Market Update - It ain't no bursting bubble

Condos and co-ops

March's inventory of newly listed apartments was 74.4 percent higher than in the same month last year, 858 condos and co-ops as opposed to 492. The sole decline by price level was relatively insignificant – 43.8 percent, to 9, for those offered between $100,000 and $150,000. Most other price levels posted strong double-digit increases. The total of 249 apartments put on the market was twice what occurred in the previous March, and all other price levels above $150,000 posted high double-digit increases. Consider these statistics: 183 new listings at $200,000-300,000; 249 at $300,000-400,000; 141 at $400,000-500,000; and 222 above $500,000.

Compared with last year at the same time, supply jumped by 234.4 percent of those still seeking buyers by the end of the month, with triple-digit increases as high as 421.4 percent at every level above $200,000. Of the 1,341 apartments available, there remained 292 at $200,000-300,000; 335 at $300,000-400,000, 201 at $400,000-500,000 and 365 at $500,000-600,000. A one-month decline in supply, in December, is history as the number of condos and co-ops on the market reached a higher point than at any time in the preceding 12 months.

Meanwhile, sales fell 11.6. percent from March to March, owing to decreases at every price level but $150,000-200,000, which grew a negligible 2.4 percent –from 41 to 42 apartments that went under contract. Units offered between $400,000 and $500,000 registered a decrease of 21.4 percent, to 66. Sales of condos and co-ops above $500,000 slipped 9.2 percent, to 89. Nonetheless, the volume of apartments that found buyers was substantially higher than it has been since June. March's showing failed to bring up the year-to-date sum, however; with 992 units sold, results were 9.7 percent smaller than at the same time last year. The biggest declines were below $150,000 (51 percent at $100,000-150,000) and above $400,000 (off 22 percent at $400,000-500,000 and 14.4 percent above $500,000).

The market absorbed just 23.2 percent of the apartments available for sale during March versus 21.4 percent in February. That was 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.

Not surprisingly, prices have actually eased below the 2005 average. The average is now at $413,195 in comparison with $426,429 and, in 2004, $364,425. The March average represents the first slippage to date; in February, the average was $437,195 for condos and co-ops. At the same time, the median is falling somewhat away from the average. Now at $350,000, the median was $375,000 in 2005 and $325,000 in 2004.

Single-family homes

Gains in new listings started to accelerate in March. February had 12.9 percent more homes put on the market than did February of 2005, but last month's total was 36.6 percent greater. Inventory went up in the solid double digits at every level above $300,000, including a 74.2 percent change at $450,000-600,000. Of the 728 new listings, nearly half (341) were offered between $300,000 and $600,000.

By contrast, the number of homes still on the market by the end of the month was more than twice that at the end of March, 2005; there 1,160, a 113.6 percent increase caused by triple-digit changes at the three levels between $300,000 and $750,000. The biggest percentage growth was at $600,000-750,000 (219.6 percent to 147). With 297 active listings, the $450,000-600,000 category had more than any other. Of those that lingered on the market, 118 were between $750,000 and $1 million (up 93.4 percent) and 168 were above $1 million (up 50 percent. Supply continued to head up again from December and is about equal to last fall's 12-month peak.

Sales activity sank by 12.2 percent from the 484 homes that went to contract in March 2005. Volume declined at every single price level but $450,000-600,000, where it was even with the previous March. Of the 425 ratified contracts, 84 were at $150,000-200,000, 111 were at $300,000-450,000 and 78 were at $450,000-600,000. Other price points registered lower numbers. As for year-to-date activity, it fell by an average of 15.5 percent to 1,083 by as much as 69.2 percent (up to $150,000) and as little as 5.1 percent ($750,000-$1 million). A drop from a total of 607 last year to 495 between $300,000 and $600,000 obviously dragged down the average considerably. But March sales were above every month since June.

With an absorption rate of 26.8 percent, sales activity showed somewhat more strength than February's 25.8 percent. Buyers went to contract on more than one out of every four homes on the market. Such returns compare with January's 26.1 percent and 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.

Prices in March were below last year's average, the first drop in years. It was $590,914 last month in comparison with $628,096 last year and $510,279 in 2004. The median is noticeably far from the average. It was $462,000 in March versus $489,450 last year and $381,080 in 2004.

What it all means

Forget about the bubble. This market is one that economists have been predicting for many months – a gradual easing of prices. Just because they aren't as high as last year, doesn't mean they aren't high. Buyers appear to be cherry- picking. They are paying respectable prices for the most desirable – and, sometimes, most expensive - properties. Especially, in the mid ranges, they are demonstrating a high degree of skepticism about prices and a discernibly discriminating eye about quality. As inventory continues to grow, they are in a position to flex their muscles and are taking advantage of their strength in this changed market. If prices are going down, does anyone hear a loud bang or a resounding thud? Although prices have edged below the unprecedented highs of last year, there is no reason, with so much employment growth, to believe that real estate will not continue to be worth buying. Property can command prices that represent not so much records but amounts that are, from a historical perspective, still mind boggling.