On July 27, 2010, The National Association of Realtors released its monthly report on home-sale transactions. In it the NAR states that the sales of existing homes declined in June while the inventory of unsold homes rose. Also, newly signed contracts dropped off by 30%...most likely a result of the tax credit expiring.
What does this mean for the Philadelphia region? Well, it’s not a good sign.
Whenever you have a supply (a growing supply, at that) of homes and a dwindling number of buyers chasing those homes something has to change. Prices will have to come down. In order to attract the shrinking pool of buyers to their properties, Sellers will be forced to lower their prices to compete.
Another factor looming on the horizon in coming months is the wave of foreclosures that are expected to hit the market as banks work to complete government-mandated loan modifications. This will likely affect densely populated metropolitan areas like Philadelphia the hardest since there is a greater occurrence of foreclosures per capita than in the other surrounding counties.
As more inventory is added to an already saturated market…prices will continue to decline through the second part of this year.
Below is a graph of the inventory levels for Philadelphia, Montgomery, Bucks, Delaware and Chester Counties. As you can see, since the beginning of the year, inventory levels in all five counties have been on the rise. As this trend continues, prices will have to give way.