased property and flood insurance rates, along with an uncertain economy, the housing market continues to be in a precarious position.

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