Incredible as it may seem it is already July and I am writing this article for a late summer-fall publication. It seemed just a couple of months ago I was looking at 08 fourth quarter data hoping the slight positive trends I saw emerging were real and reliable enough to forecast improvement in our local real estate market. We have indeed seen continued improvement in reduced inventory and constant percentage gains in actual closed contracts. We may even have slight evidence that the eroding values of our homes might be sputtering into an environment of the long hoped for period of stabilization.

A review of the Orlando Regional Realtor Association statistics that are restated with sample data going back to 2003 shows very large swings in the categories mentioned.

Table Number 1

Most significant is our inventory which has really started decreasing from the June 07 number of 25,923 to June of this year’s 17,831. The good news is that is a much needed drop of over 8,092 homes but the fact that it took two years to accomplish the decrease is the bad news. Nonetheless, it is the correction we need. The steady increase in sold homes will hopefully continue to decrease the inventory as more distressed properties are forecast to enter the market for this year and possibly into next. Since this January we have witnessed the steady increase in sold properties from 1,050 to this June’s 2,131. With the exception of seasonal lulls (beginning of school and the coming holidays) I am hopeful to see sold properties continue its upper momentum and reach 2,300.

Also, an indication of the elongated selling times that distressed properties bring to our inventory is the fact that Average Days on Market (ADOM) continues to exceed 100 days.

Additionally, there have been some small but hopeful signs of price stabilization. For the first time in a very long time ORRA reports the median price from April to May was stable at $130,000. Even more encouraging was the median had a slight increase to $131,200 May to June. The average price also jumped from $155,900 in May to $161,000 for June. We will have to watch these metrics closely next month to see if it is an anomalous blip or the start of actual stabilization. It is more likely a blip but one of several we can expect over the next six to eight months while pricing (median & average) fluctuates between increases and decreases month over month eventually stabilizing before reaching (hopefully) a small but constant appreciation some time next year. This fluctuation in price is a direct result of the complexity of our inventory. Instead of being just the number of homes on the market, inventory has morphed into multiple strata in different categories based on seller motivation, unrealistic or realistic pricing points, and varying degrees of financially and or physically distressed conditions.

The first strata of inventory is the portion that sellers and agents have not priced the property to current downward market conditions and are “chasing the market” and are not catching it. These properties are therefore on the market an elongated time and continue to lose value in addition to becoming stale. Overpriced short sales can be part of the strata and “chase the market” as well.

Second strata is those homes that entered the market as destressed properties (foreclosures and short sales) and are increased over time from the first strata that eventual become depressed because of incorrect listing prices. Again, this incremental increase from the first strata is because they were chasing the market and didn’t catch it and in some cases became a short sale or foreclosure.

And the final stratum is that portion of our inventory where sellers and agents understand current market conditions and have priced the property accordingly. This portion also is well maintained and is therefore very attractive and most likely to have many showings and even quick and or multiple offers. While this phenomena can happen at all pricing ranges it typically happens below the $450,000 price point.

Adding to this schizophrenic nature of our inventory is the massive influx of condo units. Acting to drive the local, regional and national prices down these transactions can cause volatile swings in metrics because they are well below median price ranges and can be snapped up in large numbers by first time home buyers and investors.

But we ARE making progress as the numbers continue to show each month and each quarter. Our real estate agent population needs to continue to take strong positions with sellers by clearly conveying the market conditions and how that affects the price that a property will ultimately obtain. Our agent population must also work with buyers to make sure that the perceived “Deals” in short sales and foreclosures are received with trade offs in prolonged contract times and frequently physical depressed property conditions. In short, seller’s need to stop chasing the market and price the home to market conditions and buyers must realize not everything on the market is a fire sale.

As we move through this next six month period of inventory complexity, price point issues for listings and un-realistic buyer expectation on obtaining deals on distressed properties will possibly self correct with slow movement to a more normal real estate environment. We are headed in the correct direction so keep your fingers crossed that we stay on the course and have the same incremental improvements for the upcoming quarters as we have had for the last one.