August Sales Figures: The Dog Days Have Arrived

If you're a regular reader of this blog, you know that real estate sales figures have been looking pretty encouraging since last winter. Well, we have hit a bump-in-the-road in August. I guess it had to happen sooner or later.

Let's start by our usual look at the August Absorption Rate (AR) which is determined by dividing the number of units sold during the month by the total number of listings in the MLS system for Pinellas County.

For single family homes, the AR for August stood at 10.3 percent. The July AR was at 11.1. For condos, the AR for August was at 5.9 percent compared to July's 6.9 percent. What does this mean? Well, if you're selling a single family home the average time on market will be 9.7 months. If you're selling a condo the average time on market will be about 16.5 months. If you think back to time-on-market figures during 2005 and 2006 you will recall inventory turns that were much, much longer; so, this really is an improvement.

Single Family Homes

During August, there were 6,446 single family homes listed for sale in the Pinellas MLS system. In July, there were 6,525 homes listed. In preparing this report, I noticed that the number of homes listed for sale in Pinellas MLS has been dropping quite steadily for about two years. If you're a seller, this is a good thing since the smaller the inventory the less competition to worry about. If you're a buyer, the smaller the inventory the fewer choices you have in selecting a new home.

The number of single family homes sold in Pinellas during August was 665. This is quite a drop from July's 722 homes sold. The median price of these sold homes dropped 19.3 percent compared to sold prices from August 2008. The median price for August 2009 was $142,000 compared to August '08's $175,900 median.

Condominium Sales

Condos continue to struggle. The number of condos listed for sale in the Pinellas MLS in August was 5,796. In July, there were 5,954 listed units. Similar to single family home listings, I noted a steady two year drop in condo inventory month after month.

There were 333 condos sold in August as compared to 412 sold in July. The median condo price fell from $150,000 in August of 2008 to $138,900 in August of 2009. That's a drop of 7.9 percent and frankly, that's kind of an improvement.

I think what we are seeing is a seasonal kind of thing. It's been hot. Winter visitors/buyers are still up north. The economy is questionable. People are worried about jobs, health insurance, property insurance, taxes, taxes and more taxes. So, things have slowed down a little.

Hey, I think it's just a summer kind of thing. Pray for snow.

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The Buy VS Rent Decision

It seems to me like a lot of folks I talk with -- especially first time home buyers -- are wrestling with the choice of continuing to rent or making the leap into purchasing their first home. Of course, many are encouraged to buy due to the $8,000 first time home buyer's credit that is offered by the government.

For many people, however, the $8,000 incentive is little more than a complicating factor in this troublesome decision.

So, here's some information that might prove beneficial in making an informed decision.

To make the call as to which is the right path to take, experts agree that people should rely on the price-to-rent ratio. This ratio is determined by dividing the average cost of purchasing a house by a year's worth of rent payments.

Economy.com has indicated that the ratio stood at 24.7 in 2005 but has since fallen to 17.4, probably due to falling real estate prices in most cities across the nation. The historical average since 1986 is 16.5, so today we're pretty close to the average ratio. Let's take today's ratio of 17.4. This means that individuals could spend 17.4 years renting a property for what it would cost to buy a house.

Dean Baker of the Center For Economic And Policy Research reminds people that the price-to-rent ratio should not be the only factor in making the choice to buy or rent. Baker says renting is probably the right path if you plan to move in a few years, or if renting allows you to live in a neighborhood where home ownership might be too expensive.

I hope this is of some help to those who are struggling with this kind of decision.

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