DC Condo Market Tightens Again in June

What a difference six years makes in real estate! The peak for condo & co-op inventory in the history of DC occurred six years ago in June of 2006. On the sixth anniversary of the peak, inventory has dropped 49.1% (827 vs. 1,684) according to the most recent data released by the Greater Capital Area Association of Realtors. (Click here for the report)

Supply Side
On a monthly view, new inventory coming on the market dropped 6.4% from a year ago (470 vs. 440), while that’s good news it lags the pace that was set in the spring of the year. The total available homes to buy is down 31.5% compared to last year, which is incredibly strong. (1,027 vs. 827).

Unlike the house market, the condominium inventory is down pretty evenly across all price ranges except the $600,000-$700,000 and $800,000-$900,000 ranges where the inventory is actually up year over year.

Demand Side
One major divergence between the condo/co-op market and the house market is on the demand side. Unlike houses, condos and co-ops have seen demand pick up in the last month versus the year as a whole. The total number of contracts for the month is up 21.9% last month vs. 2011 (283 vs. 345); this compares to the total contracts for the year which is “only” up 17.5% (1,512 vs. 1,777).

Summary
It’s interesting to see that the market for condos/co-ops is able to absorb everything on the market and continue to bring down the inventory levels. This  inventory decline is drawing the “shadow inventory” onto the market.

In the past six years owners who could not sell their condos/co-ops chose to rent their homes to defray costs. Now that the inventory is shrinking and pricing is starting to firm up, the owners are putting their units on the market. But, we are not going to see a flood of shadow inventory come on the market. Here's why:

The ridiculous tenancy laws in DC effectively prevent owners from selling their homes for market price while tenants are occupying the home. This means that landlords are waiting until tenants leave their properties before marketing them. This process of getting rid of tenants can take months or years and this artificial restraint on the market is slowing the pace at which the shadow inventory reappears.

DC House Market Tightens Further - Lowest Inventory Since 2005

The market for houses in Washington continues to tighten according the most recent sales statistics for released by the Greater Capital Area Association of Realtors (Click here for the report). The available inventory of houses is the lowest it has been in seven years and the cheapest homes on the market lead the way.

Supply Side
For the month, inventory dropped 11.9% compared to a year ago (486 vs. 428), which is still strong, but not a strong as the spring season was. The number of available houses declined 35.1% this year compared to last (1,092 vs. 709) and is now at its lowest level since August of 2005, which was two months before the market started to slip.

Generally the inventory rises and falls at all price ranges at approximately the same rate, but that’s not the case this month – the low end of the market is much tighter than the high end. Last month the number of new listings for properties under $400,000 dropped 39.2% (214 vs. 130). Whereas number of new listings for properties that are $900,000+ increased 32.1% (78 vs. 103); the highest priced homes had a 53.8% increase in inventory this month (40 vs. 26)!

Demand Side
As supply is constricting, demand is waning. Total number of contracts accepted last month declined 9.7% from a year ago (408 vs. 452).

The reason for this is mostly due to the restricted supply, had there been more properties available, the number of contracts would have increased as well. The proof of that is that the demand for properties has the same disparity as the supply side. Low-end properties are showing weak demand, while the high-end side has shown strength.

Pricing is King
These market trends show an important difference between the current market and the peak of the market in 2005. Buyers are willing to wait for the right home at the right price. There is not the insane desire to buy “anything.” If a home is priced too high, buyers will simply wait for the seller to lower the price of the home.

Summary
If you have a house that is $900,000 or more, it’s critical to price correctly at the beginning. With large numbers of competitors coming on the market and finicky buyers it’s a tougher market on the high-end. If you have a home that languishes for 2-3 weeks without interest it would be prudent to cut the price sooner rather than later.

The Only 3 Reasons a Home Doesn't Sell

Everyone has seen it. A house languishes on the market month after month. Why isn’t the house selling? Sellers have a thousand excuses, but at the end of the day there are only three reasons a home does not sell:

1.    It’s priced too high
2.    It’s not properly marketed
3.    It’s hard to show

That’s it. There are no other reasons.

Pricing:
The marketplace knows what homes are worth. Anyone with an Internet connection can find out what homes are selling for now and what they’ve sold for in the past. When buyers see a home they will decide what to pay based on what other homes that are similar have sold for. If a particular home is priced outside of the right range, buyers simply won’t buy the home.

