Holy Cow! Condos Sales Improved In August! But Not Much!

It's hard to believe, but there has been a small uptick in the condo market during August!

Overall, however, real estate's poor performance has continued with no real light visible to give us any vision in this deep, dark cave that we are groping our way through. Here are the facts ...

First, let's look at the Absorption Rate(AR). As you know, this is the inventory turn and it is determined by dividing the number of units sold during the month by the total number of listings in the MLS.

The AR for single family homes during August was 7.9%. That's a new record low. In August 2005 the AR was a healthy 43.2%.

The MLS showed that there were 9,758 single family homes for sale at the end of August. Last month, there were 9,549. At the end of August, 2005 there were only 2,832 single family homes in the MLS. Reflecting the record low AR, sales of single family homes dropped to only 771 sales in August, 2006. By comparison, 1,223 single family homes were sold in August of last year.

On a somewhat brighter side, condo sales seem to have picked up a little last month. There is still a glut of condos on the market, in my opinion, but a few actually were sold in August. Here are the condo facts ...

The AR for condos during August was 7.7%. Okay, that's nothing to write home about. But it is an increase from the lowly 4.8% AR at the end of July. Overall, however, it's a big drop from the nice 39.3% AR we enjoyed at the end of August, 2005.

The MLS shows that there were 6,130 condos for sale at the end of August, 2005. That's down a little from the 6,194 condos for sale in July. By comparison, there were only 1,813 condos for sale at the end of August, 2005. Now, in fairness, we have to remember that a lot of new condos were completed and went into the MLS during the last year, so the number of listings has swelled.

There were 474 condos sold in Pinellas County during August. That's up from 299 sold in July. So, you can see that there has been a bit of an upsurge. I don't think this will start a buying frenzy and create condo shortages, but it is nice to see some positive signs in the condo market. By comparison, some 712 condos were sold in August of 2005, so the market still appears depressed to me. But hey, perhaps it's improving. We'll have to wait and see.

Right now, I'm getting a lot of questions about where I think prices are going. Buyers want to know if they should buy now or wait for lower prices. Sellers want to know if they should list now, or wait for prices to go back up.

Frankly, I don't know for sure. I'm guessing that prices may come down a little due to the rules of supply-and-demand although that's speculative on my part and a lot of real estate gurus around the country are saying prices won't come down very much. Others are saying that there is now "pent-up demand" on the part of buyers and that once the floodgates of buying open that prices will be forced upward again as buyers purchase the available inventory of new and pre-owned property. If the "pentuppers" are right, I'd buy now. But if they're wrong, well ... Here's what I'm seeing:

• The median price for single family homes in Pinellas County during July and August of 2006 has been flat at $230,000 according to MLS data. Now, a year ago that same data showed a median price in the county of $262,600 for August, 2005. So, the median price has dropped $32,600 during the last 12 months for a single family home. How much of a price drop do buyers want? What can they reasonably expect? How much of a price reduction can sellers absorb, especially those who bought in the last year or two when prices were high? The answers are currently unknown.

• The median price for a condo fell in Pinellas County from $187,000 in July to $170,000 in August. That is a HUGE drop in median price in a 30-day period. There was also an uptick in condo sales which may have been associated with this median price reduction. Are the two factoids linked? I'm not sure. If they are, I would think that you should look for condo prices to continue to fall resulting in an increase in condo sales. More data is needed to make an accurate prediction on this matter.

Well, there you have it. The August report. Nothing real earth-shattering. Nothing you can hang your hat on and say "here's what's going to happen". Only this. There were real, definite, measurable reasons why the real estate market jumped up during the past five years. There are real, definite, measurable reasons why the real estate market is slowing today. I don't see any changes in the factors that are driving this slowdown of the real estate market, do you?

Have mortgage interest rates dropped significantly and are they projected to drop in the immediate future? No. In fact, just the opposite.

Are property taxes going down in Pinellas County? No. In fact, just the opposite.

Are homeowners and flood insurance premiums headed downward? No. In fact, just the opposite.

Is the stock market falling and driving investor dollars into real estate as an alternative investment? No. In fact, just the opposite.

Is there some new outside force or employment opportunity that is driving a population shift and creating a huge new housing demand for Pinellas County? No. In fact, just the opposite.

Are housing inventories decreasing and creating a housing shortage? No. In fact, just the opposite.

Are plane loads of real estate investors, developers, speculators and flippers landing in large numbers at Tampa International Airport with suitcases filled with property-buying cash like they did for the last few years? No. In fact, well by now you know the rest of the answer.

The key factors that drive real estate upticks are not in real estate's favor right now. They lined up in real estate's favor five years ago, but not today. That was then, this is now.

You know what, those key factors will line up in real estate's favor again someday. Real estate is cyclical. What goes around, comes around. Just be patient. Or as my late father used to say, "Keep the faith, baby."

For more information on real estate matters, visit my website at www.thestpeterealestatesite.com.

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