Some of us are hearing a few signs of economic recovery in the real estate market: pending and closed home sales are up, inventory of unsold homes on the decline, leading a few folks in our industry to predict higher home sales volume and home prices stabilizing over coming months.
But there also are some doubts: are some buyers (and some banks) waiting to put their properties on the market until things get better? Also, that alarming UNDER-employment report showing almost 20% of us are either out of work, had hours cut, or are working at parttime jobs because we can't find fulltime ones.
Inventory for a balanced market seems to be six months ___ all homes should expect to sell in six months. Our broker Charnna Gilmore explains how this is computed: take the closed sales for the past 12 months and divide it by 12 to see how many sold per month on average then divide that answer into the number that are for sale right now.
For example, there were 41 homes sold in Lake Shastina in the last 12 months which is an average of 3.42 per month. There are 75 homes for sale right now so when you divide you will see our inventory would last almost 22 months at this rate.
Put another way, to reach the ideal "balanced market" at the 3.42 rate there should be only 18 homes out there for sale. Or, from the other end of it, with 75 homes for sale, to reach a "balanced" state we'd have to be selling homes at the rate of 13 per month (75 divided by 6 months), roughly four times faster than they are selling now.
In 2005 when it was practically the reverse, a seller's market, there were 74 closed sales with around 50 homes for sale at any given time. 74 divided by 12 = 6.16 which when divided into the 50 homes for sale equals 8.3 months, a whopping difference.
Judy Darner from BofA mortgage services in Yreka who has been in the business a long, long time told Sally the other day that Shastina was the hardest hit community in the county, with more foreclosures and REO's (bank-owned, where the owner just gave the home back to the lender) than any other. Most everyone in the business agrees that this is because of over-speculation . . . many builders during the boom years put spec homes up and got caught when the economy collapsed last summer. Some had multiple loans due on vacant, unsold homes and many had to walk away from them.
A sad by-product of too many vacant homes is they sometimes get stripped or gutted by angry owners or even burglars. I showed one this week like that; carpet gone, kitchen cabinets, lighting fixtures, all appliances, and even the toilets ripped out. This one was also missing one entire side of the backyard cyclone fence, you could see where they had pulled out the posts, cement and all.
All of this of course has a depressing effect on the rental market as well. More homes are going into rental from owners worried about making the mortgage payments which in turn depresses the going rental rates because of the competition.
Lose, lose. Let's hope the small signs of improvement we see here and there continue and that next spring will bring steady recovery.
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