News sources have been reporting some numbers recently that paint a very gloomy picture for real estate. Just in the last week, MSNBC has run stories that detail the housing slump, plunging construction activity and slowing or falling home sales. This can be very troubling for homeowners especially if they need to sell in the near future.
However, not all of this information is bad news and a lot of the information is too old to be applicable. The problem is news organizations are in the business of selling news and what sells in today's market are the flashy headlines that proclaim doom and gloom. But I'm here to tell you that the worst is behind us and there are some good signs for the future.
One thing to keep in mind is that real estate is local. And by that I mean, any information regarding national numbers, overall trends and industry averages do not always apply to us here in Loudoun County. In fact, most times it doesn't. We are actually about 9 to 12 months ahead of the nation as a whole. That means that if prices are reported as going down nationally for the first time in June 2006, Loudoun prices probably started going down between June and August of 2005.
To get a look at the trends for Loudoun County check out the Northern Virginia Real Estate Guide. There are plenty of charts indicating when the market turned in Loudoun.
But the most important information for predicting what is ahead for the real estate market is leading indicators. Information that tells us where things are likely to go in the future not where we were 3 to 6 months ago.
One of these indicators, which I mentioned in an earlier post is that is the number of units sold this year versus last. In Loudoun County, that indicator has been down 21 straight months. However, in November the drop over last year was only 8%. That is the smallest drop since July of 2005. And in Ashburn this indicator was up for the first time since February of 2005.
Another leading indicator is inventory capacity. This tells us how long it will take to sell the current homes on the market if no other homes came up for sale. It is calculated by dividing the current sales rate per day into the available inventory. In Loudoun as of today that number is approximately 200 days or about 6.5 months. This number got as high as 9 months during the peak of the current buyers market in June.
I will be looking at the current trends during the next two months to give you a better idea of what you can expect for the spring market next year.
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