The Lake Norman/Davidson area pending index of luxury homes under contract spiked upward the first two weeks of January, with the number of homes under contract in the 500,000 dollar and up range popping up to 60, from 51 just two weeks ago. This spike shows early signs of the possibility that this year’s spring market might be more active than last year’s, and more in line with 2010, when several hundred Lake Norman area luxury homes sold between March and May.
Low inventory, low rates, and pent up buyer demand seemed to get the 2012 year off to an early start. This early 1st quarter contractual activity looks like it will reward some sellers who either stayed on the market over the holidays, or got their homes listed early.
This year’s housing buzzphrase is undoubtedly “shadow inventory”. While we’ve seen numerous attempts to describe and define this concept, the basic idea is to quantify the number of homes that a) are in some type of distress and therefore might go to either short sale or foreclosure, or b) have been on the market and withdrawn, or even c) people thinking about selling.
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While there is no doubt that all three exist in the Lake Norman and Davidson areas, its helpful when trying to estimate the impact of this potential inventory, to quantify and put it in context of prior inventory levels.
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The media tends to talk about it as an enormous elephant in the room, something that is going to crash upon the housing market like a tsunami, further eroding housing prices. This discussion always seems to center around foreclosures, pre-foreclosures, and people who are underwater on their mortgages in the sense that they owe more than the home might be worth. Much of this potential problem statistically exists in Florida, California, Arizona, Nevada, and Michigan. In fact, those states make up 75% or more of all distressed activity. There’s also frequently a vital fact left out of this discussion, that of distressed homes in those areas being actively purchased. For inventory coming on the market to be a problem, it has to come on at a pace much more quickly than it can be absorbed, and the absorption rate in many states for distressed property is increasing.
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Here in North Carolina, Realtytrac’s regional month to month tracking index of pre-foreclosure activity by banks, while slightly up the past 60 days, is within the monthly range that it has plodded along at for over a year, something that seems to project distressed flow arriving on the market at a pace similar to what we’ve seen the past 12 months, and that pace has seen it absorbed faster than it came on the market (albeit slowing over the winter). The luxury distressed home index at Lake Norman has declined from 70 units to the mid-40’s over 12 months, so it will be an indicator of absorption moving forward.
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Inventory levels in areas like The Point, The Peninsula, and River Run are all at 4-8 year lows for January, yet there will likely be at least an average seasonal increase as homes come on the market for spring. Given there’s starting to be some positive economic news, we anticipate a run up into the mid-range of the last two springs, perhaps slightly higher. For The Point, that would put inventory in the 60-70 range, River Run in the 35-45 range, and The Peninsula in the 50-65 range through the mid-summer. All of which seem to be levels which would support at minimum, flat pricing in terms of sold price per foot.
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Equally interesting but not nearly as much discussed in the media, is the number of buyers who one might consider in the “shadows”. The affordability index in the U.S. is at 45 year lows, rates are cheap, as are prices, and that has spurred many to wade into the viewing arena and to look at homes. The past 60 days in the Lake Norman area, have seen roughly 3000 showing appointments for homes listed at 400k and up, by area realtors. During that period, with 3000 home showing appointments, there were 48 contracts placed. If you figure the average luxury buyer looks at 10-15 homes, this would indicate 200-300 buyers out looking, yet only 48 putting the hammer down. Clearly an indication that there are buyers out there timing the bottom, waiting for the perfect combo of price and features, etc.
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All of that seems to point to “shadow inventory” as being a potential issue, yet perhaps nothing close to an impending tsunami.
Ivester Jackson brokers once again dominated the lists of top producing luxury realtors in the Davidson and Lake Norman areas for 2011.
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Julie Pfeffer finished atop the MLS standings for luxury listings sold in 2011 in Davidson.
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Lori Ivester Jackson finished first in Cornelius luxury listings sold for the third year in a row, and led the entire Lake Norman area in million dollar home sales.
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Ivester Jackson’s Doris Nash finished among the leaders at The Point with over 15 million dollars in sold business while Jan Sipe produced just under 10 million across the Davidson/Cornelius, and Mooresville areas.