What are the telltale signs the home is overpriced? When the feedback includes:
1.    It’s too small – That means the buyers expect a bigger home for the price.
2.    It’s on a busy street – For the price the buyers expect the house to be quieter
3.    The rooms are too small – Other houses in the price range have bigger rooms
4.    The house is a mess – if it were priced low enough the condition would not matter
5.    The home has been on the market for a long time  – The price is too high.

But pricing isn’t everything.

Marketing:
Let’s pretend for a moment that you are a seller who is willing to give away your home for free to anyone who brings an offer; but you never tell a soul that you’re willing to sell. How long will it take to sell your home? The answer is “forever” because nobody knows it’s for sale. You can’t sell something unless buyers know it’s for sale!

If the home is not properly marketed it does not matter how well priced the home is. Sometimes a property can be entered in the multiple listing service (MLS) and still be badly marketed. How is that possible? Because the listing agent does not fill out information about a home completely. For example, a listing agent may have a 3,000 square foot home but does not fill in the square footage for a home. The MLS shows the home as being ZERO square feet. When a buyer looks online and enters “Find homes over 2,000 square feet” the MLS will not find the home that has “0” square feet! Thus, the home is hiding in plain sight.

But marketing isn’t everything either!

If you have a house that is overpriced it does not matter how much marketing you do. Let’s pretend you are a seller who is selling a house for one-billion dollars. It wouldn’t matter if your agent gave the world’s best individualized presentation to every human on the planet, the house would not sell because the price is too high.

Access:
You can’t sell what you can’t see. When owners don’t allow easy access the home won’t sell. Ideally, the home should be available 24-hours a day, seven days a week on a lockbox without an appointment required. The more restrictions on easy showings the harder it is to sell. You’d be amazed at how many houses require appointments to be seen, or require the listing agent to be present for showings, or only allow showings at inconvenient times. All of these are obstacles to the sale of the home.

Whose Fault Is It?
When a home is not to selling the seller naturally wants to know why that’s happening. The answer is simple, it’s either the agent’s fault or the sellers fault. That’s because the agent is responsible for marketing the home. The seller is responsible for the price and access.

As a seller you must determine if the house is being properly marketed. Frequently, when a home fails to sell, it’s because the agent is working for such a low commission that he/she doesn’t have enough money to properly market the home. Even if the agent has the money, the question is whether the right marketing is being done. If not, find an agent who can properly market the house.

If the marketing is being done well and the home isn’t selling, make it easier to show.

If the home is properly marketed and easy to show, but has not sold: Lower the Price!

DC Condo & Co-op Market Sizzles in May

The Greater Capital Area Association of Realtors has released the most recent market report for condominiums and cooperatives in DC and it shows the market is very strong. (Click here for the report.) The inventory is severely down, the contracts taken are way up.

The market for condos and co-ops has clearly shifted to a seller’s market. The inventory of available condos and co-ops is down 33.1% year over year (857 vs. 1,281) and demand is up with an increase in contracts taken of 16.7% (1,452 vs. 1,244).

Supply Side
The drop in inventory is particularly striking when looking at historic trends. For the past seven years inventory of available condos and co-ops builds an average of 33.7% between December and May. From there it drops until September when it builds again for the autumn market. However, this year the increase has only been 13.5%. This indicates that there will be a continued shortage of available condos and co-ops throughout the summer.

The only indication of a slowdown on the supply side is that the inventory of new condos coming on the market increased by 3.4% year over year in May (429 vs. 415).

Demand Side
The number of contracts accepted in May was up 6.9% year over year (324 vs. 303). Here again, this is a strong number, but it’s not as strong as the rest of the spring has been. Also, May is typically a stronger month for contracts than April is and this year contracts were down from April to May, which is an indication of a strong market, but not one that’s continuing to tighten dramatically.

Stand Out Performance
Out of the entire market for condos and co-ops in DC, the price bracket between $500,000-$600,000 has been the strongest. The number of available properties has dropped 39.3% year over year (71 vs. 117) and the number of contracts for these properties has jumped 44.9% year over year (171 vs. 118).

The Bottom Line
The market is clearly on the seller’s side. As a buyer it’s critical that you bring a strong offer and be prepared for multiple offers on a home. We’re still not seeing large price increases, but escalation clauses are de rigeur now. If you are a seller and you are not getting an offer within a week your home is either not being marketed correctly or is priced too high.

Strong DC House Market Tightens Further

The Greater Capital Area Association of Realtors has released the most recent market report for houses in DC and it’s striking what it shows. (Click here for the report.)

