Friday, October 3, 2008

Jacksonville Market update

Monthly Survey of Real Estate Agents
Foreclosure Pricing Needed to Attract Buyers

■ Start of the fall season, but few buyers are found, aside from foreclosure-rich markets. Our Monthly Survey of Real Estate Agents showed another slight decline in September, with traffic worsening over the course of the month. Agents generally noted fear among buyers about buying before prices reach their low, difficulty getting a mortgage, and the elimination of down-payment assistance on Federal Housing Administration (FHA) loans as the main issues.
■ But there are signs of better traffic again in the hardest hit markets. Overall, our traffic index fell to 24.0 in September from 25.9 in August (readings below 50 point to traffic below expectations). However, we saw improvement in traffic in September in hard-hit markets such as Ft Myers, Las Vegas, the Inland Empire (CA), and Sacramento. The key driver of the better traffic is the improved affordability as the lower home prices on the many foreclosure sales (foreclosure sales have represented as much as 40-50% of sales in these markets) have restored affordability back to attractive levels (p. 5). We are encouraged that there seems to be a clearing price in many markets, but foreclosures are typically sold at least 20% below current market pricing so there will likely be a painful further adjustment for traditional sellers.
■ Texas markets (Austin, Dallas, Houston, and San Antonio) show further weakness along with a couple Florida markets (Jacksonville and Miami). We expect those builders with significant concentrations in Texas (MTH, DHI, LEN and RYL) to see worsening order trends based on the declining traffic. Unlike the other markets with significant foreclosures, we have not seen similar improvement in traffic in Phoenix. The Washington, D.C. area (p. 27), in which we had seen better traffic from April-July slipped back to a lower level of traffic in both August and September.
■ Pricing drops further, consistent with high inventory levels and weak traffic. Our price index fell to 17.5 in September, down from 20.1 in August (readings below 50 point to sequentially lower prices).
■ Inventory levels near stabilization. Our home listings index increased to 39.5 in September, up from 37.5 in August (with a level of 50 indicating flat inventories sequentially with levels above 50 pointing to falling inventory levels). Denver, Las Vegas, Minneapolis, Sacramento, Sarasota, Tucson, and Washington, D.C. were among the markets showing flat or falling inventory levels in September. We continue to believe that declining inventory levels are necessary for home price stabilization.

John Holbrook-Realtor
Prudential Chaplin Williams Realty

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