May 2012 Update:

Introduction: This month we are looking to see if supply will continue to decrease. If decreasing supply continues for May 2012 and beyond, then there could begin a increase in prices. Comparing year over year (i.e May 2011 vs May 2012) has shown compelling metrics for the future. The positive year over year view supports the trend of decreasing supply which will eventually lead to price accretion.

Year over Year Supply & Demand chart: Chart

For Sale: -3.2% Under Contract: +56.5% Sold: +3.5%

Reaction: This chart is perfect for future Lehigh Valley home price increases. The overall supply is down compared to last year. Homes are going Under Contract at an increased rate and homes are settling at a modest increase. Homes reaching the settlement table has been an issue for the Lehigh Valley; this chart is a reversal of that trend.

Cumulative average of the Supply and Demand chart: Chart

For Sale: -12.7 %       Under Contract: +47.8%         Sold: -18 %

Reaction: Transactions reaching settlement in the Lehigh Valley has been a tumultuous area and the cumulative chart represents that theme is still prevalent. The bright side is that the For Sale homes and Under Contract metrics continue to be auspicious and that the future could and should be better.

Year over year Median Price chart: +3%   Chart.       

May 2012 = 164,848 @ 470 homes sold
May 2011 = 160,000 @ 454 homes sold

Reaction: The price increase is fairly nominal as the scope of this chart is just month's time frame. However, the increase in homes settling is a positive step in the right direction toward price increases.

Cumulative Price chart: -5.6%      Chart

Reaction: The decline in prices is most likely explained by distressed properties. If there are less properties being listed, and more properties going Under Contract, then there should be price increases. The question to how much more shadow inventory of foreclosed properties there remains in the market is difficult to predict. If Supply remains low, which I will discuss further, then that is cause for optimism.

Yearly Average of Supply: Month’s Supply of Inventory Chart: -35.3%    

Chart

Reaction: As supply decreases, the Lehigh Valley should be able to weather the effect of shadow inventory. If Supply keeps decreasing then prices should follow; prices have followed in the year over year comparison.

Month over Month of Supply: Month’s Supply of inventory chart: -42.8 %

Months of Supply for May: 4.9     Chart

Reaction: This past May was 42% better than last May. The supply is in a range that indicates the majority of the Lehigh Valley is in a neutral market. Therefore it is unclear if the buyers or sellers have the advantage. What this also means is in some areas the sellers have the advantage over the buyers which has been rare in the past few years.


Overall: Foreclosures and short sales are relinquishing their grip on the recent median prices and the MSI coincides with that theory. Progress has been made, but that does not mean people should rush into the market. The market is slow moving so that means cautious people are smart to feel the market out before jumping in. I believe it is a prudent time to refinance as there is certainly no evidence saying the trend for homes is downward from these metrics.