ByThomas Harding

Always a man for statistics, I give you two pertinent facts. First, the number of residential homes that have sold in Jefferson County was up to 69 in September 2009. This is a big step forward from the depressing early months of the year (see figure 1) when monthly sales dipped to 21 in long dark nights of January. The strongest part of the market are homes priced in the $100,000 to $250,000 range, where multiple-bid offers have become common, a situation not seen since the heyday of 2005.

Figure 1: Residential Sales 2004-2009  “Solds” and “Pending ” sales

Even more promising, the number of pending sales has risen to the dizzying heights of 81 new ratified contracts in the month of September, the latter is twice as many for the same month last year. We have not seen such activity in the market since early 2006. Progress indeed.

There are three main reasons that we are seeing such positive signs in the local real estate market. First is the temporary tax bonanza offered through the federal first-time homebuyers credit which runs out at the end of November. There has been some talk in Congress that this might be extended, if not, many argue that the uptick in real estate sales will be reversed.

The next reason is the dramatic decrease in home price values in the area. Driven largely by foreclosures and short sales, we have seen a significant influx of highly attractive homes on the market, particularly in the sub-$300,000 range. This has resulted in a considerable downward trend in the average sales prices in the area (see figure 2). Don’t be fooled though, just because average home sales prices have fallen by as much as 50% doesn’t mean that your house has depreciated by this amount, it simply means that lower priced homes are selling more often than higher priced homes. Of course, your home has probably reduced in value, but you knew that already.

 Figure 2: Average sales price residential sales 2003-2009

Third, and most sustainably, confidence is back in town. It is noticeable in the smiles worn by local realtors and the spring in the step of local lenders. Of all the factors, this is the most elusive and yet most important. With confidence comes sustainability and the balance between buyers and sellers becomes more equal which is critical for a healthy market place.

Yet, to be negative for a moment, there is still one more problem in the marketplace. There are still too many homes for sale (see figure 3). While the overall number of homes has fallen since  2005, there are still over 500 homes available for purchase in Jefferson County. Unless this number continues to fall, especially in the higher end of the market, house prices are likely to remain flat and the length of time it takes to sell a home will remain high. 

To sum up, we are seeing almost frenetic activity in the lower ends of the market, which may or may not continue depending on the extension of the federal tax credit, as well as the continued confidence in the market.