Nevada County Real Estate Market Snapshot – Federal Homebuyers’ Tax Credit
Paul Sieving - www.PaulSieving.com
November 16, 2009 - The Worker, Homeownership and Business Assistance Act of 2009 (HR3548) was signed into law in November by President Obama.
The bill deals with housing and unemployment aspects of the current economic crisis, including the Homebuyer Tax Credit. In addition to extending the first-time homebuyer tax credit, a whole new category of homebuyer is now eligible for a similar tax credit.
The $8,000 first-time homebuyer tax credit was due to expire on Nov. 30. There is a pretty good argument to be made that this tax credit has played a significant part in the apparent halt to the years-long decline in median home prices nationwide and to the increasing sales volume in many markets, including our own. In our last column, we showed that there has been a halt to price declines and substantially increased sales volume in the Nevada County market.
A consensus developed among real estate industry and government officials that expiration of this economic stimulus at a crucial time heading into the winter season might be extremely hazardous to a housing recovery in its infancy.
And so the legislation was redrafted to extend it to June 30 2010, and added a new category of tax credit for repeat home buyers.
The categories are as follows:
First-time homebuyer: A person who has not owned a home for three years or more. This credit is 10 percent of the home price, up to a maximum of $8,000.
Repeat homebuyer: A person who has lived in their current home for five consecutive years of the previous eight years. This credit is 10 percent of the home price, up to a maximum of $6,500. This program is intended for both move-up and downsizing buyers and there is no requirement that the current home be sold.
Rules that apply to both categories of buyer
- The buyer must remain in the newly purchased home as the primary residence for at least three years in order to avoid having to repay the entire credit. There are exceptions for death and certain military service.
- The buyer must be in contract to purchase by April 30, 2010, and close escrow by June 30.
- New and existing homes qualify.
- For purchases completed after Nov. 6, 2009, the maximum purchase price is $800,000. Previously there was no limit.
- The income limits are higher for purchases completed after Nov. 6, 2009.
- Under the original law, the credit was phased out for single taxpayers with Modified Adjusted Gross Income (MAGI) between $75,000 and $95,000 and for married couples with MAGI between $150,000 and $170,000.
- After November 6, the tax credit phases out at incomes between $125,000 and $145,000 for single and $225,000 and $245,000 for joint filers.
Finally, our government has come up with a way to put a few of the nearly $1 trillion of TARP funds back in our pockets at last. It’s about time!
Nevada County Real Estate Market Metrics - Q1-Q3 2009
Paul Sieving - Paul@PaulSieving.com
October 30, 2009 – As the peak selling season for the year winds down and we head into the holidays, there are some interesting numbers in the rearview mirror. Three important trends stand out as encouraging indicators that our local market is stabilizing, or at least experiencing a significant pause in the dramatic correction of the last 4 years.
The first three quarters of 2009 have been very dynamic in the Nevada County real estate market. Overall unit sales as well as sales of distressed properties have increased dramatically, while median prices have stabilized and begun to show modest increases over an extended period. All of these trends are bucking the usual seasonal variations in one way or another, indicating unusually strong market forces.
Nevada County Real Estate Market Snapshot-Morgan Ranch
Paul Sieving - www.PaulSieving.com
October 5, 2009 – This week we look at the year-to-date activity figures for Morgan Ranch. The idea is to see how Morgan Ranch has fared relative to the overall Nevada County market.
Morgan Ranch was established as a premier subdivision in 1989, and has matured as one of the more desirable neighborhoods in Nevada County, attracting residents from right here at home and also those relocating from other areas. Since breaking ground 20 years ago, approximately 400 homes have been built, with only a handful of lots left. Prices in Morgan Ranch are generally from entry-level to mid-market, with a few high-end custom homes. Lying between the communities of Grass Valley and Nevada City and with superior convenience to all community resources, Morgan Ranch has broad appeal to a wide range of homeowners.
It’s becoming evident that we have reached a pause, if not the turnaround, in this long market slump and unit volume is up and holding steady over the first half of the year. Along the way, there has been some distress in the market, with many Short Sales and Foreclosures, and this is likely to continue for a time as the market works through the problems.
So far this year, MR has seen 9 homes sold, which is one per month. Not one of these sales was a distressed sale, and this is in contrast to the overall Nevada County market. This is a ray of light for one neighborhood of many, as the absence of distressed sales in a particular neighborhood tends to help keep prices firm.
In the middle of September, MR saw the first distressed listing, a short sale, come on the market. Even the most unique neighborhoods will feel the effects of the current market.
The statistics for Morgan Ranch for year to date 10/05/09 are:
- Homes Sold = 9
- Average Days on Market = 101
- Median Sold Price = $370,000
- Average Sold Price = $354,990
- Average Sold Price in $/square foot = $209
- Homes in Escrow = 2
- Homes Active = 3
- Homes Active Short Sale = 1
A few of the corresponding figures for homes sold in Nevada County overall are:
- Homes Sold = 569
- Average Days on Market = 146
- Median Sold Price = $300,000
- Average Sold Price = $337,000
- Average Sold Price in $/square foot = $192
It’s clear that MR is holding up better than the Nevada County market as a whole. Fewer days on the market, higher selling prices, and greater value per square foot are signs that Morgan Ranch was a well-executed development plan that is holding value over time.
