Published: Wednesday, December 1st, 2010 @ 6:16 pm
By: Brandia Deatherage   ( More Entries )
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    Over the past four months, we've tracked the average list price of a Washington home up from $223,055 to $231,260, as the market inventory decreased from 355 to 317 residential listings. Such a price increase, coupled with this contracting inventory, made economic sense--a comforting rarity in today's artificially induced housing market.

    All the while, however, directly under our noses, the average sales price of a Washington home has been in straight decline: from $199,738 in July, to $166,796 in August, to $143,650 in September, to $114,246 in October. These prices correspond with Beaufort County sales-price averages: $238,425 in July, $187,037 in August, $163,844 in September and $103,482 in October.

    This drop in the average sales price of a local residential property appears as a contradiction to the simultaneous rising of the average list price--an upsetting conundrum, with the potential to destroy whatever meager amount of consumer confidence we had been able to muster. But, not to fear! There is a relatively simple psychological explanation:

    Gone are the days when a real-estate broker can convince his or her clients to price their properties using the traditional method of adjusting value based on the past six months of comparable sales. In a real-estate environment where potential sellers are clinging to any evidence that might substantiate a pricing bottom, many are pricing on a curve. In the mind of the optimistic homeowner or Realtor, the historically low amounts paid for comparable properties are just that: history. Many people are listing properties based on the assumption that the recent drop in property values was an anomaly that has seen its worst days. Any good news--such the narrowing of local inventory, the steadily improving local unemployment rate, along with gains on Wall Street--supplements whatever figure is reached via the real-estate broker's Comparative Market Analysis. For example, even if a new seller's neighbor was, four months ago, only able to get $100,000 for their 3BR/2Ba, 1500 sq. ft. house; the new seller would list his or her home for $125,000, based on a perceived improvement in market conditions.

    Even though sales prices, as stated above, declined from July to October, they actually started to increase in November. The average sales price in November was $143,583 in Washington and $176,818 in Beaufort County. The reason for this increase could be attributed to a possible improvement in consumer confidence, spurred by the recently decreasing unemployment rate. According to a Nov. 30 report from the Employment Security Commission of North Carolina, the Beaufort County unemployment rate dropped from 10.5 percent in August, to 10.1 percent in September, to 9.7 percent in October.

    Despite fears of increasing mortgage rates, the 30-year fixed home loan has stayed static since last month, at 4.57%, according to bankrate.com. Even if rates did start to go up, it is my opinion that the government wants low rates and will do anything possible to keep them low. Access to credit is still tight, however, and some arguably qualified borrowers are unable to secure financing. Stringent underwriting is necessary to stable the housing market, since its crash was caused by lax lending practices. I would love to see more houses moving off the market, but the last two years of mortgages are performing better than ever, which means new buyers are actually satisfying the terms of their loans and keeping their houses. As I've said before, waiting for the perfect time to buy a humble home is preferable to risking it all on a castle made of sand.