The market for houses in Washington, DC has shifted to a seller’s market.  Indications of this come from both the supply side with a decrease of 34.7% in available houses to buy versus last year and from the demand side with a .2% increase in the number of contracts accepted this year vs. last.

Supply Side
Typically in DC the inventory of homes to sell rises from December until May and then slowly drops throughout the summer before a small autumn bump.  But, for the first time in over eight years the available inventory is lower in May than it was in December.

The current level of available homes is down 34.7% from the same month in 2011 (814 vs. 1,247). But the majority of that decline happened from September 2011 through December of 2012 when the inventory plummeted 26.6% from 1,124 to 825 available homes.

The number of new listings on the market for the month of May dropped 8.3% compared to last year (483 vs. 527). This shows that the supply is still tightening but not at the torrid rate that it did from last autumn to last winter.

Demand Side
Interestingly, the demand side is actually increasing even as the inventory shrinks. The number of contracts accepted year-to-date is up only .2% (1,828 vs. 1,824). But last month the number of contracts was up 3.5% compared to May of 2011 (443 vs. 428). This indicates that the demand is increasing as the year has progressed despite the lack of inventory.

Stand Out Performance
Out of the entire market for houses in DC, the price bracket between $800,000-$900,000 has been truly exceptional. The number of available homes in that range plummeted 51% year over year (25 vs. 51); and the number of contracts for those homes has increased 31.8% year over year (116 vs. 88).

The Bottom Line
If you are a buyer in today’s market you need to bring your best offer right from the beginning; there is no room for second chances on a house you love. As a seller, if your home is on the market for more than two weeks and has not generated an offer either it’s not being marketed correctly or the price needs to drop.

Special Considerations for Co-op Special Assessments

The worst news most condo and co-op owners can hear is that their building is doing a reserve analysis and it appears that the building does not have enough money in reserve. What this means is that the building should have been saving more money (for necessary building repairs and improvements) and is now short. When this happens the building will need to levy a “special assessment” on owners to raise more money for repairs and improvements. This special assessment can range from just a couple of hundred dollars to well over $100,000 per owner!

When a special assessment comes due co-op owners are in a much better position to handle it than condo owners. That’s because cooperatives can take out an “underlying mortgage,” which means the co-op can mortgage itself as collateral for a loan. (Condos don’t have this option and the assessments usually have to be paid in one lump sum.) There are several nuances that a co-op owner must consider when they find out that their building is about to take out an underlying mortgage.

Generally, when a cooperative building finds that it is short on funds it will allow owners to either pay for the assessment in cash when it come due OR finance the assessment as part of an underlying mortgage (ULM). So, what should a co-op owner do?

If You’re Not Moving it Doesn’t Matter
If you are not moving during the course of the underlying mortgage (ULM) then it doesn’t really matter if you pay off the assessment or take out a ULM. Whatever meets your financial needs is fine. But, the reality is that most ULMs are at least 20 years and the odds are that you’re not going to move within 20 years. So it is important to consider the long-term consequences of your decision.

Should you pay off the special assessment?
Buyers are very sensitive to what the fee for a particular unit is. When a fee is very high the buyer will be less inclined to buy the home. Even when the fee is mostly comprised of a ULM the buyer will be less interested in the home because the buyer’s monthly holding costs will be higher.

Underlying Mortgages will generally have a higher interest rate than a regular “institutional” mortgage. That’s because the bank is generally making a loan that cannot be resold like a “regular” mortgage could.

So, if you own a co-op and have equity in the home, it may be better to get a “cash out” refinance than take the ULM. That means that you would get a whole new mortgage to pay off your existing mortgage and take out extra cash from your equity to pay off the special assessment. This will allow you to pay off the assessment over 30 years (instead of the usual 20 or few years) and have a lower interest rate; the lower rate and longer repayment mean you’re monthly payment will be lower than paying a ULM.

Or, if you have the cash available to pay off the assessment why would you pay interest on a ULM for 20 years? That’s a whole lot of interest on money that you don’t need to pay.

These points would indicate that an owner should pre-pay the assessment when possible. But things are not always what they seem.

Should you take the Underlying Mortgage?

Buildings get reputations for having high fees. Once a building gets that reputation agents and the public will not necessarily take the time to review what the fee for a building is. They’ll see the address and the photo of the building and dismiss it as having a high fee immediately.

This means, as an owner many agents and buyers will not take the time to read through information about a property to discover that the fee is actually lower than usual because the owner pre-paid the special assessment.