Nevada County Real Estate Market Snapshot – Summer Trends
Paul Sieving - www.PaulSieving.com
September 14, 2009 – Early in the month, there were 858 active single family listings in our western Nevada County real estate market. This number has been fairly steady for the last 6 months.
This number includes all 3 of the segments we have been discussing: Orderly non-distressed properties, bank-owned REO properties and Short Sale properties. I’ve broken down the active and pending listings by segment in the table below.
Single Family Pending Sales Index for September
Active Listings Pending Listings
|
Total 858 |
136 |
|
Orderly 641 |
85 |
|
REO 43 |
36 |
|
Short Sale 174 |
15 |
We’ll be tracking these figures going forward to gain an understanding of the closing rate for each of these segments. In other words, in a given month how many properties are in escrow, how many actually close, and how do these trends vary by segment. Closing rates have a strong effect on absorption rates, and can be an indicator of secondary factors, such as availability of financing.
In an earlier column, we looked at absorption rates for the 3 segments and for the market as a whole. The overall absorption rate for the month of June was about 10%. Orderly sales were the same, while REO sales were clipping along at 30%, and Short Sales were lagging at about 4%. In the table below are the comparable figures for June, July and August, as well as the median price.
Single Family Sales – Monthly Unit Volume by Segment
June 2009 July 2009 August 2009
|
Total Units 89 |
82 |
76 |
|
Orderly Units 70 |
51 |
31 |
|
REO Units 13 |
20 |
29 |
|
Short Sale Units 6 |
11 |
16 |
|
Med.Pr. $299,900 |
$320,000 |
$297,000 |
There are some striking trends in this table. While the overall absorption rate is holding steady at around 10% with a minor downward trend, the mix is changing dramatically. The absorption rate for orderly sales has fallen from about 11% to less than 5% over the 3 month period, while the rate for REO has increased from an already snappy 30% to a positively torrid 67%!
Likewise Short Sales have increased from under 4% to over 9%. This change in the sales mix, while the overall sales rate holds relatively steady, is a positive sign for the health of the market.
What appears to be happening is that the focus of buyer activity has shifted somewhat from orderly sales, which made up nearly 80% of units sold in June, to distressed properties, which in August accounted for 60% of units sold. This is healthy for the market in the sense that we are seeing the distressed properties being snapped up at a rate that is keeping the overall inventory of REO and Short Sale listings steady and avoiding a buildup of these properties in the market.
This is a very interesting trend and will be worth following as a reliable indicator of market health.
Throughout this period of change in the mix of properties sold, median price had been fairly steady, with less than a 1% decline in the 3-month period.
We are looking for data that we can make sense of, both leading indicators and trailing indicators, in keeping an eye on the health of our local market as we seek visible signs of a recovery.
Nevada County Real Estate Market Snapshot – Absorption Rates
Paul Sieving - www.PaulSieving.com
August 17, 2009 – The listing count for Single Family homes in Western Nevada County has been relatively steady at 800-850 over the first 6 months of 2009, with a slight upward trend, and is currently at 854. Even with the fairly steady inventory, sales volume is up considerably in the second quarter compared to the first quarter, an increase of over 50%.
The absorption rate for a market is the percentage of total inventory that is sold in a given month and is related to the supply of homes. For example, a 10% absorption rate represents a 10 month supply of homes and a 25% absorption rate reflects a 4 month supply of homes.
For the month of June 2009, during which the total listing count was approximately 850, 85 homes were sold. This is an overall absorption rate of 10% or a 10 month supply of homes. This compares to the supply in a “normal” market of approximately 5-7 months, and to the year ago period when the supply was approximately 14 months. Unit Sales have improved in the second quarter of this year.
When we break down our total inventory into the 3 main categories of non-distressed sales, short sales, and bank owned properties (REO), we see varying absorption rates. The breakdown is as follows: Of the 855 total listings, 677 (80%) are non-distressed, 140 (15%) are short sale, and 40 (5%) are REO.
The absorption rate for non-distressed properties mirrors the overall rate at 10%, while the rate for REO is a whopping 30%, and the rate for short sales is under 4%. The REO properties are selling through quickly, with a 3 month supply, the non-distressed sales are at a 10 month supply and short sales are above a 2 year supply. This is a highly segmented market and will slowly converge as the recovery unfolds.
What this all boils down to is that the overall market is recovering, the REO properties are selling quickly (this is key to the recovery) and short sales remain the most challenging segment of the market, with lenders seemingly preferring to foreclose rather than to accept short sales. As a result, most of the short sale listings will eventually go through the foreclosure process before selling in the open market.
We would like to see a longer trend of brisk REO sales and a continuing decrease in the overall supply of homes before we claim that a recovery is underway, yet the signs are encouraging.
