Well, we are glad that is over! Local home sales tanked in 2008, a year in which a sales decline was recorded in every single month – with ten of them double digit decreases – and finished with a 13.9% decrease in the number of homes sold compared to the previous year. Combined with the last four months of 2007 we have now gone sixteen months in a row of decreased home sales, and there were double digit decreases in fourteen of those months. Home sales have now dropped in each of the last four years and average annual sales have gone from a peak of 4,100 in 2004 to the current 3,121. This market has never experienced a four year slump in home sales, the previous mark was a three year drop from 1993 to 1995 when sales went from 3,131 per annum to 2,833, a decrease of 10% compared to the current 25% drop so we are in uncharted territory.

About the only good news on the home sales front is that December sales were certainly better than expected, recording a 22% increase over November sales. Normally December sales are less than November sales so maybe this shows that we have hit bottom and sales will start to improve – although we are not betting on that.

The 0.9% decrease in the average selling price for the year is also a first. In the records we have dating back to 1976 there has never been a year over year decrease in the average selling price. The median price also showed a 1.7% drop from $215,720 in 2007 to $212,000 in 2008. In addition to better sales than expected, December also showed some improvement in the average selling price, up 7% from the previous month and halting two months of double digit average price decrease.

The total 2008 sales volume was $783.6 million, a 15% decrease from the previous year and the lowest level since 2000. We have to go all the way back to a 20% drop in 1982 to find the last double digit decrease in annual sales volume.

The homes sold in December averaged 130 days on the market, up from 123 in November but a slight improvement on the 132 days in December 2007. For the year, the homes that sold averaged 112 days on the market which is an improvement over the 115 days on market in 2007. The inventory of homes for sale continues to drop dramatically with just 1,499 active listings at the end of December. This is down 11.5% from November and almost 15% less than the number of homes that were on the market at the end of 2007. Based on the last twelve months sales, the demand is for 260 homes per month so the current supply is about six months, normally referred to as a balanced market. Obviously the reduced inventory is helping to hold up selling prices. Who knows what would have happened to the average selling price if we had sold 4,000 homes in 2008 – the betting is that we could have seen a double digit drop in the average selling price.

We certainly overused down, drop, decrease, decline in this column but that seems to be the story of the year’s home sales. In our next column we will compare what has happened in our market to our neighbors and to the national scene. We will also attempt to come up with a bit of a forecast for the near future of local home sales – although it would probably be better to wait and report after the fact.

Now that all the ‘Happy New Years’ have been handed out, we need to get to work to ensure that it is ‘happy’. As we begin 2009 it is readily apparent that the U. S. economy is a mess and consumer confidence is at an all time low. Most economists predict that the recovery will have to be led by a turnaround in the housing market and where better to get this started than right here at home. We can be thankful that our local economy is in better shape than a lot of other areas and we also have a more stable housing market that has not experienced the highs and lows of many other parts of the country so let’s take the lead in the recovery and…go buy a house!

Home buyers will find a good inventory of homes for sale, most of which are competitively priced and prepared for sale by motivated sellers. Selling prices remain low and the rate of increase, which is less than 3% per annum over the last seven years, is far below the increase in replacement cost which will eventually be factored into the market. They will find helpful mortgage lenders with money to lend at extremely attractive interest rates and they will find motivated, experienced, professional Realtors with time to provide knowledgeable, helpful assistance.

There are four main categories of home buyers: first time buyers, move up buyers, relocating buyers and investors and the current conditions offer benefits for buyers in each of these categories.

First time home buyers have the advantage of not having an existing home to sell which puts them in a very good position come contract negotiations. Plus there is not a better time to become a home owner by taking advantage of the new, temporary $7,500 tax credit which is available for the purchase of a principal residence during the period of April 9, 2008 to July 1, 2009. A first time home owner is defined as someone who has not had an ownership interest in a principal residence in the previous three years. This incentive could reduce your 2009 tax liability by $7,500 which is money in your pocket. The credit is a loan but repayment terms are very affordable and there is no interest on outstanding balances.

This inducement coupled with the normal tax incentives which include writing off mortgage interest and property taxes against your income make becoming a home owner a very attractive proposition, particularly if you close on the purchase by July 1, 2009.

Move up buyers will find that the market supply and demand is working in their favor. A typical move up is around a 25% to 35% increase in price and the higher the price the more supply there is. As an example, there is a good demand for homes priced below $300,000. If you want to consider a move to a home priced above $300,000 you will go from a six month supply to a twelve month supply. If you go from $400,000 to over $500,000 the supply goes from twelve months to eighteen months. Many potential home sellers are concerned that there are not enough buyers around and that they will not get a fair price for their home but they may be pleasantly surprised with the deal that can be made on a higher priced home and they need to factor in the difference in price between what they are selling and what they are buying.

Relocating buyers without the need to sell an existing home can make a strong purchase offer which will get the attention of the seller. Typical relocation buyers are in the higher end of the price scale so they will find a good supply of homes to choose from plus they get to invest in this economy and live in this wonderful area – what more could you ask for.

Investors will find a very good active rental market and rental income compared to home value is probably as high as it has ever been. In addition, mortgage interest rates on non-owner occupied properties are as low as they have ever been and it is still relatively easy to convert equity in your existing home into a down payment for an investment property. If you are not a real estate investor now is a good time to get in and another option move up buyers should consider is holding onto their existing home as an investment and putting the equity into a new home.

So make it a Happy New Year – go buy a house!