Even if the agents and buyers do look at the unit and discover that the fee is acceptable they will undervalue your home. That’s because they’ll look at the most recent sales in the building and compare your sale price with the prices of other units that have substantially higher fees. It’s hard to get agents and buyers to acknowledge that your unit is worth more money because the fee is lower when they see everything else sells for less.

Another consideration is that underlying mortgages are always assumable. So, with interest rates exceptionally low right now, you can lock in an assumable mortgage at a very low rate. In the future, when you sell the odds are very high that rates will be much higher than they are today. Thus, the underlying mortgage actually becomes a benefit! The next buyers can borrow money at a much lower rate than they will be able to with an institutional mortgage.

Remember, the interest on ULMs is tax deductible so they give you the same financial benefits as an institutional mortgage.

The Devil is in the Details
Before you can make a decision about whether to take an underlying mortgage or not you will need to know the details of the ULM. You will want to carefully consider if you can afford to pay off the assessment in cash. If not, you will want to carefully consider whether to take a cash-out institutional refinance or just accept the ULM. You will also want to think about how long you plan on staying in the property and how the assessment will affect your long-term financial position.

What is an MLS?

First, you need to know that a “listing” is a property that is for sale and represented by an agent. 

A multiple listing service is a computerized database of all listings for sale by all the participants in the MLS. So, isn’t any computerized list of homes an MLS? No. 

To be an “MLS” the database must allow the listing broker to offer to pay a commission to another broker if the broker procures a buyer who buys the listing. That offer of compensation from the listing broker to broker who brings the buyer is what makes it an MLS and not just a database of homes.

There are hundreds of MLS’s in the United States, but there is typically only one multiple listing service per geographic area. For the Mid-Atlantic area the MLS is called MRIS, which stands for “Metropolitan Regional Information Systems.” (www.MRIS.com) MRIS is 100% owned by local Realtor associations, but any real estate licensee in a state covered by the company may join whether they belong to a Realtor association or not.

We are fortunate in the Mid-Atlantic to have the second largest and the most advanced MLS in the world. MRIS supplies the full range of multiple listing services for the region. In addition, the technology MRIS created is used as the backbone for the two largest MLS’s in the world as well as many other MLS’s in the US.

The full information in the MLS is only available to subscribers of the MLS. However, the general public has access to information about every property that is actively available in the MRIS database through www.MRISHomes.com . This web site is up-to-the-minute accurate and a serious buyer would be wise to use this site as the best source to see which homes are available.

The Hidden Costs of "Closing Costs"

As an agent I can see firsthand the reality that most Americans have no savings. Even in affluent sections of Washington, DC I have clients with very strong incomes but no savings. This becomes an issue when it’s time to buy a home because saving up for a down payment is hard enough; but when buyers find out they need an additional 3% for “closing costs” there is despair in my buyers’ eyes.

Suppose there is a home for sale for $500,000 and the buyers need to put 3.5% down to buy the house, the buyers would need $17,500. (Realistically, an FHA 3.5% down loan is the cheapest possible option most buyers can hope for.) In addition, the buyers need $15,000 for the closing costs. Thus, the buyer needs $32,500 in order to buy the home. 

It may take buyers years to save the initial $17,500 down payment to say nothing of the additional $15,000 for the closing costs.  How can a buyer save years of additional scrimping and buy as soon as possible? The glib advice handed out by “housing experts” in the local and national papers is to simply ask the seller to “pay the buyer’s closing costs.” This is referred to as a “Closing Cost Credit” or a “Seller Subsidy.” What it means practically is that the buyer is building their closing costs into their mortgage.

Here’s how it works:

The buyer offers to buy the $500,000 home for $515,000 and asks the seller to “give back” $15,000. The seller will “NET” $500,000 from the sale ($515,000 - $15,000 = $500,000 NET Price). The buyer would only need a down payment of $18,025 to buy the home; and the $15,000 “give back” is used to pay for the closing costs.

This scenario seems like a win-win. The seller gets the NET price he wants and the buyers get the house with only $18,025 in cash instead of $32,500. Frequently this is a win-win deal, but there are some considerations that most buyers and sellers don’t think about.

For a Buyer, there are four major concerns:
There is no such thing as free money. The $15,000 “give back” is not really a concession at all. It’s simply a contrivance to allow the buyers to finance the closing costs. Even at a 4% interest rate this will cost the buyers $10,780 over 30 years.

