As we emerged into 2009 we found acceleration in job losses, a continuation of the stock market slide that kept consumer confidence down and many questions surrounding what programs the new administration might implement. This compelled many to sit back and wait for some clarity before giving consideration to home purchases. Combine that mindset with an inability to find mortgage money and you have the environment for our 1st quarter of 2009.

Table Number 1

Let’s fast forward to the present and view the actual results of our first quarter of 2009. Nationally, regionally and most importantly locally, all our indicators we traditionally track (see Table 1) are showing positive trends: Inventory for the first quarter while taking a slight seasonable up tick in January continued to recede to 21,448. This number needs to continue trending towards between 15,000 and 16,000 for meaningful progress. Actual Closed contracts have after a seasonable pause in January showed strong growth through March with 1,050, 1,322 and then a large jump to 1,653. These figures are welcomed as they show buyers beginning to come into the market after a prolonged absence. Average Days on Market (ADOM) has stagnated somewhat but is still just over 100 days signaling a significant portion of short sales which have prolonged selling times. And while I haven’t usually reported on Pending Sales that metric is now being watched as its’ ongoing increase predicts potential contract closings to come. Numbers for the first quarter are all over 2,000 which haven’t happened since April of 2008. January through March figures are 2,282, 2,434 and 2,956.

Some of these results come from a myriad of programs specifically targeted to stimulate real estate growth, correct and improve financial elements of our society thereby hopefully course correcting a significant portion of our economy. These programs really just commenced and are therefore anemic in their affect and should become significantly more influential in the 2nd and 3rd quarter of this year. But nonetheless the following programs are beginning to take effect:

1. Most directly affecting real estate is the first time buyer’s $8,000 house tax credit. This is significant in that it is a tax credit and even individuals who have not owned a home in the last three years are said to qualify. Over time it is expected that entry of buyers into the first time portion of the market will begin to trigger chain reaction movement of those who want to move up or down in housing requirements.
2. Critical to funding all transactions and removing toxicity from the financial sector are programs designed to lower interest rates and create more financial liquidity:
   1. TARP (Troubled Asset Relief Program) and -
   2. TALF (Term Asset-Backed Securities Loan Facility) both have design intent to improve banking capital positions and -/li>
   3. A mid March announcement by the Federal Reserve that they were buying $300 billion dollars in long term securities and –
   4. Another Treasury purchase of securities issued by Freddie Mac and Fannie Mae in the amount of $850 billion in agency backed securities, bringing total purchases to $1,250 billion dollars.
3. Additionally the Financial Accounting Standards Board (FASB) in early April decided to allow banks more leeway in determining what their assets are really worth. The five-member Financial Accounting Standards Board voted unanimously to let banks exercise more judgment in using mark-to-market accounting that has forced billions of dollars in writedowns and been blamed (by some) for worsening the recession. With the new mark-to-market accounting rules banks can potentially improve earnings and capital levels and thereby increase lending activities.

The overall result of the above actions: Banks and financial institutions are beginning to report profits and healthier projections and therefore resources for mortgages are coming online again, and buyers are in the marketplace searching for homes. This continues to decrease housing inventory which further stimulates buyer activity. In other words, we are seeing the potential for the housing market to stabilize this year as some have predicted.

The other critical factor that we hope to see corrected are our home values. This past two years the “perfect housing-financial storm” has battered home prices to 2003 values and even below. According to Lawrence Yun, Chief Economist, National Association of Realtors Research, “The current home price is the lowest since March 2003” and there is concern about prices continuing to fall and over correcting from their highs of 2005 and 2006. There are indications that “the high prevalence of distressed home sales and of those in the lower price range has skewed the median price markedly lower than under normal market conditions” Yun says. And Yun reports that “Distressed sales, as defined as foreclosed properties or those requiring lender mediated short sales, account for about 45% of all sales.” He suggests that of our total inventory strictly distressed properties is about 25%. And relative to valuation, distressed and non-distressed, our non-distressed properties are holding their value much better than distressed ones. The hopeful sign from this analysis is that if 45% of the sales are distressed properties it may not take as long as some have predicted to get through the inventory if they constitute 25% of the total. With activity picking up we could have exponential impact on the distressed inventory at a pace of 45% of all sales. The effect of declining distressed inventory will really support the stabilization of home values. However, the distressed inventory represents a significant challenge in the coming months as non-distressed sellers’ battle with buyers who assume everything on the market is a deal. Not until the distressed inventory is pared down considerably will we see home prices stabilize so any increase in the rate at which we can lessen the distressed inventory is a very positive activity.

So, with the first time home buyer tax credits, the programs for banks and financial institutions hopefully increasing bank capital for mortgages and the upward trending housing statistics can we expect to turn the corner this year? Certainly we are headed in the right direction and maybe we can even see the corner approaching. However, we still have a way to go and some rather significant financial, housing and economic hurdles to overcome before we can move out of this current crisis. Our all important consumer confidence levels have shown slight improvements recently and hopefully the anticipation of continued job losses for several months to come won’t portend any back sliding. And we will have to carefully watch the auto industry as the outcome of GM and Chrysler will have a very compelling effect on consumer confidence. But with all things being considered I still believe we will see housing stabilization this year which should set the stage for us to come closer to market recovery next year.