So far this year seems to be one that in the fall, a number of real estate professionals remarked would be a year of transition with not a lot of activity, but moving from the worst part to an improving market. It seems though, that the market isn’t really so much recovering as it treading water at the bottom of the cycle curve as it works through the excess inventory currently on and off the market.
I say “off the market” as I believe there is a “shadow” market, an inventory of properties of homeowners that would like to sell but have held off because of the lack of activity and hence, no idea as to what the fair market value of their home may be. If there aren’t any sales of properties similar to yours, how can you justify what it is worth? It takes a sale to make a comparable, and there have not been a whole lot of sales.
Exactly how many properties would this consist of? I have no idea. But it came up from watching the inventory of the MLS service Multi-List Vallarta. For the past two years the inventory has been very consistent with around 1,100 re-sale property listings (there’s about another 900 new property listings in Multi-Dev Vallarta – properties offered by real estate developers). With the re-sales, we see about 100 new listings come onto the market each month. But we are only seeing 15-20 sales taking place during this time. So what is happening – are sales not being reported? That’s part of this, but certainly not all of it. I think the majority are homeowners who have gotten tired of seeing no action on their homes so they have allowed it to expire, or, thinking its the real estate agent’s fault, listing it with another agency (which gives it another new, unique MLS number). The one’s that decide not to list again are just sitting on the sidelines, waiting for the market to recover and in the meantime, using or renting out their property.
There’s also a form of shadow market with developers. The inventory most developers now place in the MLS are those that are ready, or will be ready, to deliver in the near future. They are not entering in the MLS future planned phases. And there are a number of developments in this situation. This form of “shadow” market is not a severe, however, as the units haven’t been started yet therefore would not add to the overall inventory of properties on the market. They are just “planned” for the future.
Although this year is an improvement over last year, with more sales taking place, I don’t believe this can be construed as a recovery. Properties that do sell average time on the market of nearly a year. There is a substantial difference between the initial list price and eventual sale price. Many properties are “chasing the market” by continuing to reduce their listing price, trying to find what currently is fair market value.
Most activity seems to be in the under $250,000 range, for both homes and condos. Actually the average sale price for a home is less than the average sales price for a condominium ($250,000 for homes and $333,000 for condominiums in 2010). But when you get over $250,000, and especially over $1 million, the bottom becomes more difficult to determine.