For the better part of the last year, there existed a price gap between what Louisville homes for sale were asking, when you compared homes that were already on the market to homes that were just coming on to the market.  On the graph below, you will notice that our existing inventory in the Louisville real estate market is shown in gold.  The black line on the graph shows the median asking price of the group of listings that just came on to the market that one week.  Normally we see that new listings show up on the market asking less than homes that have been on the market.  This makes a lot of sense, in a bad or slow market.  If you keep noticing that your neighbors can’t sell their homes at the prices they are asking, doesn’t it make sense that if you were to decide to sell, that you would ask less than the home down the street?

But what if you notice that all of the homes on your street are selling?  And maybe they are even getting the prices they were hoping for?  In that situation, we would expect to see new listings start asking more than before, and maybe even catch up to what the existing homes for sale are asking.  And that’s exactly what we have seen in the past month or so.  The median price of homes for sale has just about equalized for both groups of homes.

In just the past few months, the number of homes for sale in Louisville has fallen by about 1,000 units. Normally this would be a signal that we are entering, or had fully entered, a seller’s market. But in today’s environment, all that means is that we have worked our way through some of the bloated inventory we have added to our marketplace over the past year. Now, instead of welcoming a seller’s market, we are simply getting back to a more “normal” number of Louisville homes for sale. Whether or not you view this as good news, or bad news, depends upon your basic outlook. Are you a pessimist, or an optimist? After our seasonally strong selling season of spring, are we glad to be back to where we were last year this time, or are we upset that we didn’t make more progress working through our standing inventory?

Last week I wrote a few articles about different parts of town and how most zip codes in the Louisville real estate market saw a big jump in the median asking price of homes for sale.  As part of my articles, I tried to come up with a reasonable explanation about why prices might jump so severely in just one week, and the best I could do was to tie it to the expiration of the Federal Tax Credit.  More buyers came out to buy, for the most part, lower priced homes, and once those left the market, there was a relatively higher number of more expensive homes available, all of which would push the median sales price higher.  And now, check out the graph below.  The average number of days that Louisville homes for sale are staying on the market dropped 20% this past week.  Wow, that’s kind of crazy.

If you look at the chart above, you will see that this big drop was almost immediately after the 1st of May, right when the Federal Tax Credit expired.  Coincidence?  I doubt it.  I think the most likely scenario is two fold.  First, some people obviously bought houses at the end of April to make sure they got their $8,000 tax credit, and if the bulk of those homes had been on the market for quite awhile, that would bring the average days on market down.  But that seems far fetched to think the DOM measurement would fall so quickly for that reason alone.  I think that in addition to the extra sales we saw, there was probably a large number of sellers who thought that the tax credit was their last real chance to sell their homes, and failing to get a contract in place by April 30th, they simply took their homes off the market, leaving only (relatively speaking) homes that haven’t been on the market as long and the sellers aren’t quite burnt out yet by failing to get a contract.

Two months ago, the median asking price of single family homes in Louisville hit a low water mark of $145,000.  In the time since then, there have been about nine weekly measurements taken by Altos Research, and it appears that almost every single one of them showed a price increase, with only two small decreases.  As a result, the median asking price has grown from $145,000 to $159,000 in that short time.  This rise in price has been a big enough change to bend the trend line and show a positive trend.  The big question remains how the market reacts to the end of the tax credit and whether sellers can keep their confidence and keep pushing prices up, or whether buyers dry up and prices start falling once again.

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… Rank: wait… Traffic: wait… Price: wait… C: wait…

Inventory levels of Louisville homes for sale have dropped over 750 units in the past six weeks alone, but levels are still higher than at this point last year.  As recently as early or mid-March, inventory was at incredibly high levels, above 5,300 single family homes in the Louisville real estate market as defined by Jefferson County.  Even with a recent flurry of activity and a decrease in the number of available homes for sale, the current inventory level is still a bit higher than it was this time last year.  Which makes me question a bit the large number of Realtors around the city who are touting our recent run of sales as proof that we have turned a corner.

