Dry But Promising

In the last week, some hopeful signs have developed with respect to Massachusetts real estate:

The best news by far was that home sales (overall volume) from April to May of this year had their greatest month to month percentage gain in the last 10 years! (Source: MAR, NEAR)

Although May sales on a year over year basis saw a decrease of 10.1% for single family homes and a decrease of 24.5% for condominiums, these decreases were still a vast improvement over the recent past. Meanwhile, single family home sales and condominium sales increased 24.5% and 27.5% respectively from April to May. (Source: MAR, NEAR)

A similar trend as to that which is referenced above occurred regarding prices. While single family and condominium sale prices were down 9.2% and 2.6% respectively year over year for May, April to May of this year saw sale price increases of 2.4% for single family homes and 2.7% for condominiums. (Source: MAR, NEAR)

Regarding the time it takes to sell a home, in May of this year, the average time on the market for single family homes was 143 days, as opposed to 139 days in May of 2007. The time on market for condominiums remained virtually unchanged, moving from 134 days in May of 2007 to 135 days in May of 2008. (Source: MAR, NEAR)

Although the statistical analysis may be mind-numbing, what is important is the future of the real estate market and what we might glean from these numbers. Simply put, the year over year slides in sales volume and prices were less drastic than in recent months. Both facts bode well for a gradual market stabilization. Moreover, the month to month positive gains in sales and prices strengthen this hypothesis.

However, so as not to cause irrational optimism, keep in mind that the condition of the local real estate market is far from healthy from the seller's perspective. We will not see properties flying off the market at the speed at which they did at the market's peak a few years ago for quite some time. After all, there is a difference between a bottom and a recovery. (The interchangeable manner in which these terms are used by the media and analysts alike is disconcerting.) I am seeking the former for the time being.

Finally, keep in mind a few simple rules when contemplating your particular situation. All real estate is local. Each sale depends on marketing and pricing, not necessarily in that order. Pricing must be based on market conditions and in consideration of comparable properties. Pricing has nothing to do with (or should not have anything to do with) what a seller owes, or what a seller needs to net in order to purchase another property. The market is what the market will bear.

Interest Rates & Bank-Owned Properties

Interest Rates

FED Chairman Bernanke gave a speech yesterday wherein he made an abrupt change from his former policy of not commenting on the dollar as, per his prior position, it is not within the province of the FED. By raising his concern over the weak dollar, as well as the lagging economy, he seemed to be posturing for future interest rate increases, or at minimum a freeze of the rate (2%) for the immediate future. (Source: MSNBC, WSJ)

Keeping the above in mind, for anyone contemplating a refinance, now may be your best opprtunity.

Bank-Owned Properties

On another note, I am seeing a bottom in multi-unit investment property prices, albeit artificially determined. It appears the banks are looking at individual properties and determining a floor price at which they are willing to sell each property. If a property does not sell at that price, they will then auction the property with the predetermined floor price being the minimum they will accept at auction. I am told that, if a bank does not obtain its floor price at the auction, it will then bundle the property with similar properties and sell the bundle to a large (institutional) investor.

What are the ramifications of the above? They are twofold:

First, this should stop the bleeding for those of you who own multi-unit properties in that the bank-owned properties will not remain on the market as a continuous drag on values. In theory, your property value will be determined by this floor price per unit in conjunction with the relative condition of your property. Without this process in place, your property would continue to decrease in value until such time as the floor was determined on the open market. This would naturally be lower than the floor price set by the banks.

Second, for those of you investing in these properties, keep an eye out for the unit price at which these properties are taken off the market in your area and compare the different prices/properties against one another. If the per unit price is fairly consistent taking into acount condition of the respective properties, you have a pretty accutate indication of the bottom and what you should expect to pay per unit.