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Have We Returned to a Healthy Market with Appreciation Just Around the Corner?

February 24, 2012 by Joe McAuliffe

Have We Returned to a Healthy Market with Appreciation Just Around the Corner?

    According to the National Association of Realtors, the month’s supply of inventory has returned to a near-normal 6.1 months supply of homes for sale. This number is considered the magic balance where inventory levels don’t favor either buyers or sellers.

Does this mean we’ve returned to a healthy market with appreciation just around the corner? That depends on your price point.

Most of the people live in average neighborhoods that aren’t driven by wealth. These area’s nationwide didn’t have the same massive appreciation that occurred in areas like Florida, California and Nevada. Also, the problems have been worked out and foreclosures process much quicker in these areas because average homeowners live month-to-month and didn’t have the ability to try to wait out the downturn. The majority of those foreclosures have already occurred in many areas.

The more affluent second-home and vacation-type markets like The Jersey Shore, were the markets hit hardest by the downturn. Also, the higher end of the market has been the slowest to recover because those people have more staying power than people who don’t make as much money and live month-to-month. Most of those areas haven’t depreciated enough for the market to recover yet. Prospective sellers are beginning to figure out that they won’t be getting the prices they had hoped for anytime soon and are finally beginning to accept lower prices for their luxury homes.

The general rule, for lower priced homes under $250,000.00, both prices and inventory levels have stabilized. $250,000.00-$500,000.00 or so, prices and inventory levels are beginning to stabilize. The prices of properties valued over $750,000.00, still need to drop before inventory levels will return to normal. A great deal of the stabilization in the lower price points has come because of investor demand. Prices are significantly lower than new construction costs and rental rates continue to rise, making this sector a “no brainer” for investors. You can expect appreciation in this sector of the market.

Most importantly, all homeowners or prospective homeowners, must evaluate local market trends to determine the conditions that apply within their area.

Filed Under: Buyer Considerations, Cup O' Joe

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Managing Partner, is one of the top business consulting professionals in Florida. He has worked with Fortune Magazine, Oracle, Network Solutions, Computer Associates, and Lawyers.com. Some of MET’s current clients include Christie’s & Illustrated Properties, Coldwell Banker, Merrill Lynch, Smith Barney and Sotheby’s.
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