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2012 in Review

Market Update

  “Isn’t it interesting that the same people who laugh at science fiction listen to weather forecasts and economists?”

-- Kelvin R. Throop, III (fictional character, Analog Science Fiction and Science Fact, 1964).

 With 2012 in the books, and wild weather forecasts swinging from one end of the scale to the other to start off 2013, what should we expect for the real estate market going forward? Can we glean any insight from 2012’s numbers? Let’s take a look.

 In real estate analysis, we must look backward to look forward. Looking back over recent years (for comparison to 2012, and how they compare), we see that in 2010 there were a total of 415 total transactions (houses, land, condos, commercial, timeshares, foreclosures, etc), as compared to 300 during 2009 and 285 in 2008. The total dollar amount of real estate changing hands in all of 2010 was approximately $690 million, while in 2009 it was approximately $445 million and approximately $568 million in 2008. Just by these numbers alone, 2009 was the low point, with 2010 showing much improvement.

For 2011, there were a total of 384 transactions (houses, land, condos, commercial, timeshares, foreclosures, etc) with a total dollar volume of approximately $542 million, down slightly in number of transactions, and down in total dollar volume from 2010’s numbers. By comparison, in 2012, there were 546 total transactions, with a total dollar volume of about $834 million, a 42% increase in transactions and a 54% increase in dollar volume over 2011’s numbers. So, simply based on comparisons to recent years, we saw the bottom in 2009, a rebound of sorts in 2010, a slight settling back (mild ‘double bottom’) in 2011 and now a seemingly stronger rebound of sorts through 2012.

Foreclosures and foreclosure related transactions made up approximately 6% of the overall market in 2009, with approximately 25 – 30 foreclosures and foreclosure related sales taking place. This unfortunate statistic continued in 2010, showing no real signs of slowing, with an estimated 35 foreclosures and foreclosure related transactions taking place, making up about 7% of the market in 2010 (based on dollar volume). For 2011, there were an estimated 23 foreclosures, representing approximately 2% of the market based on dollar volume. For 2012, we saw an estimated 35 foreclosures, representing about 3% of the market.

The average home sale in 2010, hovered in the $2.2 million range, roughly even with the approximate $2.236 million average home sale for all of 2009, while the median home sale at the end of 2010 was $1.225 million, down about 20% from the $1.538 million median home sale for all of 2009. The average home sale in 2011 was approximately $1.635 million, down about 26% from 2010, while the median home sale was approximately $1.195 million, down about 2% from 2010 levels. These numbers also reflect the fact that there were only 8 home sales over $5 million, representing 13% of the overall market and 2 home sales over $10 million in 2011. Whereas, in all of 2010 there were 23 home sales over $5 million, with eight home sales over $10 million and in 2009, there were 12 home sales over $5 million and 6 over $10 million.

In 2012, the average home sale was $1.854 million, up about 13% from the average home sale for all of 2011. Further, there were 42 sales over $3 million, with 19 of those over $5 million, and 5 over $10 million in 2012, compared to only 27 sales over $3 million for all of 2011 and only 8 over $5 million. Helping to boost the average home sale is the upper end of the market. The average sale in the $500,000 to $999,000 range is $749,000, up 6% from 2011’s numbers.

There were 35 vacant lot sales in all of 2009, with an average lot price down about 48% from 2008, which in turn was down about 36% from 2007. Vacant land sales increased modestly in 2010, with a total of 42 vacant lots sold.  The average lot sale in 2010 was up 29% over 2009 and the median lot sale was up 41% compared to 2009. For 2011, there were 43 vacant lot sales, only 1 more than in 2010. As of the end of 2012, there were 83 vacant lot sales, with an average sale price of $1.375 million, compared to the 43 vacant lot sales for all of 2011 with an average sale price of $1.853 million (2011’s average vacant land sale was skewed by a $12 million lot sale, as well as an $8 million lot sale and another at $6 million).

2008, on an annual basis, saw the fewest number of new single-family building permits being issued for any year since building permits were first required in 1972. 2009 is now the new record holder for the year with the fewest number of building permits being issued since 1972, with a total of only 44. 2010 ended with a total of 53 new single-family permits being issued, perhaps a glimmer of hope, and 2011 saw 54 single-family permits issued, only 1 more than were issued in 2010. As of the end of 2012, 58 single-family permits were issued in 2012, a modest increase over 2011. The general feeling in the market is that building has begun to slowly return, albeit cautiously.

 Overall sales volume (number of transactions) was down about 7% in 2011 versus 2010, and the dollar volume of those sales in 2011 was down about 21% versus 2010. 2012 was much stronger compared to 2011, as we seem to be slowly climbing up from the bottom. A large flurry of market activity recorded in December 2012 was a result of consumer panic in the face of potential negative tax implications and tax law changes. If this was just a “blip” or possibly the signal of renewed market confidence, remains to be seen. Whether or not this recovery of sorts can be sustained is the real question. Stay tuned.

 -Rob Ranney