??SWMI Home Sales Down Average Prices Up
ST. JOSEPH, MI ? "The housing market last year in April was fairly strong because buyers were taking advantage of the tax credit program. Sales this year in April dropped 19 percent from last year. The very cold and rainy weather may have put some buyers off. With the housing market heading into the peak selling season, activity should begin to escalate. We have good conditions in our market now. The average selling prices are up, but still very affordable, interest rates in April were lower than rates were just a year ago and we have a very good selection of homes," stated Gary Walter, EVP, of the Southwestern Michigan Association of REALTORS?, Inc.
Walter said, "Our peak selling year in MLS history was in 2006. The market declined afterward. Since 2009 we have experienced a steady improvement in the average sales price and a continued slow erosion of the number of units sold. There was no solid trend in sales last year with numbers bouncing up and down from month to month. This year we had a good first quarter."
In April, 182 houses were sold compared to 225 last year.Year-to-date, houses sold were down 9 percent. The April total dollar volume also dropped 18 percent (28,937,796 vs. 35,145,007).Year-to-date dollar volume was up 12 percent due to the robust first quarter. The average selling price at $158,999 was up just 2 percent while the year-to-date average selling price of $157,742 was up 22 percent.The median selling price dropped from $109,839 in 2010 to $97,400 this year.The year-to-date median selling price is dead even at $88,000. The median price is the price at which 50% of the homes sold were above that price and 50% were below.
Nationally, existing-home sales slipped in April, although the market has managed six gains in the past nine months, according to the National Association of Realtors?.
Existing-home sales, which are finalized transactions that include single-family, townhomes, condominiums and co-ops, eased 0.8 percent to a seasonally adjusted annual rate of 5.05 million in April from a downwardly revised 5.09 million in March, and are 12.9 percent below a 5.80 million pace in April 2010; sales surged in April and May of 2010 in response to the home buyer tax credit.
Lawrence Yun, NAR chief economist, said the market is underperforming. "Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger," he said. "Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations."
"Home values, despite month-to-month volatility, have been remarkably stable in the range of $160,000 to $170,000 for the past three years," Yun said. "Stable home prices in turn will steadily lower loan default rates, including strategic defaults."
The national median existing-home price for all housing types was $163,700 in April, which is 5.0 percent below April 2010. Distressed homes ? typically sold at a discount of about 20 percent ? accounted for 37 percent of sales in April, down from 40 percent in March; they were 33 percent in April 2010.
Regionally, existing-home sales in the Midwest rose 5.7 percent in April to a level of 1.12 million but are 16.4 percent below a cyclical peak in April 2010. The median price in the Midwest was $133,200, down 5.1 percent from a year ago.
First-time buyers purchased 36 percent of homes in April, up from 33 percent in March; they were 49 percent in April 2010 when the tax credit was in place. Investors slipped to 20 percent in April from 22 percent of purchase activity in March; they were 15 percent in April 2010. The balance of sales was to repeat buyers, which were 44 percent in April.
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said, "There are proposals and regulations are being considered in Washington that could further constrain the housing market. "One of the most damaging proposals would effectively raise down payment requirements to 20 percent, which would slam the brakes on the housing market," he said. "What we need to do is simply return to the sound standards that were in place before the introduction of risky mortgage products."
"Our data shows only one out of five first-time buyers needing a mortgage could afford a 20 percent down payment, and without first-time buyers the trade-up market would stall with very negative consequences for housing and the overall economy," Phipps said. "Ironically, low down payment FHA and VA loans, which are so critical to this segment, have performed well and never needed a taxpayer bailout because those borrowers stayed well within their budgets." NAR consumer survey data shows 56 percent of entry level buyers in the past year financed with an FHA loan.
A parallel NAR practitioner survey shows 11 percent of Realtors? report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10 percent had a contract delayed, and 14 percent said a contract was renegotiated to a lower sales price as a result of a low appraisal.
In SWMI, bank-owned or foreclosed homes peaked in March at 47 percent. In April, the percent fell to 38 percent. "This percentage of transactions we hope will continue to decline," Walter stated.
Walter continued, "On April 30, we had 3,020 houses listed for sale, which is down 12 percent from last year. At this inventory level, based on the last 12-month's sales, we have a 15.4- month supply of homes for sale. Last year, in April the inventory level was at 15.6 months. With fewer houses selling this year, the inventory supply ratio remains almost even with last year."
Nationally, the total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, which represents a 9.2-month supply4 at the current sales pace, up from an 8.3-month supply in March.
Interest rates slipped stepped up slightly from 5.03 percent in March to 5.08 in April in SWMI. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in April, unchanged from March; the rate was 5.10 percent in April 2010.
"Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards," Yun said.
All-cash transactions stood at 31 percent in April, down from a record level of 35 percent in March; they were 26 percent in March 2010; investors account for the bulk of cash purchases.
Phipps added "The lending community needs to return to sensible standards. "We want to ensure that qualified buyers will be able to own their property on a sustained basis from a sound credit evaluation, but banks needn't be so stingy as to only lend to those with the highest credit scores."
"Very high shares of cash purchases, and high credit score requirements, have led to historically low default rates among home buyers over the past two years. This trend implies a gulf is opening between those who can and cannot have access to the American dream of home ownership," Phipps said. "At the same time, existing guidelines from Freddie Mac and Fannie Mae must be fully implemented so all appraisals are done by valuators with local expertise."
The numbers reported for local sales include residential property in Berrien, and the western half of Van Buren and Cass counties.? All three counties are included in numbers and percentages and do not reflect differences in any individual areas.
The Southwestern Michigan Association of REALTORS?, Inc. is a professional trade association for real estate licensees and ancillary service providers for the real estate industry in Van Buren, Berrien and Cass counties.? The Association is located at 3123 Lake Shore Drive St. Joseph, MI 49085, (269) 983.6375.? They can also be contacted through their web site, www.swmar.com.
The National Association of Realtors?, "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.