How is the Market in Cumming, GA, Forsyth County?

Tim Renshaw
Published on March 19, 2016

How is the Market in Cumming, GA, Forsyth County?

How is the Market in Cumming, GA, Forsyth County?

Cumming GA Real Estate Market Jan 6 2016

How is the Market in Cumming, GA, Forsyth County?

Click to enlarge and use interactive graph

This month’s update on December 2015 results is going to launch from the spike in Expired Listings in December. Yes, it is normal that expired listings jump in December for a simple reason, it is roughly 6 months (typical listing contract period) after the large influx of new listings during the summer. Combine this with the natural inclination of sellers to have a contract end at year end and you have a bunch of contracts coming to a close in December. One could rightly say, “So what? Completely normal!”.

Not so fast! This statistic doesn’t exist in a vacuum. No single statistic explains an entire market. It strikes me odd that there are so many houses not selling and having their contracts expire when all other statistics throughout the year show that:

Inventory is low. Less than 6 months is considered a seller’s market.

Homes sell quickly. 67 days on average in December 2015. Only 2014 was quicker at 66 days in the last 9 years!

Homes sell for very close to their list price (96.8% in Dec).

The above shows that demand for homes is high.

Consequently, home values are increasing. $311k sales price average in December 2015 the highest since 2007 ($318k).

Total real estate sales $ volume is up in Forsyth County / Cumming, GA! Seriously, look at this graph right now!

Total Annuals Sales Volume - Forsyth County, GA - Tim Renshaw How is the Market in Cumming, GA, Forsyth County?

All of the above add up to a seller’s market, which has been the case throughout the majority of 2015. So why the large increase in homes listed that did not sell? Not just in December, but notice that red line of 2015 is near the top every month of this chart’s (top of page) nine year range! Of course the simplest answer to why homes aren’t selling is that sellers are asking more than buyers are willing to pay. Duh, completely obvious, but what is creating this gap that seemingly should be bridged by normal market forces? You know how this works in normal markets: “I want to sell, but no one will buy at my price, so I lower my price to attract buyers and then we negotiate a market price and a sale occurs.” What is preventing this from happening?

Misaligned expectations!

In general, sellers think the market is stronger than it is and buyers believe the opposite.

Here are some misalignment points to ponder:

It is easy for sellers to look at the Average Sales Price and think “Hey, the house I bought 8 years ago for $X00k is now back to being worth $X00k! Time to sell.” Umm, wait a minute, let me think… no. The house you bought 8 years ago is not worth what is was then unless you have invested in (i.e. maintained and updated) your house so that it is the same, relative to today, 8 years later. Your investment also likely only keeps you even with your 2007 purchase price, it doesn’t mean you get additional ROI from that investment. Note the chart below which shows homeowners increasingly over-estimating the value of their house throughout 2015..

Appraiser home value vs homeowner throughout 2015 - How is the Market in Cumming, GA, Forsyth County?

Homeowners increasingly over-estimating the value of their house throughout 2015.


 

Sellers, remember, the recovery is far enough along that brand new homes are built, available and did I mention, new? New floors, new HVAC, new roofs, new appliances, new drainage, etc. Get a house inspection, get an appraisal, take a deep breath and rethink your price (or invest and you may even rethink moving).

Buyers act as if sellers are stuck in “fire sale mode”. Sorry folks, foreclosures are down, investors and other buyers quicker on their feet than you got the ready made “steals” (see graph below). The fact that there are so many expired listings should be your clue that sellers don’t “need” to sell. They’d like to sell for any number of reasons, but clearly aren’t in a desperate rush to sell at a gouged price.

Distressed property sales 2012 - Oct 2015 - How is the Market in Cumming, GA, Forsyth County?


How is the Market in Cumming, GA, Forsyth County?

Forsyth County GA Real Estate Market Dec 14 2015

I usually try to get to the Forsyth County GA real estate market update earlier in the month, sorry this is a bit delayed. Truth be told, there really isn’t that much new to report on in the Cumming, GA / Forsyth County real estate market. It is so similar to what I reported on in November that I’m appending the November 3rd post to this one! Here’s some summary points showing how strong the Forsyth County GA real estate market is:

All great news if you are considering selling. The market drivers and analysis from my November 3rd posting remain true. Read below for that analysis.

Note: All updated statistics along with a description of the statistic and how they are used in analyzing the market are provided in one handy page here.

