The numbers for Smithtown over the last few weeks have not brought good news for many home sellers prompting questions about whether people increasingly are turning away from the dream of homeownership. Inventory is rising while median price continues to slide in each quartile (the full range of prices for all residential homes in Smithtown divided up into four quarters) of the market. While I have read many articles on the web predicting a major reduction in home ownership in the U.S., my experience in Smithtown is not all bad news for would-be sellers.
The Numbers:
13 homes went into contract in Smithtown in the last 30 days.
19 homes were put into contract in the previous 30 days between May 5th and June 5th. 9 homes were placed under contract in the 30 days prior to that.
41 homes found buyers during the height of Smithtown’s spring real estate market.
According to data from MLS, 99 new homes were introduced to the market over the total mentioned time period. That is a relationship of a little more than 40% of homes sold.
There were at least 98 homes on the market prior to the start of our spring market effectively doubling the existing inventory. If Smithtown were to have had a healthier absorption rate to set up the 2011 spring market, I believe prices would have faired much better. A larger point is that buyers ARE out there. My own experience has confirmed this.
The Silver Lining:
According to local mortgage broker, Dawn Sullivan of All Shores Mortgage, “Most potential first time buyers that I sit with for guidance lately end up coming to the conclusion that it makes better economic sense to buy now than continue to rent.” Indeed, when I look at economic factors, the continuation of super low finance rates fuels the desire for people, especially first-time homebuyers to take the plunge into ownership. Ms. Sullivan continues, “When running numbers on these lower purchase prices at interest rates like 4.5% on a thirty year fixed rate, with as little as 3.5% down payment, these potential buyers tend to be pleasantly surprised with the monthly payments that they are looking at.” Basically, the decision in the minds of would-be buyers comes down to the perception of throwing away money on rent indefinitely or, for near the same amount per month, have at least opportunity to build equity in the years to come.
There is another motivating factor for serious buyers which should not be under appreciated; it is remains a major lifestyle decision to own your a home. Smithtown and the surrounding communities do not have a robust rental culture the way certain other places in the country do. People interested in living in Smithtown, do not want to rent a sketchy basement apartment if they do not have to. So, if they qualify for a mortgage (FHA still requires only 3.5% down as the minimum), the fundamentals still point in the direction of buying which leads me to conclude that we should not give up on homeownership just yet in our community.
Conclusion:
The high inventory remains a challenge to prices but people still want to take advantage of historically low interest rates and own a home. Prices will spring back once there is an extended period of inventory that is more in check with demand.
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