The buyer has to pay closing costs on the $15,000 which means that the buyer is paying an additional $450 in closing costs by financing them. That’s not a large sum, but it’s a hidden cost often forgotten.

The buyers must be certain not to ask for too much in closing costs. If the actual costs end up being less than the subsidy the seller may have the right to keep the differential! This can be a big surprise for an unprepared buyer.

The buyer must be certain the bank will allow the seller subsidy at all. Sometimes the particular loan type prohibits seller subsidies or limits the maximum possible subsidy. Additionally, as a transaction progresses it is common for buyers to ask for seller subsidies in lieu of the seller making repairs to a home. It’s important not to ask for too much in subsidy because the bank may not allow the increased subsidy or may even reject the loan.

For a Seller there are three major concerns:
The commissions paid to agents is based on the Sales Price not the NET Price. That means that the seller is paying commissions on money he doesn’t receive. On a $500,000 this can be $900.

Just like the buyer, the closing costs are based on the Sales Price. That means the seller is paying closing costs on money he does not receive. This is usually an additional $300. 

These first two costs added together mean the $500,000 NET the seller is expecting is actually $499,100. Usually sellers don't realize this until settlement and by then it's too late.

The property has to appraise for the higher price. In these days of tightened lending this can be an issue. If the home does not appraise for the Sales Price the buyer will (in most circumstances) have the option to renegotiate the price to a lower value or walk away. This can be particularly galling for a seller when a home appraises for more than the NET Price but less than the Sales Price and the seller’s proceeds are reduced.

Conclusion:
None of the issues with closing costs are insurmountable and frequently subsidies are the only way to make a sale happen. But it’s important that both buyers and sellers know what the pitfalls are before committing to a subsidy in a transaction. Be certain to discuss these details with your agent before signing a contract.

DC House Market Still Strong, But Plateauing

The real estate market for houses in Washington DC remains strong, but there are possible indications of a coming plateau in the market.

Inventory of available houses in Washington is down 27.3% in April 2012 vs. 2011 (1,199 vs. 872). This is, obviously, an indication that the marketplace is recovering from the downturn. It’s important to note that at this point, inventory is down 46.5% from the highest level of inventory in 2008 when there were 1,835 houses on the market.

One small indicator that the market is slowing slightly is that the total number of new listings on the market for April is “only” down 16.5% versus last year (505 vs. 605). While that’s still very good news, it’s 10.8% higher than the drop for the rest of 2012. This indicates that the dearth of inventory is lessening.

Another gray cloud is the number of contracts taken. For the year so far, contracts for houses in Washington, DC are down 2.5% compared to last year (1,407 vs. 1,443). While that is a very small increase and is also related to a lack of inventory to buy it’s an indication that buyers are not willing to just buy anything at any price.

Slightly more troubling than a drop of 2.5% of contracts year over year is that the number of contracts taken in the month of April is down 3.7% compared to last year (445 vs. 462). This indicates that the slowdown is accelerating.

Clearly, the overall news is about sales of houses in Washington, DC is very good and we are still in a slight seller’s market. But, the combination of the drop of inventory slowing and the number of contracts slowing indicates that the market for houses in Washington, DC is not accelerating, but may well plateau in the near future.

What this means for a seller is that it’s important not to overestimate your position in negotiations. It’s still crucial to price your home aggressively (meaning on the lower end of a range of possible prices) and be prepared for a market that is slowing, not accelerating. From a buyer’s point of view this market data is an indication that the market is still slightly in the seller’s favor, but it’s not surging towards a full-blown seller’s market. Buyers need to bring strong offers for homes that are well priced and expect to compete when a home is intentionally priced below market.

Here is a link to the statistics from the Greater Capital Area Association of Realtors: http://www.bestaddress.com/upload/documents/dcsf041212052313195438866.pdf  These were the statistics that were used for the information in this blog posting.

"Sale of Home Contingencies" Cost the Buyer Serious Money

One of my clients recently asked me what the practical implications of a sale of home contingency would be on his ability to buy a home. It's an important question buyers need to consider when they already own a home and need to sell it before they can buy their next home.

Let me approach this from the seller's point of view and we'll work back to what it means practically to a buyer.

As a rule, sellers are looking for three things when they sell their homes: 1. Sell their home for the most money 2. In the shortest period of time 3. With the fewest possible problems.

When you bring a "sale of home contingency" you will be directly working against two of the seller's primary concerns. That's because a sale of home contingency is a problem and it will delay the sale of the house while the seller waits for you to sell your house.

