Man studying chart - Clearwater Homes marketI spent a little extra time this month reviewing the local Clearwater homes real estate statistics because there are some trends starting to show up that caught me by surprise and I wanted to look into them further to make sure I was really happening.

I’ve been reporting on sales mostly and a little on inventory but when I looked at another statistic this month I was a little surprised by what I saw.

This statistic is called Absorption Rate and is also known as Inventory Turnover.  This number is arrived at by dividing the number of units sold in a specific month by the total number of listings in the MLS.  I was a little more specific about this and narrowed it to only houses, condos, townhouses and villas in Pinellas County which included Clearwater homes and condos as well as those in St. Pete, Dunedin, Palm Harbor, etc. (same criteria I use for the sales chart).

This gives you a picture of how quickly the inventory is turning over.  The lower the Absorption Rate the slower the turnover and the higher the Absorption Rate the faster the turnover.

Back in the summer of 2005 when the market was at its peak and the inventory was at its lowest point, the Absorption Rate was over 50%.  This meant that over 50% of the properties for sale that were listed in the MLS had sold in that month.  In a normal market you’d be looking at a number more in the 12-16% range.

I noticed that since the beginning of the year the inventory was dropping and Absorption Rate was increasing so I decided to do an updated chart showing the Absorption Rate for Pinellas County/Clearwater homes and for condos since the beginning of 2006 to see where we stood.

What I saw on the chart was not what I expected.  The Absorption Rate for condos has now moved into the range you would see in a normal market and for homes it is now 33% higher than at any point since January 2006 and is in a range that is more like a seller’s market than a buyer’s market.  Here are those 2 charts:

Clearwater homes area absorption rate for homes thru Sep 2011
(Based on information from:  1) PRO/Suncoast MLS for the period of Jan 2007 to May 2011 and from 2) MFRMLS for the period May 2011 thru the end of September 2011)

Clearwater condos area absorption rate thru Sep 2011
(Based on information from:  1) PRO/Suncoast MLS for the period of Jan 2007 to May 2011 and from 2) MFRMLS for the period May 2011 thru the end of September 2011)

I wrote in one of the most recent newsletters about the inventory dropping to 5 year lows and that this seemed to correspond with a drop in foreclosures coming on the market so I looked into some other statistics to see if this was really what was going on. It took a lot of digging but I think I finally have a better grasp on what is really going on.

The Absorption Rate includes properties in the MLS with the status of Active and excludes any with the status of Active with Contract (under contract but uncertain about closing, like with short sales) or Pending (under contract and looks pretty certain to close). When I looked at the change in Active with Contract and Pending listings over the last year, their increase corresponded with the decrease in Active listings. In other words, if we were to look at the total of all 3 (Active, Active with Contract and Pending) there would be little overall change since this time last year.

On thing I’ve noticed this last year is that short sales are getting much more difficult to close and are taking longer. Our MLS statistics shows this too – time on the market for short sales increased 40% from last August to this August.

To summarize, the number of properties coming on the market is decreasing gradually with a more noticeable decrease in foreclosed properties since last year, short sales are taking much longer and between these 2 things the number of Active properties is noticeably lower and the number of properties under contract are noticeably higher but many of those are short sales that are staying under contract for a long period of time going nowhere. But the initial picture you get from the statistics is that the market has seen a dramatic change suddenly.

Now the trend is positive overall and is continuing to show gradual and stable improvement like I’ve been discussing each month. You can see this in the sale chart which does show a continuing trend of improved sales:

Clearwater homes and Pinellas County residential property sales chart thru Sep 2011
(Based on information from:  1) PRO/Suncoast MLS for the period of Jan 2007 to May 2011 and from 2) MFRMLS for the period May 2011 thru the end of September 2011)

So what does this mean for buyers? There is less available for sale and more buyers competing for the available properties. This is making it a little tougher to find properties and sometimes can make it a little more difficult in negotiations but property prices are not yet a problem. Sellers still have to sell at or slightly below market value in most cases. Most Realtors and many sellers realize this and if they really want to sell they are pricing their properties appropriately – and Clearwater homes and condos as well as those in the rest of the county that are priced right are selling quickly and at or near the list price.

There does appear to be a situation of banks holding back foreclosure inventory and, as I wrote previously, some of this is due to the ‘robo-signing’ situation but I believe some of this is due to the banks waiting to see if the federal government will take inventory off their hands to rent it out or come up with some kind of program that will benefit the banks. If this doesn’t happen then the banks will start putting their ‘shadow inventory’ back on the market. This will increase the overall inventory but since there is such a demand I don’t think this will cause more than a pause in the recovery. I guess we’ll know more in the next 12-18 months.

So in answer to the question in the title, no – the buyer’s market is not over but it has shifted and you need to be aware of how it has changed. Right now, if you want to buy Clearwater homes or condos or any residential property in the Tampa Bay area you can still get good deals but you have to be prepared and need a good Realtor to help you gain any advantage you can get – and you will need to have your financial arrangements all set and should be ready to act quickly when you find a property you really like.