September sales of existing homes and condos. What do the numbers mean?

The Florida Association of Realtors (FAR) reports September sales down but prices off only slightly.

Sept. 25, 2006 – The number of existing Florida homes sold in September was off by 34% from September 2005 but the median price of homes sold was only off 1%. Condos sales dropped 45% with the median price off 8%. Some think that because prices are only off slightly, the market is not in trouble. I don’t agree completely.

Here is the raw data reported by FAR on the sale of existing single-family homes and condos.

It may seem comforting that prices are holding fairly well, but the numbers are telling us that there are many fewer buyers willing to pay today’s prices. At the same time, the number of available properties in many markets is at an all-time high. There are only two real options for sellers – lower prices or wait for the market to catch up with their asking price. Both will happen. Some sellers will find themselves in a financial bind, continuing to carry their property. These sellers will need to lower their price because they "just can’t wait". Others can be more patient, letting the market gather itself for the next rally. Many local properties are still listed at prices much higher than justified by current market conditions. The process will be slow and, for some, very painful. I predict the Flagler County market will take 12 – 24 months to flush out the existing inventory to the point that we will not be calling it a "buyers market." Condos will take the longest. Condo purchases are more often driven by investors and purchases of second homes, the first group of buyers to step back and the last to step back up.

Real estate markets are cyclical. They respond to many macro factors such as interest rates and the state of the economy. But all real estate markets are essentially local, or at the most, regional. Florida will continue to attract new residents long after this blip in the curve. Flagler County will continue to compare favorably with other more crowded and expensive coastal areas of the state. The Baby Boomers will continue to grow old and retire with record setting wealth and liquidity. Smile and be happy.

Toby Tobin