carol elizabeth pennell asheville native real estate broker pennell@beverly-hanks.com 828.273.7770

02/08/2011

CREDIT SUISSE January 2011 Monthly Survey of Real Estate Agents
by Research Analysts, Daniel Oppenheim, CFA

Improving Traffic, Focused on Bargains

Highest level of traffic index since tax credit, but waiting for buyer
interest in new homes: Our Monthly Survey of Real Estate Agents pointed
to another month of improved traffic – the third straight month, and the
highest level for our traffic index since April 2010, the last month of the
homebuyer tax credit. The improved economy and stronger consumer
confidence has translated into an increase in homebuyer traffic. However,
buyers remain focused on bargains. This creates trouble for new homes, as
homebuilders have not reduced prices by as much as existing home prices
have fallen. As a result, it appears that the better homebuyer traffic is largely
bypassing the new home communities when it comes to signing a contract.

Attractive prices, pent-up demand, and higher mortgage rates cause
increase in traffic, but much concentrated in warm weather locations:
Agents generally mentioned that buyers were led out of hibernation by the
attractive prices (most pronounced on foreclosures and short sales) along
with pent-up demand that is being released by the increased confidence in
the outlook for the economy. In addition, the sense of urgency created by the
rising mortgage rates continued, as buyers attempted to act at a time when
affordability remains extremely favorable. Our traffic index increased by 10
points to 39.1 in January, up from 29.1 in December.

Slightly better pricing trends in January, but February and March will
determine the direction of pricing through 2011. Our price index
improved to 26.9 in January, up from 23.0 in December. Readings below 50
indicate declining prices sequentially, but the modest improvement in the
level of the index (even though it remained below 50) indicates that some
agents are seeing a bit more stabilization. We think February and March will
likely represent the key to pricing trends for much of 2011, though, as we
think that we will see some price reductions if demand is not sufficient to
absorb much of the inventory hitting the market. Our home listings
(inventory) index worsened to 41.0 in January from 51.2 in December,
pointing to an increase in inventory, which is consistent with Spring trends.

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