I’On Real Estate Market – 2010 Recap

There was a 34% increase in the number of I’On homes sold in 2010!  A total of 51 homes sold in I’On last year compared to only 38 in 2009. This increase in activity also contributed to a steady reduction of available inventory throughout the 2nd half of the year.  After hitting a high of 76 I’On homes for sale in May, the number of I’On homes for sale has been steadily decreasing and we now have only 49 homes for sale in I’On.

Price Pressure Continued in 2010 for I’On Home Sellers

In spite of the increased sales activity, there was more price pressure on sellers last year as buyers continued to have many choices in I’On and other Mt. Pleasant  neighborhoods.  Overall, the average selling price/square foot was down 5.7% in 2010 to $250. However, this is an improvement over 2009 when prices fell 10.5%.

Let’s break the numbers down a little further in order to gain some perspective.  To do this, I am going to analyze 3 specific price ranges in the I’On real estate market:

• Homes sold below $750K
• Homes sold between $750K and $1M
• Homes sold above $1M

Preferred Price Range of I’On Home Buyers Has Shifted

The chart below shows the number of I’On homes sold in the last 6 years, broken down by the above price ranges.  What is interesting is that the 34% increase in sales activity last year is directly attributed to a huge spike in home sales below $750,000.  In fact, I’On home sales below $750K surged 93% last year (from 15 to 29 homes sold) and represented 57% of overall I’On homes sales.  Most of this increase was due to a spike in homes sold below $500,000.  In contrast, when the market was peaking in 2006, this price segment represented only 17% of I’On home sales!!

The surge in I’On home sales below $750K has had an impact in two other areas – selling prices and months of available inventory.  Due to the increased activity in this price segment, prices actually increased 3.2% over 2009 to $260/square foot.  No, that is not a typo.  I did say INCREASE!!  This is the first price increase we have seen in any I’On market segment in years and hopefully this represents a bit of stability returning to the market.  In contrast, pricing for homes above $1M fell 7.1% to an average of $260/square foot while homes between $750K and $1M fell 19.6% to an average of $217/square foot.  The chart below shows the trend in each segment for the last 6 years.

Sales of Bank-Owned I’On Homes Impacting Pricing

For homes that sold between $750K and $1M, it is important to note that the dramatic reduction in pricing was due in large part to the inclusion of 3 bank-owned properties.  These homes normally sell at a steep discount to the market and that was no exception here.  Without these 3 homes included, the selling price per square foot in this segment would have been $229, still a reduction of 15%.  In addition, there were several other homes in this segment that sold at a fairly significant discount to the market.  We are likely to see more of the “bank-owned” affect in 2011 in every price range.  It is simply a reality of the market right now.

I’On Home Inventory – Some Good News!

Currently, there are  49 I’On homes for sale.  This is down 36% from the 2010 peak in May when there were 76 homes for sale in I’On. Overall, there are 12 months of available inventory in I’On. As with home sales, we get more perspective by breaking the available inventory down by price range.  This is based on the rate of sales for the last 12 months….

• Less than $750,000 – 8 months of available inventory
• $750,000 to $1M – 14 months of available inventory
• Over $1M – 18 months of available inventory

I expect that inventory will rise as we move into the spring selling season and more I’On homeowners put their properties on the market. However, the overall trend is down.  At the peak of this buyer’s market, there were approximately 100 homes for sale in I’On!!

What’s Ahead in 2011 for the I’On Real Estate Market?

There are many factors that will affect the I’On real estate market in 2011, including interest rates, jobs, economic growth, etc.  But in the end, it will be all about inventory levels.  As I have indicated in previous posts, a “balanced”  market is generally defined by about 6 months of available inventory.  As you saw above, I’On home sales below $750,000 were strong in 2010 resulting in lower inventory and some much needed price stability. Currently, there are only 8 months of available inventory in this price segment…..not the 6 months or below sellers are looking for, but very close!  I do expect continued stability in this segment of the market in 2011 but don’t look for any significant increase in pricing.

I do expect price pressure to continue in other segments of the I’On market in 2011, particularly for homes priced above $1M.  The reason for this is simple……too much inventory!!   Currently there are 18 months of inventory above $1M and 14 months of inventory between $750K and $1M.  While I certainly can’t predict the future, I do know that it is going to take some time to work through this inventory before we can expect to see prices stabilize.

If I can answer any questions about this I’On real estate post or if you are thinking of buying or selling an I’On home, please contact me.  My team offers a full range of services and we will be happy to assist you in any way we can.

