Has the Market Bottomed Out?

This week brought some peculiar behavior in the real estate market which led to conflicting reports and opinions as to whether we’ve reached a turning point.

Last Saturday was alive and buzzing with real estate shoppers. Realtors from Provincetown to Orleans reported that the combination of scheduled showings, walk in inquiries and busy open houses, were reminiscent of a stronger market. The weather cooperated as well.

Mortgage brokers reported that although the majority of their traffic is refinance business, the number of buyers seeking pre-approval letters, are increasing.

As a result of the recent activity, this week brought a number of offers from buyers still seeking to get a steal, not a deal, on the outer cape. Most fell flat and only one condominium priced under $300,000 was put under agreement.

The Boston Globe reported this morning that home values slipped an average of 15% in Massachusetts since the market peak in 2005 compared to other states which saw a 50-60% decrease in value.

It’s hard to predict when the curve will turn upwards, but here are some significant signs that momentum is building for something to happen:

1. Pre-approved buyers are shopping. Getting a mortgage these days is not an easy thing and going through the process shows commitment to buy.
   
2. The interest rates remain historically low.
   
3. Low prices are creating extreme opportunity.
   
4. Closed sales in the hardest hit markets of Phoenix and South Florida have already increased three months in a row due to the purchase of foreclosed properties and short sales.
   
5. The Housing stimulus package is helping sellers keep their homes and avoid slipping into foreclosure or listing their homes at fire sale prices.

Stability may be returning and although there is a long road ahead, it appears flat and clear with the writing on the wall as to where this is going.

Activity This Week

The performance of the real estate market was a bit static this past week.

The optimism in the air created by the combination of low interest rates and low listing prices had generated some sales activity in Provincetown for the first quarter. Although the quarterly comparison to last year was dismal in regards to number of sales, dollar volume had increased. There was one sale this week, a $349,000 condominium. Another condominium, new construction, went pending. The property is listed for $399,000. 

Easter brought many shoppers to town looking at single family homes and condominiums. Traffic volume for shoppers was high on Friday and Saturday. Easter Sunday was very slow, as most realtors observe the holiday and do not work.

Open house traffic for Friday and Saturday of Easter Weekend was also up a bit. As spring proceeds, more open houses will pop with the advent of warmer weather.

The activity over the holiday weekend included numerous second and third showings. These usually lead to offers. However, the interest rates inched up earlier this week causing a ripple effect amongst homebuyers who want to be sure they get the lowest rate possible. 

Compare the real estate market to a Wal*Mart. The store is full of shoppers but only a few are at the register.

Is Mortgage Insurance the Latest Incentive to Attract Buyers?

Sold: January 1- March 31, 2009

Provincetown

• Homes = 5
• Condominiums = 8
• Avg Days on Market = 324
• Avg Sales Price = $531,664

Truro

• Homes = 4
• Condominiums = 2
• Avg Days on Market = 177
• Avg Sales Price = $466,767

Wellfeet

• Homes = 8
• Condominiums = 1
• Avg Days on Market = 139
• Avg Sales Price = $420,333
  

Sold: January 1- March 31, 2008

Provincetown

• Homes = 5
• Condominiums = 31
• Avg Days on Market = 193
• Avg Sales Price = $424,344

Truro

• Homes = 4
• Condominiums = 4
• Avg Days on Market = 237
• Avg Sales Price = $515,713

Wellfeet

• Homes = 8
• Condominiums = 2
• Avg Days on Market = 300
• Avg Sales Price = $600,250

Sunshine in Sight?

April showers bring May flowers. Can it be possible that the rain on the housing market will turn into brighter months ahead?

President Obama announced this week from the G20 Summit that the recession has turned a corner. With rescue packages in place for struggling homeowners, interest rates as low as they’ve been in years and the stock market performing favorably, we are hoping he is right. A little spring sunshine in our economy may be just around the corner.

However, with the jobless rate the lowest it has been in 26 years, consumers are not motivated to buy a home out of fear of losing their jobs. Builders have identified this as the number one issue in selling new construction. Not having the resources to pay a mortgage due to a lay off ranks among the top anxieties in the United States today. Developers have stepped up to the plate and are now offering targeted incentives to overcome this obstacle.

Free upgrades like granite countertops, swimming pools and finished landscaping are a nice touch, but seem to have no impact on a buyer’s decision. These finishes are practically expected in today’s market and major developers recognize this.

Major builders are offering mortgage unemployment insurance as an added amenity to overcome the buyer’s fear of losing a job. The way this works is the developer pays for a mortgage insurance policy for the buyer. Typically, this policy is valid in case the homeowner loses his or her job within the first two years of the purchase date. Up to six months worth of payments can be made while the buyer looks for a new job. In some cases, the builder has included the cost of the insurance, which is estimated to be $450 to $900 per customer, into the listed price.

Right now, the insurance is limited to only those buyers who finance with the development company directly.

This is definitely a bold marketing move and numerous builders are adopting this strategy daily. As with any sales promotion, time will tell how effective this program will be.