New information from Marketwatch.com points to a slowing foreclosure rate in leading indicator states. Their conclusion is that the number of foreclosures is in decline due to some of the aggressive measures being taken by banks, and government agencies to keep families in their homes.

Their research shows a slight drop from 84,534 to 84,291 in the number of properties repossessed by lenders following foreclosure November over October. But that’s off nearly 21% from September’s 106,415 REO filings.  In California  Foreclosure Index numbers show REO filings in the state down to 15,978 in November. That is a decrease of 6.55% from October and off nearly 50% from September.

The hope is that as these foreclosure rates slow there will be fewer foreclosed homes on the market, which will help stabilize home values.  The article however does not take into account the overarching economic slow down. Although the major real estate challenges of 207-2008 are being resolved, I’m not sure if there is an eminent rebound. The Cincinnati real estate market remains relatively steady, with prices across the board lower than a few years ago and activity levels down as well. Our real estate values did not balloon like Florida, Arizona and California so subsequently we did not experience, for the most part, the bubble bursting.

There is some good news recently put out by the Cincinnati Board of Realtors. According to the sales numbers the last 4 months have seen increasing home sale activity, a good indication that the housing market is beginning to recover. An even better secondary metric is that the overall inventory is dropping. This means that more houses are being sold than are being put on the market. Generally speaking a balanced market carries about 5 months of home inventory.

More sales and less inventory helps to return demand to a steady level. It is this relatively static demand that has given Cincinnati real estate has historically appreciated 2% each year. Although modest, it is steady and the recent positive changes in the short term market point to the fact that we will soon return to slow and steady long term appreciation.

Month 2008 Home Sales Inventory

January 1,130 13.31

February 1,334 11.32

March 1,557 9.75

April 1,636 9.49

May 1,913 8.38

I was talking to a real estate agent yesterday and we discussed the inventory of homes in the greater Cincinnati area. I was very surprised to hear them terribly concerned about their perception that there are 11 months worth of homes on the market right now. I questioned his concern and did some research on my own at Housing Tracker.

The short story is that there are 64 more homes on the market today than there were one year ago, 1/2% more inventory than in 2006 and 1.8% more inventory than 2005. Now it is true that prices have gone down slightly; for the median home the drop since 2005 is 3.35% and for higher priced homes 4.45% over the same time period. Lower priced homes have dropped 5% since 2005 but also did not experience the price spike and hard correction that the median home and luxury home experienced.

What this translates to is that if you are in a median priced home it is the best time to move to a bigger space if you need to. I know it is against everything that we have been hearing on the news but the reality is that the price of the home you want is closer to selling price of the home you have right now. Math does not lie - the difference between a median and high priced home this week is $90,000. One year ago that difference was $97,000 and in 2005 the difference was $94,302. In real dollars upgrading is ALWAYS a good move in a down market. If your Cincinnati real estate agent is not telling you this they are just plain wrong.

Week Inventory 25th Percentile Median 75th Percentile
11/28/07 11,415 $99,900 $149,900 $239,900
11/28/06 11,351 $104,900 $158,000 $255,000
11/28/05 9,418 $104,900 $154,900 $249,202