Home Buyer Demand Slows But is This the Whole Story?

Heading in the Right Direction

Weekly Market Activity Report

As the weeks following the tax credit expiration unfold, buyer demand continues to slow. The 600 purchase agreements signed for the week ending May 29 were 34.6 percent below the previous year—the fourth consecutive week of year-over-year decline in Pending Sales.

Refreshed supply is also in decline, as New Listings posted a fifth consecutive week of year-over-year decline, landing at 1,474 for the most recent reporting week—a 5.9 percent decrease from a year ago.

Two other metrics for this week:

Days on Market – This stat continues its year-over-year downward trend, resting at 118 days for May 2010.

Percentage of Original List Price Received – This continues to grow, up 2.8 percent above last year at this time to 94.1 percent of the list price.

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And now my two cents on the subject:

The above weekly activity report was published by our Realtor Association this week. I anticipated that sales here in the Minneapolis and Saint Paul area would drop off following the end of the tax credit window. So far this has been the case.

I was happy to see the deadline pass. Why might a Realtor say such a thing? Because I was sensing a bit of an unreal “market”. A market that was partially generated by something that was not related to housing in the sense of a place to live by itself, but to money being saved. Buyers certainly bought because of the tax credit. There were also buyers who began looking but were more concerned with finding the “right home” and not just buying simply to take advantage of the tax credit. There were buyers in the marketplace that didn’t find their dream home during the tax credit window.

Another aspect of today’s buyers is that some are still finding home prices too high for what they believe the homes are worth. They genuinely want to buy and they are more concerned with getting the “right house” at the “right price”.  A bit of prudence is in play.

The tax credit definitely created a temporary increase in home sales. I’m now seeing an increase in showing activity on listings. I’m also getting more calls from buyers. I’m sensing a different mentality in the marketplace. There’s an earnestness and a calmness about buyers. They’re ready to be out looking, to be in talks with lenders about their qualifications, to research the market, to determine what works and doesn’t work in a house for them.

Making Sure all is Set for a Smooth Sail

And, when the aspects align for them, I’ve no doubt that in the process of being thoughtful about all of these things, they’ll put pen to paper and realize the Great American Dream of home ownership. In essence, they’ll be buying for a reason other than getting a tax credit. Kind of like the days when lenders gave mortgages based on sound lending practices and for amounts that were well within the buyers ability to make their payments over the years.

Many sellers are still waiting for the right buyer for their homes. It will continue to be this way for a great number of sellers. There is still more supply than demand. Price your home right for your location, condition, floor plan, and amenities, and you should have a buyer making an offer.

This all bodes well in my book. An image comes to mind of a ship now turning in the right direction. It was off course and the compass is working properly again. We won’t reach shore overnight. We may be a ways out in the ocean yet.  Still, I think we’re on the right path and heading home, both literally and figuratively.

Bringing Her Home

And, for what it’s worth, that’s my take on the rest of the story.

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My thanks to Dennis Kroll of Kroll Architects for the use of his photos.
http://www.kroll-architects.net

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