• 70 Sanibel Street – $475,000
• 37 Sowell Street – $515,000
• 197 North Shelmore – $1,070,000

The home at 197 North Shelmore was the first I’On home to sell above $1M in 2010.  Prior to this sale, the last home to sell for a price above $1M in I’On was in November, 2009.

Through May 19th, the number of I’On homes sold is still significantly above the same period last year, though the pace has slowed somewhat in the last 30 days:

2010 I’On Home Sales Through 5/19/2010:

• 17 Homes Sold
• Average Selling Price Per Square Foot – $260
• Median Sold Price – $637,500

2009 I’On Home Sales Through 5/19/2009:

• 10 Homes Sold
• Average Selling Price Per Square Foot – $260
• Median Sold Price – $887,500

I’On Home Buyers Opting for Homes in Lower Price Brackets

While the average selling price per square foot for I’On homes sold in 2010 has remained steady, the median selling price for I’On homes is down 39% from 2009. This is reflective of buyers opting to purchase proportionately more homes in lower price brackets than they were doing in previous years.  In the last 9 months, 90% of all I’On homes have sold below $1M, yet currently 47% of all I’On homes on the market are priced above $1M.  Clearly, the market for I’On homes above $1M is very sluggish.  There are very few buyers in this price range and I don’t see that changing significantly in the near term.

Inventory of I’On Homes For Sale Slightly Higher in Last 30 Days

Inventory levels have risen slightly since my last report.  Currently, there are 72 homes for sale in I’On.  The chart below reflects current I’On inventory by price range compared to the number of I’On homes sold during the last 9 months.  This further reflects the disappointing results in homes priced above $1M.

I’On Home Buyers Still in Control

The “months of inventory” by price range still reflects a sold buyer’s market.  However, for homes priced below $500K, we are approaching a “balanced market” as there is only 7 months of inventory available in this price range.  Unfortunately for buyers, the supply is rather limited in that price range so there is not going to be an overall jump in sales activity unless more inventory comes on the market in that bracket.

• Below $500K – 7 months of available inventory
• $500K to $750K – 13 months of available inventory
• $750K to $1M – 17 months of available inventory
• Above $1M – 102 months of available inventory

Distressed I’On Home Sales Becoming More Common

I get asked a lot about short sales and bank-owned properties in I’On and what is happening with them.  While they are certainly not yet the norm, the number of homes being contracted for that are in a distressed situation is certainly rising.  For example, of the 15 homes currently under contract in I’On, 7 of them are either potential short sales or bank-owned.  When these homes do close, the sales prices are likely to have a negative impact on the average selling price per square foot.  For example, the average selling price per square foot in I’On is currently $260 but the asking price per square foot for the 7 distressed homes that are under contract is $222.

If I can answer any questions about this post or if you are thinking of buying or selling an I’On home, please contact me.  My team offers a full range of services and we will be happy to assist you in any way we can.

Can One Distressed Sale Impact Value?

For example, let’s say that the recent sales for comparable homes in a neighborhood suggest that the average value is approximately $350,000.  But, suddenly a neighbor’s home is sold at a foreclosure auction for $250,000.  Does that mean that the average market value for homes in that neighborhood is now at $250,000 instead of $350,000?

This answer to this question is not an easy one.  I have spoken to some local appraisers about this issue and they tell me that it really depends on how many distressed sales there currently are in that particular market.  For example, if a high percentage of recent home sales in a neighborhood have been distressed, then a real estate appraiser will likely take those comparable sales into consideration when determining value.  On the other hand, if distressed sales comprise a very small percentage of the recent activity, it is less likely that the appraiser will use those distressed sales as comparable data in determining value.

This is good news for sellers of homes in neighborhoods that have had very few distressed sales in recent months.  It’s not likely that their market value will be adjusted significantly just because a bank decides to “dump” a property at a price that is well below market value for that neighborhood.

Ultimately, It’s the Real Estate Appraiser’s Call

However, it is important to note that this is always going to be judgment call on the part of the real estate appraiser.  Determining the true value of a home can be very challenging in this market environment.  There are fewer home sales which translates to fewer comparable properties for appraisers to use in their evaluation process.  This requires the appraisers to really “dig deep” for relevant comparable homes to use in their market analysis.  Sometimes the appraiser may have no choice but to use a few recent distressed sales in their market analysis.

If you have any questions about this post, please contact me.  Also, please feel free to use the space below to comment.