Market Update - The market is speaking out, and loudly

Condos and co-ops

New listings in February swelled 47.1 percent higher than in the same month one year earlier, and there were 174.3 percent more listings of apartments still available by the end of the month than at the same time in 2005. The supply of condos and co-ops put on the market during the month rose in the strong double digits at all levels between $150,000 and $1 million, above which the numbers were too small to be meaningful. Of the 525 new listings, 108 were at $200,000-300,000 – 92.9 percent more than in February, 2005 – and 139 were at $300,000-400,000 – 63.5 percent more. At $600,000-700,000, a 75 percent increase accounted for 35 units newly offered.

By the end of the month, 1,141 apartments remained on the market, with gains in the high double digits at most levels. Especially notable were increases in inventory of 85.6 percent, from 36 to 250, in unsold units at $200,000-300,000; 75 percent, from 65 to 260, at $300,000-400,000; and 71.5 percent, from 37 to 130, at $400,000-500,000. A decline of 200 percent, from 36 to 12, in the supply of apartments listed above $1.5 million also is worth mentioning. Although inventory had started to fall from September's 12-month high, it began rebounding in January to a new high last month.

Meantime, sales activity dropped 9.6 percent from February to February, owing to declines as high as 66.7 percent at price levels between $300,000 and $900,000. Volume was in the double digits between $150,000 and $300,000, with 108 condos and co-ops going under contract during a month in which 310 of them found buyers. Year-to-date sales were down 10.7 percent, yet higher than they have been since October. Activity was slightly higher than in 2005 at the same time of year at levels below $400,000 but lower in double digits above that price point. The 585 ratified contracts so far this year compares with 655 in 2005.

Approximately one out of five units on the market went to contract during February. The absorption rate was 21.5 percent, hardly better than January's weak 21.4 percent and below December's 23.2 percent. By contrast, it was 53 percent in April, followed by lower rates in successive months, dropping to 43.5 percent in July and 38.7 percent in August.

Yet prices, which show distinct signs of tapering off, remain higher than they were last year. The average is now at $437,195 versus $426,159 in 2005, $338,618 in 2004 and $263,131 in 2003. At the same time, the median is almost at a plateau, departing farther than any time in the past five years from the average. It has reached $373,450 in comparison with $371,000 in 2005 and $293,000 in 2004.

Single-family homes

The supply of new listings was 12.9 percent greater than in February last year, 507 of them as opposed to 449, with the lion's share of the growth in homes offered between $300,000 and $800,000. Above $1.5 million, such inventory went up 25 percent to 30 properties. The biggest category was $400,000-500,000 homes, which rose 21.3 percent to 97, but the biggest gainers were at $500,000-600,000 (up 69.2 percent to 66) and $700,000-800,000 (up 81 percent to 62). Properties offered between $1 million and $1.25 million climbed 21.4 percent to just 17. Otherwise, inventory slipped.

With sales falling, the number of listings still active at the end of the month was about twice the amount a year earlier. The increase was 99.4 percent, to 989 from 496. Every single price level between $200,000 and $1.25 million experienced strong triple-digit gains – the biggest being 250 percent, to 28, at $1 million-$1.25 million. Only below $200,000 were there any losses in supply, from 71 a year ago to 13 now. Inventory has been edging up again since December, but it is below the peaks of earlier in the fall.

The volume of sales slumped by 22.7 percent, to 343, growing atypically at the highest price levels as much as 70 percent ($1 million-$1.25 million). Activity dropped at all other price levels but those between $400,000 and $600,000, which had insignificant changes. The number of homes that went to contract varied from 444 in February of 2005 to 343 last month; still, the month was busier than January and December, in which the 12-month lows were recorded. For the year to date, the decline in sales was 18 percent, and decreases occurred at every single price level but $500,000-600,000, which rose a mere 1.5 percent, to 66 homes sold.

The market absorbed about a quarter of the homes in the Multiple Listing Service (MLS) during February. The 25.8 percent absorption rate was below January's 26.1 percent, though higher than December's 21 percent, which was significantly lower than it had been during all of 2005. For example, in November, it was 24.9 percent. It was 26 percent in October, 28.1 percent in September, 35.8 percent in August and 35.5 percent in July. Earlier in 2005, the rates were far higher.

The average price of a single-family home has moved only to $546,080 from $531,880 last year and $414,140 in 2004, a noticeable abatement in acceleration. So, too, with the median, which is at $435,000 versus $414,980 in 2005 and $310,000 in 2004.

What it all means

The market these days is nothing if not hesitant. Or perhaps “resistant” is a better description. Buyers are sending a clear message that they are uncertain about the direction prices will take or worried about where interest rates are going. More important, they are demanding – and, because of rising inventory, commanding – value for the real estate they are seeking. With price acceleration ebbing, sellers obviously are beginning to believe that buyer resistance is here and that it is not going away any time soon. Although the market is now replete with contingencies such as home inspections, multiple offers for exciting and well-priced properties persist, albeit with less frequency. It is a new day. The times, they are not changing. The change is here.