By Greg Slater, CAAR President-Elect
Based on inventory levels, this market has been defined as a buyer’s market for quite some time now. Since the inventory is so critical to the conversation of what is going on in our market, I thought it would be a good idea to take a closer look.
The first thing we need to cover is the latest change to our MLS. The CAAR MLS now includes a “proposed” property type option for attached, condo, and detached new construction listings. It is an MLS Rule that new construction listings not actually started must be entered as “proposed.” This new property type was created for several reasons.
1. Since inventory is so vital to market conditions, removing homes that were not actually built are important to the integrity of our data.
2. Agents often complained that they were arriving at listings only to find no home under construction. Similar photos and exceptional digital renderings can be misleading.
3. We have builders in our market who do not speculatively build and needed a place to list the homes available to be built.
If you look at the total active inventory for our MLS, there are 3701 listings. (For the purpose of this article these numbers are as of 05/17/09) If you remove the proposed listings there are 3440 active listings in our entire MLS. That’s 261 proposed listings.
More importantly, if you are following the new construction market, the numbers are significant. For example, 83 of 183 new home listings in Albemarle are proposed. In Fluvanna, 59 of 89 are proposed and in Greene 28 of 43 are proposed.
This change just happened in 2009 and became mandatory as of March 2009. It’s hard to draw conclusions from the data yet, however, if we watch the non-proposed new home inventory going forward, we should be able to learn something about development and new home starts in our area. Building permits are down and the inventory is down as well. It’s just a little hard to quantify historically right now.
Second, let’s look at the overall inventory. The CAAR Market report does a great job quantifying our inventory and months of supply. However, I’d like to share a couple of new perspectives to see if it is telling us anything about our market.
We are all aware of the seasonal trends of our market. Each year inventory grows heading into the spring, peaks in the summer, and declines heading towards December. For years our inventory was suppressed by increased sales activity. Let’s look at how we have started and finished the year going back to 2005. (Albemarle, Cville, Fluvanna, Greene, Nelson)
JAN 2005 960 DEC 2005 1418 47% Increase
JAN 2006 1502 DEC 2006 1977 31% Increase
JAN 2007 1952 DEC 2007 2256 15% Increase
JAN 2008 2208 DEC 2008 2246 2% Increase
As of April 2009, we were essentially right were we were in April of 2008. So it appears for the time being, inventory has leveled off. If you look at listings coming on to the market by listing date you’ll note that the pace has slowed. (These numbers include proposed listings to be consistent with years past.) In 2010, we will be able to start comparing year over year levels excluding proposed listings.)
New Listings by Month
2006 2007 2008 2009
JAN 725 802 688 706
FEB 793 756 748 712
MAR 980 1027 801 702
APR 963 947 768 750
So what does all this mean?
We have always defined the market as buyer or seller’s based on the inventory and the number of months available. With inventory levels remaining relatively constant now for over a year and sales levels (over $300k) still decreasing year over year, we may have to take the definition of “buyer’s market” a step further. It seems to me that our buyers and seller’s, in many cases, have opposing views of market value right now. Maybe this “buyer’s market” is better defined as a market in which the buyer’s opinion of value carries more weight than the sellers.
As CAAR President, Judy Savage reminded us monthly that we needed to make sure we were helping our sellers price their homes correctly. I think that message is still VERY pertinent today. The title of this article is “Its all about the Inventory.” It could have just as easily been titled, “It’s all about the prices of the inventory.”
I think one of the challenges of pricing a home in this market is that buyers and sellers are using different methods to determine value. Many buyers (who believe prices are still coming down) want 2010 price now. Many sellers think their home is still worth what it was in 2006. As REALTORS®, we need to help our sellers understand what buyers are focused on right now. And maybe just as importantly, help our buyers understand the reality of this market as well. There’s frustration on both sides of the negotiation and it’s our job to find the common ground.
If we work with BOTH buyers and sellers and help them understand what is going on, maybe we can help them meet at today’s market prices and release some of the very real pent up demand that exists today.
Charlottesville has, once again, been ranked in a national survey of “best” cities. This time, Kiplinger has named us the 4th best city in America based on stable employment and job opportunities, among other things. Also, the number one city on the list, Huntsville Alabama, has strong ties to the Charlottesville Area Association of Realtors. Huntsville is where the CAAR MLS system was developed and is still hosted. When members access the MLS, or the public searches listings on CAAR.com, they are accessing a database in Huntsville. Small world, huh. 
The economic downturn, complicated by a severe credit crunch, is dampening commercial real estate activity, 
The guest speaker at today’s membership meeting of the Charlottesville Area Association of Realtors was Brian Wheeler, Executive Director of Charlottesville Tomorrow and Chairman of the Albemarle School Board. Brian divided his time between his two positions, so CAAR members got a two for one deal. To symbolically switch between these two unique presentations, Brian actually changed his name badge and PowerPoint presentation. CAAR has a good working relationship with both the School system and Charlottesville Tomorrow and each presentation had a special treat for the local real estate community.