Springfield Real Estate News
Home sales in the greater Springfield metro area rose by 4.6% in January 2010 as compared to January, 2009. 295 homes sold as compared with 282 in January, 2009. This is a very significant slowdown in sales growth when compared with 30% sales growth in October and 50% sales growth in November 2009.
Average home prices fell 9% compared with January 2009. The January ‘10 average selling price was $125,266 versus $137,787 in January, ‘09.
Breakdown of Sales by Price
Homes priced at $100,000 or less continue to lead the market with 132 sales in January; a 23% rise compared to January, ‘09. Sales in the $100,000 to $200,000 price range followed closely with 130 units sold in January compared to 123 units in January, ‘09.
Again, following the pattern of the last several months, sales of upper-end homes continue to languish. Sales in the $200,000 to $300,000 range were down to 19 units in January, ‘10 from 37 units in January, ‘09. Sales of homes priced over $300,000 were basically unchanged registering 14 units sold in January, ‘10 versus 15 units the prior January.
February Preliminary Stats
Preliminary February, ‘10 numbers seem to support the trend of relatively strong sales in the low end of the market continuing as buyers try to beat the April 30, ‘10 buyer tax credits deadline. . Prices also appear to be following a declining trend in February with average prices near a 14% drop as compared to February, ‘09. Final February sales and price information are not yet available.
Headwinds on the Horizon
As stated earlier, the $8000 first-time home buyer and $6,500 repeat buyer tax credits expire on April 30th of this year. Buyers trying to take advantage of the credits must have a contract to buy a home in place by that date and must close on their purchase by June 30th. The question is: What happens after April 30th? In theory, one would expect the number of new contracts in May to be significantly below the number of contracts written in March and April. However, considering May and June are historically strong home sales months, it remains to be seen if this theory becomes a reality.
My personal opinion is that sales will in fact slow in May and June; perhaps markedly. The reason is not only the expiration of the tax credits; but also, the March 30, 2010 expiration of a less widely publicized campaign by the Federal Reserve to artificially hold down mortgage interest rates. The Federal Reserve has been the primary buyer of mortgage backed securities over the last 18 months. Over that time they have purchased $1.25 trillion worth of these securities which are a primary determining factor of mortgage rates. It is estimated that this buying program by the Federal Reserve has lowered mortgage rates anywhere from a half a percent to a full percentage point. If the Federal Reserve does end its buying program, as planned, mortgage rates will almost certainly rise. Prior to the financial meltdown of late 2008, the traditional buyers of these securities had been large institutional money managers, pension funds and investment banks. During the financial crisis these traditional buyers shunned mortgage related securities. Now that they are set to be the primary buyers again, they will almost certainly demand higher rates of return than the Federal Reserve. Lawrence Yun, chief economist for the National Association of Realtors (NAR), says 30-year fixed rates are “rock bottom” and simply cannot stay at 5 percent.
Any way you slice it, there are definite headwinds approaching for the housing market in the second half of the year. Ultimately it is a good thing to get the stimulus out of the market and let the market find its own natural equilibrium. Things just might get a little more painful for a short time while that happens.
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