New Castle County, DE Housing Report

As of the end of June 2009 (chart 1) the number of homes for sale decreased by 15% from June 2008. The number of pended properties declined nearly 6% and the number of sold properties declined nearly 17% as compared to the first half of 2008. New Castle County experienced an average pricing correction of 8.5% with specific areas within the county declining from 4 % to 21% (chart 2). This continued correction will restore the ratio of housing prices to income and provide the stimulus needed to stabilize our local real estate market.

The $8,000 first time home buyer credit, coupled with historically low mortgage rates and lower prices, have dramatically improved affordability for many potential home buyers.  New Castle County experienced a 3% increase in the number of homes sold priced below $250,000. This suggests that first time home buyers are taking advantage of the incentives in today's market and provides further confirmation that market conditions can vary greatly, not only within a geographic area, but also within price points. As a home buyer, you can gain an understanding of today's market by taking the pulse of the area and price range in which you would like to purchase (chart 3).

Supply vs. Demand

We typically look at months of inventory as a good barometer of market conditions, that is, how long it will take to sell the existing supply of homes at the current sales rate. Generally speaking, in a balanced market there is approximately five to six months' supply of inventory. Above that level, market conditions may be more favorable for buyers, i.e., there are more homes for sale than there are willing and able purchasers, and potential buyers can demand value - they simply will not make a purchase unless the home is correctly priced and represents a great value! A supply of less than five to six months generally favors sellers, because there are more buyers in the market than homes for sale; competition for active listings heats up, driving prices higher (chart 3).

When the market is out of balance, one way or the other, prices can change rapidly. From 2003 until late 2006, the availability of financing to just about anyone created an unprecedented demand for homes, resulting in homes in our area selling quickly and prices soaring. Since 2007, the pendulum has swung the other way and as the market seeks balance, prices decline (chart 4).

Housing Indicators

In addition to supply and demand, economists follow three other housing market indicators to assess the direction and overall health of the market: the number of new listings coming on the market; the average number of days it takes a home to sell; and the sales price as a percentage of the original list or "asking price."  

For the first six months of 2009, there is a 24% decline in the number of newly listed properties (chart 5) when compared to this time last year. This has a positive effect on the market - a lower number of homes entering the market decreases months' supply, which helps regain balance.

The days on market prior to sale (chart 6) continues to average about 87 days as compared to 71 days this time last year.

Finally, homes are selling with further reductions from the original list price often referred to as "listing discount" (chart 7). The increase in this indicator from the same time period as last year reflects the wider gap between buyer and seller during negotiation and suggests that sellers are "chasing" or "falling behind the market" when pricing their properties. Correct pricing will bring buyers back into our housing market - as listing prices have fallen, sales have increased (chart 8).  The month of June 2009 saw a 17% increase in new contracts compared to June 2008 and new contracts for the 2nd quarter of 2009 increased 4% as compared 2nd quarter 2008.

Helping You Achieve Your Real Estate Goals

If your personal situation affords you the opportunity to purchase a home in today's market, focus on the information specific to your area and price range of interest, be less concerned about national housing trends and don't assume every house on the market is overpriced. If you are a seller, understand that a sale will occur only when a qualified buyer perceives the price and condition of your home to be a better value than its closest competition.

At Patterson-Schwartz, we have helped people buy and sell in every kind of market. We welcome the opportunity to provide you with the guidance and strategy necessary to successfully navigate a real estate transaction in today's environment. 

(All reports presented are based on data supplied by TReND MLS. TReND MLS does not guarantee nor is it responsible for its accuracy. Data maintained by the MLS may not reflect all real estate activities in the market. Information is deemed reliable but not guaranteed. Data is as of 7/29/09)

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