JULY, 2010 AVERAGE (Single Family) & INVENTORY LEVELS (All Residential)

Unit Sales in Blue Bell since 2000

In Montgomery County, the average monthly unemployment rate increased from 6.9% in the 4th quarter, 2009, to 7.9% for the first two months of the 1st quarter, 2010.

Home prices are not prone to fluctuations as in the stock market, as homes are "traded" far less frequently than financial assets. Homeownership is unique in that it provides shelter, in addition to often yielding a financial return through the leveraging of this investment. Our real estate market is a first home market, not a vacation or second home market. 

We seem to have forgotten the benefits of home ownership in the past few years:
tax breaks, a hedge against rising interest rates and inflation,  and the stability of owner-occupied neighborhoods. 

Non-quantifiable factors, such as cultural life, restaurants, parks, city vibrancy, etc., also have an influence on the stability of pricing in our area. See the description of the Blue Bell area, rated #14 in places to live in "Money" magazine, on my website. 

LONG TERM FORECAST

According to the Joint Center for Housing Studies of Harvard University, pent up demand, deeply discounted prices and the huge size of the "echo-boom" generation (the children of the baby boomers born between 1981-2000) will boost up housing demand over the next several years.  Furthermore, the number of households over age 65 will vastly increase with longer life spans. A prolonged recession, however, may reduce immigration and thus household growth.

The real median household income of buyers may be less than in the previous 10 years which will reduce the buying power of these first time homebuyers though.
As consumer confidence continues to rise,  housing markets will rebound in advance of labor markets based on historical trends.

Locally, I see pent up demand with buyers coming out early in 2010, but in the pricepoints under $550,000. I still expect to see price concessions from sellers, but a possible stabilization if inventory levels remain low.   Inventory levels in Montgomery County are currently lower than they've been in the past three years. House sales over $600,000 will still be slow and negotiable.  Luxury home sales will be even slower as buyers in this price point may be undergoing even more economic distress and job uncertainty than others.  Jumbo loan financing is more difficult to obtain and buyers generally bring less equity from their current homes to work with.

"Recent data in Pennsylvania shows that median house prices throughout the Commonwealth continue to decline as well, albeit at a slower pace. Nonetheless, a recent investigation revealed that with the exception of some seasonality during each late spring and early summer, monthly median prices in Pennsylvania dropped in 2008 compared with 2007 and in 2009 relative to 2008.  For nearly any month, prices were lower in 2009 than in 2008 and lower than in 2007 as well.

It is not apparent in the statewide data that Pennsylvania housing markets have bottomed out. It may be true that this process is beginning in some local markets. Given the limited number of foreclosure cases in the Commonwealth compared with many other states, we may not be subject to a continuing future of falling prices — at least not for much longer."

Source:  Wednesday, November 11, 2009 By Austin Jaffe, Ph.D. Austin Jaffe, Ph.D. is PAR's Consulting Economist from the Smeal College of Business at Penn State University.