Just two months ago, the median asking price of Louisville homes for sale was at $145,000, but has risen $13,000 in the intervening two months to the current level of $158,000.  While many agents and brokers in Louisville are quite excited about this rise in prices, I am not quite ready to be bullish on this market.  While I do believe the Louisville real estate market is improving, I also think it is quite likely that the Federal Tax Credit, that just ran out last week, may have been artificially pushing people to buy homes that might have more likely been waiting until later this year to purchase.  If they bought earlier than they would otherwise have bought, who will be left to buy later this year, over the summer?  And will we be excited by a strong spring selling season if the summer is weak?  I would like to see some strong numbers come out of our market when the tax credit is no longer around, and then I will climb on the bullish wagon!

Continuing a recent trend, the median asking price for Louisville homes for sale rose another $3,000 this past week, marking a rise of over $13,000 since the beginning of March of this year.  Also significant is that the gold line shown on the graph below, which is the trend line, has also started bending up and is showing some real movement.  There is some concern in the Louisville real estate market that this recent rise in pricing is the result of the ending of Federal Tax Credit and not some underlying stabilization of the market.  I suppose we will be able to tell in the next few weeks as the tax credit has now ended and new data coming in should reflect people’s reactions to that fact.

Today I noticed that many of the areas around the Louisville real estate market have started seeing a decline in the Days On Market measurement, at least minimal declines.  But I did run across one area that bucked that trend, Prospect Ky homes for sale.  I have charted the two areas, Greater Louisville against Prospect, on the chart below.  Louisville is shown in black and Prospect, or 40059, is shown in gold, and both are looking only at single family homes, not condos, farms or other property.  Clearly, a few weeks ago, in early April, the Louisville measurement hit an inflection point and started moving down.  On the other hand, homes for sale in Prospect continue to see their Days On Market measurement rise.

Why the difference?  My thought is price.  Obviously, the average home in Prospect is valued at well over the average Louisville home.  To be more exact, the average home in Prospect is asking a bit more than three times what the average home in Jefferson County is asking, about $475,000 to $155,000, give or take.  There simply aren’t as many higher end buyers in the market today as there are more modest priced buyers.

But there might be one more factor, that affects Louisville homes in a greater proportion than Prospect.  The Federal Tax Credit that is coming to an end within the next few days.  The $8,000 tax credit may be an incentive for people to run out and buy that home they were looking at, and buy it soon.  But people moved by $8,000 are more likely to be buying a home closer to the Louisville average than the Prospect average.  I doubt that the tax credit has had any effect on homes for sale in Prospect.

So I guess my question is this:  Is the trend line we see for Prospect closer to what we will see for Louisville when the tax credit ends and no artificial stimulus exists for buying a home?  Or is Prospect it’s own market, and any market that has an average asking price of $500,000 and higher is just out there on their own taking gas?

One more fact to help you make up your mind:  Did you know that it will take about 5 years to go through all of the million dollar listings here at our current rate of absorption, if no one else tries to sell their home?

Median asking prices for Louisville homes for sale have risen about $10,000 since the beginning of March.  I am curious to see whether or not this is a spring bounce, or more the effect of a few extra buyers coming out to take advantage of the $8,000 Federal Tax Credit.  I suppose the answer will be upon us  soon enough as the tax credit expires in just a few more days or weeks.  Over the past year, the Louisville real estate market has seen a high median asking price of about $173,000, very briefly, and then down to $145,000.  With a little luck from a possibly improving economic environment, sales will improve, which will also push home prices a bit.

There are currently over 4,500 Louisville homes for sale right now, according to data collected by Altos Research.  Note that this includes only single family homes in the city of Louisville, and not the surrounding areas, such as Oldham County or Shelby County.  That also doesn’t include condos, farms or multi family homes.  This level is down quite a bit from recent highs just a month or so ago, but still well above the norm for the area.  A real test for the Louisville real estate market will be when the Federal Tax Credit expires in just a few more weeks.  Will inventory levels rise as buyers stop purchasing, or will sales continue at their current pace, possibly showing that the tax credit did nothing, or very little to spur buyers to purchase, they were going to buy anyway.