Taking inventory: Our local housing market
It is the season of market speculation. As industry analysts review 2012 trends and forecast 2013 sales, it is time for us to consider how Delaware’s beach real estate market fits in. Fiscal cliffs and sequestration are definitely kicking up the uncertainty. But here we are – beach locals on our own “cliff”- on the edge of winter and spring. Excitement is building for local businesses (including real estate offices), as well as for home sellers. To get ready for spring, I am looking at several main factors: low housing inventory and local new construction trends.
Industry projections are consistent with our local market and “inventory” is the buzzword. Nationally and locally, inventory levels are historically low. Technically speaking, “inventory level” means the time it would take to sell all of the homes currently available for sale. The National Association of Realtors considers six months to be the norm. As of January 2013, however, NAR data puts inventory levels closer to 4.2 months –which is the lowest rate nationally since April 2005.
Our local market definitely supports this low inventory situation. NAR’s chief economist, Lawrence Yun, explains, “Buyer traffic is continuing to pick up, while seller traffic is holding steady. In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly – we have transitioned into a seller’s market in much of the country.” He further notes that we are experiencing the strongest price growth in more than seven years.
To put this information in local perspective, in my office at The Lee Ann Wilkinson Group of Prudential, Gallo Realtors, actual property sales increased 43 percent and the total dollar value of these sales increased nearly 33 percent last year. Buyers are still cautious and believe it is a “buyer’s market.” The market is actually evening out – which means buyers will need to be more open to negotiation.
Here are a few key points to remember:
We are not going from a low market to a high market in one step. We went down in steps, so we will have to go up in steps.
Appraisers are required to use no more than the past 6 months sold comparable properties to determine a value today.
If you want to sell your house now, you need to sell it for what it is worth now.
If You Build It
Another major component of this season’s beach real estate trends is new construction. My office has seen an increase in the past month in inquiries from developers and builders that want to start projects. In its March 1 press release, the U.S. Census Bureau put January 2013 seasonally adjusted construction rates at $883.3 billion, or 7.1 percent above the January 2012 estimate of $824.7 billion. While new construction may be on the rise in general, I feel strongly that the biggest segment to dry up here at the beach will be individual single-family home lots with no builder tie-in (ones for which you could hire any builder to build your custom home). As fewer lots are available, prices will rise. If you are a buyer who wants to build a custom home, my best advice is to buy a lot soon.
As much as Delaware’s beaches feel worlds away from city challenges, the potential sequester/federal budget cuts could make significant changes to jobs in Washington, D.C., and beyond. So many seasonal home owners and visitors to Delaware’s beaches live and work in the DC area. Federal cuts could make a quick impact on vacationers, retirees, and potential second homebuyers.
In contrast, in the middle of a discussion of looming budget cuts, The Washington Post reported on March 2 that the real estate inventory in the D.C. area has shrunk by 40 percent in the past year - to the point that real estate agents are essentially knocking on doors and asking homeowners if they will sell.
In addition to the low inventory climate, our area business owners are anticipating a busy summer due to Hurricane Sandy’s unfortunate shock to the New Jersey rental market. Hopefully the national economic forecast and seasonal weather forecasts will align for a great summer season!
Lee Ann Wilkinson is the top-selling Realtor in Sussex County for 2012. Find more information about The Lee Ann Wilkinson Group of Prudential Gallo Realtors at www.lewesrealestate.com or by calling 302-645-6664.