May: a banner sales month

Palm Coast Observer
Opinion

There were 208 single-family Flagler County homes sold (closed) through the Multiple Listing Service in May. By all measures, it was an outstanding month. The total represented the most homes sold in a single month since November 2005, when prices were reaching their peak. Median selling price was $130,500, highest since September 2010. The total value of the transactions was about $34.7 million, a level not seen since October 2006.

Only 725 homes were listed for sale at the end of the month, compared to 1,179 a year ago. A 725-home inventory represents only 3.5 months’ sales at May volumes. In another positive sign, there were 662 homes under contract compared to 524 at the same time last year.

It’s a sellers’ market. So why aren’t prices rising? Several factors continue to hold prices in check. Banks are in the mood to move distressed inventory. They take guidance from similar sales where median price has wandered to lower levels for several years. And the distressed property market has few advocates for higher prices. Neither lenders nor short-sale sellers are motivated to maximize selling price. They just want the transaction to be over with. Real estate practitioners too are typically OK with going with the flow. A transaction closing at $120,000 now is preferable to a higher priced unsold listing with uncertain market potential.

Shrinking inventory has not affected pricing. Today’s sellers, even those who are not upside down, are made by necessity. They must sell. Why else would they be selling during the bottom of the market? As nondiscretionary sellers, they lack the will to test the market by raising listing prices. Multiple-offer bidding wars are more likely than sellers’ initiative to kick start price increases.

Tighter, though more realistic, lending standards and low appraisals continue to dampen buyer participation.

The percentage of May sales comprising distressed property was 45.7%, less than in prior months, when the percentage was above 50%. The shift, perhaps temporary, probably accounts for the May increase in median selling price.

One month does not make a trend, but five do. And in the first five months of 2012, 41.5% more homes were sold than in the first five months of 2011.