Have We Reached the Bottom Yet? That seems to be the question on everyone’s mind lately. Will homes continue to drop in value or have we started to see prices level off? Every market is different and there are no guarantees, but even in one of the hardest-hit areas of the country – West Michigan – there seems to be a few notable trends developing.
1. Prices appear to be leveling off.
In August, the Average Listing Price for single family residences on the Grand Rapids Multiple Listing Service (Kent and Ottawa Counties) was $160,000. The Average List Price Plummeted to a low on February 2009 or $108,000. However, March numbers show a (very) slight increase, to $110,000. Likewise, Average Sales Prices dropped from $150,000 in August to a low of $97,000 in January.
2. Actual Sales Prices as a Percentage of the List Price appear to be improving.
In my view, one of the most important statistics to track is the Actual Sales Prices as a Percentage of the List Price. The statistic tells me how strong the market is; the stronger the market, the more competition for a home, which triggers better offers. Clearly, the market took a nosedive since August, 2008 when actual sales prices, as a percentage of list price, was still at a pretty healthy 95%. By December, the figure dropped to 89%. That is, a home listed for $100,000 was getting offers (that were accepted) — on average – of $89,000. The decline in the actual sales price to list price seems to have leveled off and has inched back to slightly above 90%.
3. Unit Sales of Single Family Residences are up.
In August 2008, 902 homes sold in Kent and Ottawa Counties. By December, that number had dwindled to 464, barely half the number of homes sold in August. Projected unit sales for March 2009 is 560 homes sold.
4. Summary
While these statistics do not suggest we are in the early stages of robust rebound for home values, the good news lies in the fact that property values appear to have stopped dropping and unit sales are beginning to show signs of awakening. We may be at the very beginning of seeing some competition for the homes on the market.
5. Prediction
Despite these early signals, it is too early to tell with certainty we are at the bottom. Our home values will not bounce back up to their 2005 level in a few month or six months or maybe even five years.
It will take years to recover the home values we had in 2005 but extremely good values exist TODAY for those who are ready to take advantage of them.
It is unlikely we will see continued decline at the pace we have seen in the past six months. If you are waiting for prices to go lower before jumping in to buy, you may miss the boat.
As David Knox, Real Estate Consultant, says, “The only sure way to know where the bottom was is to look back and realize you missed it.”