It's a problem for the seller because as soon as they accept a sale of home contingency the seller has lost all control of the sale of their home. They have to rely on YOU, the buyer, being a serious seller. If you are not serious and don't price your home well or make it difficult to show or keep your home in poor condition it will take longer for your house to sell; the longer your home takes to sell the longer the seller's home takes as well.

Also, if your home does not sell (which is always possible) the seller has lost the ability to sell his house to another potential buyer while he waited for your home to sell. When the seller's home comes back on the market it will be at least a month later. And, as everyone knows, the longer a home takes to sell the lower the ultimate sales price.

So, from a seller's point of view, when they get an offer with a sale of home contingency they won't want to accept it for the reasons outlined above. The end result is that accepting a sale of home contingency is a big risk for a seller.

In order to convince a seller to accept a big risk you will have to compensate them for the risk; that means you need to pay a price for that risk. The seller is usually looking for a 2-5% increase in sales price for a sale of home contingency -- and that's only if they will consider it at all.

Generally, a seller will not even consider a sale of home contingency until their home has been languishing on the market for beyond the average length of time. So, when you find a home that's been languishing and has not had a price change you have the highest odds your offer with a sale of home contingency will be considered.

Even if your offer is accepted the seller generally has the option to "kick out" your offer. That means that if the seller receives another offer while he is under contract with your offer he can force your offer out and accept the other offer. In reality, this rarely happens because most buyers don't want to look at homes that are not fully available to buy, but, this does happen occasionally.

If your offer to purchase is kicked out after you've put your home on the market you'll be in a very difficult position. That's because you'll already be on the market and then have nowhere to move since "your" next home is no longer yours. If you then remove your current residence from the market you will make it much more difficult to sell your current home the next time it goes on the market.

Another concern is that the buyer of your home will be in a better position to negotiate a lower price on your sale. That's because you will be anxious to remove the sale of home contingency in order to guarantee you get the home you want. Thus, you will be far more likely to be flexible on your negotiations on your current home when you have a sale of home contingency.

When you have a sale of home contingency you will pay a higher price on your next home and get a lower price for your current home. The total swing from both sides will most likely add up to a 3%-6% of the purchase price of your next home.

DC Condo/Co-op Market is HOT!

Ask agents in Washington, DC about the market for condos and co-ops right now and they will respond that the market is hotter now than it has been in many years and that multiple offers and pricing strength are common. While that might seem like hyperbole or wishful thinking, it’s not. The numbers bear out the perception. The Greater Capital Area Association of Realtors have released the March 2012 condo and co-ops statistics, here's a link to them: http://bit.ly/IpGjY6

Like all markets, the real estate market is driven by supply and demand. This spring supply is far down and demand is up.

Supply

The number of available condos/co-ops is the lowest it has been since 2005. As of the end of March there was a 27.9% drop in available homes on the market from a year ago (833 vs. 1,156). Interestingly, the inventory is down 50.5% from the peak of inventory in June of 2006 (833 vs. 1684).

Perhaps more important than the percentages is that this low level of inventory indicates that inventory is likely to remain tight for the rest of 2012. That’s because in Washington, inventory of available homes increases to the highest level in the spring and declines throughout the year to a low level in December. This year the increase in inventory is 43% of what it has been for the last six years. (Typically, inventory rises 23% between December and March, this year the increase has only been 10%.)

As one other point of reference, the last time inventory was this low in the spring was in 2005, which was the peak of the market in Washington, DC.

Demand

The demand side is a little more nuanced than the supply side, but the news is good here too. Contracts were up 18.2% compared to last year for the same month (358 vs. 303). This is the first time since June 2008 that we’ve had this level of contracts (without government intervention).

The government intervention I’m referring to is the $7,500 federal tax credit for buyers of homes that ended in April of 2010. In March and April of 2010 contracts exceeded 350 as buyers rushed to close before the end of the credit.

Bottom Line

So with supply down and demand up, what does this mean? It means that we’re seeing the market price for properties firming up, but not great price appreciation. The reason the properties are clearing quickly and demand is up is because sellers have finally capitulated and are pricing their homes where buyers want them.

If you’re a seller and your home has been on the market for three weeks or more your home is priced too high by at least 5% and perhaps more. Properly priced homes are selling in two weeks.

If you’re a buyer the time to act is now. This doesn’t mean you should simply buy anything, but if you find a very desirable home don’t be surprised by multiple offers and the possibility of paying above the list price.