What is likely to change in the near term are interest rates.

Most everyone is predicting that the Fed will raise rates next week. What isn’t clear is whether this long over due increase is a first of many that will eventually impact the real estate market quite negatively or whether the increase is just a proper up-tick and rates will remain historically low, thus not having a near term negative impact on the market. Your guess is as good as mine or anyone else’s, but seems likely to me that rates will be raised in the next couple months if not on Wednesday, this week. Whether they will continue up, go how high or how long they stay up is something even professional economists are split on. Here’s a couple articles to review in this regard:

Remember the Fed has a lot more than just the real estate market to take into account in raising rates and keeping them there. The job market, the stock market, the global economy relative to the U.S., etc. all come into play. Even with an increase in rates, the Fed is likely to pursue a tentative, slow up-tick. This means that rates will remain low relative to even those years when we were in “boom” economic cycles of the 1990s and 2000s. Forsyth County GA Real Estate Market Dec 14 2015 - How is the Market in Cumming, GA, Forsyth County?


How is the Market in Cumming, GA, Forsyth County?

Forsyth County GA Real Estate Market Nov 3 2015

Months of Inventory Through Oct 2015 since 2007 - How is the Market in Cumming, GA, Forsyth County?Demand for homes is strong! The number of months of real estate inventory is up a bit to 6 months from the leaner summer months where inventory was amazingly low at 3-4 months of inventory. Even at 6 months, this is still relatively low for the Cumming GA real estate market in recent years. This year is more of a mirror of the better days of 2007 – 2008 than of the “bust years” since. Taken alone this metric is not all that indicative of demand, so why am I leading with this particular stat? Take a look at the strength of listing supply and number of days to sell:

  • The number of new listings for 2015 has been quite strong outpacing every year since 2007. Sellers have gotten the message that the Cumming, GA / Forsyth County market has recovered and they are taking advantage of the opportunity to make moves they may have been putting off while the recovery broadened.
  • The number of days to sell has maintained a historically low trend (good news for sellers!) begun in mid-2013. Properties are selling rapidly! The average days to sell in 2014 and 2015 was only 62 days compared to 95 – 109 days 2007 – 2012!
  • The number of new listings combined with the rapid sales pace then explains why the active listings are staying relatively flat for the year and not running up.

Consequently, low months of inventory combined with lots of new listings that are selling rapidly adds up to strong demand!

Note: All updated statistics along with a description of the statistic and how they are used in analyzing the market are provided in one handy page here.

Why is Demand Remaining So Strong?

Lots of factors play into consumer motivations, but here’s a couple reasons to explain it. A large proportion of buyers are sellers! Many sellers have been waiting for the market to recover to get their money back out of their house or get back to a positive equity position. (update on increased number of homes with equity) Hence, this has created pent-up demand. As more and more find they have equity again, they get on with their delayed plans to move. Combine this buyers as sellers group with those forming new households and you get strong, ongoing demand. New household formation is up strongly and the millennials are apparently planning to flee their parents homes and get lives of their own! Sorry for the over-worn stereotypes, but I couldn’t resist.

Home Equity Survey Results - How is the Market in Cumming, GA, Forsyth County? Household Formations - How is the Market in Cumming, GA, Forsyth County? Millenials Planning to Buy - How is the Market in Cumming, GA, Forsyth County?
Click graphics to enlarge

Interest Rates past 5 years per Bankrate.com - How is the Market in Cumming, GA, Forsyth County?

30 Year & 15 Year Fixed Rates past 5 years.

Buyers are trying to take advantage of low mortgage rates as their ears ring with the ongoing drumbeat of looming increases. The economic recovery is wide, but many indicators show that it is thin. The Fed is unlikely to threaten the thin recovery with rate hikes in before the end of the year (see my post from last month for more on that train of thought), but as the recovery deepens, rates will go up and they may go up sharply if the Fed over-reacts having stalled as long as they have. (Source: BankRate Mortgage Rate Lookup)

How is the Market in Cumming, GA, Forsyth County?

Click to enlarge

Lastly, consumers are in a good state of mind as to the prospect of buying a home as shown by Fannie Mae’s Home Purchase Sentiment Index. I’m always a bit leery of “consumer confidence” measurements as I’m inclined to go with “hard facts” over how people “feel” about economics, but if you are selling, be encouraged that buyers are in the mood to purchase!

How is the Market in Cumming, GA, Forsyth County?
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