Home Sales are Up, but the Market is Still Down

Posted on June 5, 2008

The number of home-sales in Tampa Bay increased for the second straight month – so did the average sales price of Bay Area homes. But a continual decrease in asking prices is holding back housing market recovery. That’s according to Home Encounter’s Residential Real Estate Report for May, released today.

“There was improvement – or at least stability – in almost every indicator of housing-market-health,” commented Peter Murphy, Home Encounter CEO. “The number of sales went up across the region; sale prices rose; total listings fell; and average days until sale dropped.” All these positive indicators would ordinarily be accompanied by talk of recovery in the housing market, but Murphy isn’t so optimistic.  “Asking prices have continued to drop, dampening prospects of an immediate recovery in the housing market,” commented Murphy.

According to Home Encounter, asking prices are a key bellwether of market strength, since they’re based on factors such as comparable sales, customer demand, loan availability and what a buyer can afford. Falling asking prices are typically in response declining home values, increased competition, extended time on the market and increased negotiation from Buyers. So even though average sales prices may have creped up since last month, the large inventory of unsold homes and heavy Buyer negotiation is having a dampening effect on market recovery.

A Slowing Decline in the Housing Market

The news of May home-sales activity is a mixed bag. Home Encounter forecasts still indicate that the Tampa Bay market will reach its bottom around February 2009 – unchanged from last month. But prices will have to fall a little more before they reach rock bottom – almost 7% more, according to Home Encounter’s Report.

Everyone equates “Bottom” with “Recovery”, but the two concepts are quite different, commented Chase Clark, Home Encounter Partner and director of Investment Services. “Bottom” is the point at which the decline should end. “Recovery” depends on many factors, including inventory levels, consumer confidence, availability of loans and the job market. When it comes to the “Bottom” of the housing decline, we can safely say that the end is in sight. But when “Recovery” will occur – and how long it will take to erase the losses of the last 3 years – is anyone’s guess.

Looking for Relief

Still, May stacks-up well when compared against past months. “Asking Price is a measure of health that almost has to get worse before it gets better,” commented Murphy. “Foreclosures, Short Sales and other real estate bargains will inevitably force the competition to lower their price if they want to sell homes. But once bargain-inventory dries up – and assuming generally positive trends continue – it won’t be long before the Seller can gain some level of control again. That’s the relief that everyone is looking for.”

Peter Murphy is Co-Founder and Head Broker at Home Encounter, a Tampa-based real estate Consultancy with specialties in Residential & Rental Properties, Investment Real Estate, Property Management and Land & Commercial Properties. Murphy’s analysis of the Tampa Bay housing market is featured extensively in local media and in trade publications, including the St. Petersburg Times, the Tampa Tribune, the Tampa Bay Business Journal, the Lakeland Ledger, and the Orlando Sentinel. He has appeared on ABC Action News and Bay News 9 for his reporting on significant local developments in the real estate market. He is a regular contributor to Fox’s 970 WFLA news broadcasts and is a guest panelist on Fox 13s “Your Turn”, where he consults on local and national real estate market issues. Murphy has a B.S. in Economics from the University of South Florida and an MBA with an emphasis in Finance, Economics and Marketing from the University of South Florida School of Business. He resides in Tampa with his wife and child.