July/August 2006

By Peter Clute and Fred Kendrick

With rising inventories, combined sales of single-family homes, condominiums and cooperatives couldn’t build on a solid March sales month as single-family sales remained flat in April while condo/co-ops sales saw a loss. New contracts on homes and units fell 7% from March and were 19% behind April 2005.

For the year-to-date, combined sales of homes and units are 14% behind last year’s pace and behind the previous three years by smaller margins. This year’s totals are ahead of 1990 to 2001 by margins ranging from 2% up to 159%.

Inventories continued to move upward in April, gaining 12% from March, to a level 147% higher than the same point last year. While triple-digit increases have occurred on both the single-family and the condo/co-op side, condos and co-ops bore the brunt of it with an effective inventory which is now over four months.

Average prices of homes and units are off from 2005 in the 3 to 4% range. Given the state of the market, it is not surprising that prices are down in 2006. However, these losses narrowed on the single-family side in April and provide evidence that the muchanticipated bubble might be more of a mild correction than a major event.

Single-Family Homes

New contracts for single-family homes in April remained at about the same level as in March but are well below the sales levels achieved in previous Aprils going back to 1998. April 2006 sales were nearly 20% below those of a year ago, although for the 93% of the homes priced over $300,000 there was only a 4% difference.

The only price range to show an increase in sales over a year ago was homes over $1 million – with the biggest gains between $1,250,000 and $1,500,000.

Four months into 2006, home sales trail the same period of last year by 16% (11% for homes over $300,000) and trail 2004, which was the record-setting year for single family, by 22%. For this year-to-date period, no price range showed a gain over 2005 with homes priced over $300,000 being down between 4% and 16%.

The number of homes for sale jumped by 112% from this time a year ago and is 38% higher than at the beginning of this year. Most of this inventory increase occurred for homes priced from $300,000 up to $1 million (up 148%). The number of homes for sale over $1 million is up 61% from a year ago. The effective inventory (number of available units divided by new monthly contracts) for all single-family homes is 3.1 months, up from 1.2 months last year at this time. This compares to a national effective inventory figure of around five months, as reported by NAR.

The average sales price of single-family homes is up 1.8% from April of 2005, but is down by 4.5% when compared to 2005 as a whole. It is, however, 17% higher than at the end of the 2004 record-setting sales year.

All of this indicates a housing market which has slowed some over the last year but one which remains quite healthy when looked at over a longer period of time.

Condominiums and Cooperatives

After a solid March, sales of condominiums and cooperative were disappointing in April with new contracts on condominiums and cooperatives falling 13% – eighteen per cent below April of last year’s totals, 3% behind April 2004, even with April 2003, but ahead of previous Aprils on record by margins of 27% to 316%. Compared to last year, sales were up only for units priced from $150,000 to $200,000 (10% of the market, a 19% gain) and from $700,000 to $1,000,000 (6% of the market, an 83% gain).

Through the first four months of the year sales of condos and co-ops are down 12% from 2005’s record totals, but ahead of all previous years on record. Year-to-date totals are just 5% ahead of 2004, but have double-digit leads over 1998 through 2003 and triple-digit leads over 1990 through 1997. Despite the slowing of the market, 2006 is still likely to be the second or third best year on record.

The inventory of available units rose 12% from March to April to the highest level since July of 1994, 277% above the same point last year. The inventory between $200,000 and $400,000 (49% of the market) registered the largest increase from 2005, a gain of 444%, while the number units priced over $800,000 (8% of the market) is 45% ahead of last years totals. The effective inventory at the end of April stands at 4.23 months, the highest figure since August of 1998.

Both the average and medium prices of condominiums/ cooperatives are down 3% from high points reached in 2005. With the rising inventory it is somewhat surprising that that prices are not off further from last year, perhaps a sign of underlying strength in the condo market.