By Fred Kendrick, ABR, ePRO, GRI, REALTOR® & Market Analyst
The number of new contracts in July on single-family homes, condominiums and cooperatives fell 18% from June and trailed July sales of the previous three years by margins of 6%, 12% and 4%. The 18% drop from June to July may seem substantial, especially when there is speculation about a housing bubble, but it is certainly not unusual. Similar losses occurred in two of the last four years (17% last year, 15% in 2001). A smaller loss of 6% took place in 2003, while 2002 saw a 2% gain in this period.
For the year-to-date, combined sales of all units are now only 1% ahead of last year’s record pace, after spending most of the year 3% ahead. With just a 1% lead, it might seem less likely that 2004’s sales total will be surpassed. However, with the small sales slump that occurred in the second half of 2004, it will only take an average second half of 2005 to maintain the 1% lead and reach a record total for the fourth consecutive year.
The inventory of available homes and units rose 6% from June to July and is now 18% higher than the same point last year. There were minimal inventory gains in the summer of 2004, but September saw a large increase in the 25% to 30% range. A similar increase in August or September of this year could certainly put a damper on the fall market. The average price of single-family homes, condos and co-ops has risen by 15% to 21% over yearend 2004. Unlike four of the previous five years, the larger price increase this year has occurred on the single-family side, with condo/co-op prices moderating somewhat since the end of the first quarter.
New contracts on single-family homes fell 18% from June and posted the worst July performance since 1998–trailing last July by 18%, July of 2003 by 26% and the Julys of 1999 to 2002 by margins of 8% to 21%. Homes over $300,000 actually posted a small gain of 4%, with strong performances in the $600,000 to $1 million range (up 14%). Sales in the dwindling $300,000 and below ranges were off 55% from last year.
Through the end of August, sales of single-family homes are 9% behind 2004’s record pace. Sales of homes over $300,000 are up 17% over last year, with the $750,000 to $1 million range registering the largest gain of 50%. Homes under $300,000 have become increasing difficult to find in many parts of the District and the 53% loss in this price range reflects this.
The inventory of available homes has increased gradually since the first part of the year and is now 11% ahead of the same point last year. The largest increases have occurred in the $450,000 to $600,000 range (up 72% from last year) and the $750,000 to $1 million range (up 60%). The effective inventory (the number of available units divided by the number of new contracts) at the end of July stands at 1.82 months, the highest number since 1.84 months of inventory in September of last year.
The average price of a single-family home is now 21% ahead of the 2004 year-end price. Since the end of the first quarter, there has been an 8% gain. Prices tend to moderate toward the end of the year, but the summer settlements from the strong spring market may push prices a bit higher in the next couple of months.
CONDOMINIUMS AND COOPERATIVES
New contracts on condominiums and cooperatives fell 19% from June, but this was still the best July on record–12% ahead of both 2003 and 2004 and 26% ahead of 2002. The largest gains were in the $500,000 and over range (up 47%) and also the $150,000 to $200,000 range (up 32%), a rare occurrence of a large gain in a lower price range.
Year-to-date, sales of condos and co-ops are 16% ahead of 2004’s record pace. Units priced over $500,000 lead the way with a 119% gain. Sales of units between $400,000 and $500,000 are up 51%. With the amount of new inventory in the market (including new projects and re-sales in newer buildings), it is unlikely we will see any sales losses on the condo/co-op side for quite some time.
The inventory of available units gained 12% from June to July and is now 30% ahead of the same point last year. There has been a 37% increase in inventory from April to July of this year. Even with these increases, the effective inventory is only 1.50 months—the highest number since December 2004, but still a very low number historically.
The average price of a condo/co-op is up 15% from year-end 2004. Much of this increase took place in the first quarter of 2005, with only a 2% gain since then.