Existing home sales surged in September, bringing sales to the highest point since 2007. At the same time, the Department of Commerce just reported that sales of new single family homes fell 3.6% in September to an annual pace of 402,000 units.

Sales of both existing and new homes had been on the rise of late, encouraging many an economist that the worst is behind us.  Some will say that the new home sales numbers show that this will be a shakier recovery than in past recessions.

That may be true, but keep in mind that home sales as a whole are up by a pretty large margin. Those sales are helping bring down the inventory of unsold homes, which is so vital to returning to sustainable times.

Analysts had expected new home sales to rise to 440,000 units, most likely based on the final push of first-time buyers looking to take advantage of the $8,000 tax credit.

Buyers looking at new homes will find some homes that are already completed and those that are not finished. First-time buyers, who account for nearly 45% of the buyers at the moment, are looking to eliminate any possible risk of missing out on the credit.  Purchasing a home still under construction without a guarantee of closing before 11/30 will push many would-be new homebuyers to existing homes.

The numbers may already be bearing this out. In September, sales of existing homes jumped 9.4% to an annual rate of 5.57 million. This is the highest rate in more than two years.

In this housing market, not many positive records are being set. One notable exception comes as a great surprise to the casual market observer – length of time on the market. In this down market, well-priced home are selling in record time.

And time, as the old saying goes, is money.

Market is moving slower

With the torrent of down news about the housing market over the past couple of years, most people would expect that all homes are languishing on the market, just praying for a buyer to appear.

The market as a whole is certainly moving much slower than it did a few years back. The average market time for existing home sales now stands at 120 days, which is nearly 40 days longer than during the peak of the market in 2007.

But that picture alone is a bit deceiving; that’s not the whole story. A more detailed look at  today’s market reveals a different picture.

Overpriced vs. Well-Priced Listings

When we separate September 2009 home sales into categories of those that required a price reduction before selling (Overpriced Listings) and those that did not (Well-Priced Listings), we find that the Well-Priced Listings are selling in just 31 days.

As you can see in the above table, a different story emerges for the Overpriced listings. They average 137 days on the market (nearly four and a half times as long!), and they are requiring an average price reduction of 14% (that’s a difference of $42,000 on the selling price of a home that’s initially listed at $300,000).

That extra 4-5 months of selling time hurts in a couple of ways.

The financial impact

First, these homes end up selling for less than they could have if they had just started off priced right. Our market, like all others around the country, has seen declining prices over the past two years. Since the peak in prices in 2007, the average sales price has dropped about one-half a percent per month. That means the 4-5 months of extra marketing time cost the seller an additional 2.5%, or $7,375 for the median priced home of $295,000.

The emotional impact

So, the financial impact of pricing the home right is significant. The emotional impact is also huge. Five additional months of keeping the home in show condition, of the feeling of being in limbo, and missing the chance to move to that next home that better suits the seller’s current needs, are also a big part of the equation.

What happens when it’s priced right… the first time

More and more sellers are beginning to understand these factors. In September, 45% of sellers priced their home right and sold in an average of 31 days. Still not a majority of sellers, but the percentage is up significantly since the start of the year.

The overpriced seller should not beat themselves up too much. In a changing market, it is sometimes hard to know what the right price is.  Sometimes it takes entering the market to get feedback from buyers to know if the price is right. The key to finding the right price in those instances is to quickly review the market feedback and then make a swift price adjustment to bring it in line with the market. When done, our market’s steady activity tells us these sellers will find a ready and willing buyer.

Coldwell Banker recently conducted a survey of more than 1,000 men and women to see if any differences exist between the two groups when it comes to buying a home. The results were pretty interesting… Here are some of the highlights:

Women may be inclined to make up their mind more quickly than men …
When asked how long it took before they knew their home was “right” for them, almost 70 percent of women had made up their mind the day they walked into the house, compared to 62 percent of men. Conversely, significantly more men needed two or more visits to make up their mind: (32 percent of men vs. 23 percent of women).

Women would rather live closer to their extended family than to their job …
Fifty-five percent of women find it more important to be closer to their extended family (those that do not live in their household) than to their job, compared to only 37 percent of men.

A home’s security is a deal-breaker for both men and women …
Sixty-four percent of women said that if they found the home of their dreams but had concerns about its security, they would no longer be interested. More than half of men agreed (51 percent).

Couples say that no one “wears the pants in the relationship” in terms of major financial decisions …
When asked who wears the pants in the relationship (when it comes to major financial decisions, such as purchasing a home), almost 70 percent of respondents living with their significant other said it’s actually mutual.

However, 23 percent think that they, themselves, wear the pants in the relationship, not their partner. More men than women said this (26 percent vs. 20 percent, respectively).

Men and women agree on how they would use a spare room, for the most part …
When the respondents were asked how they would use an extra 12 x 12 room if it could be anything they wanted, men and women agreed on the top three most popular, and very practical, responses:
1. Bedroom: 25%
2. Office/Study: 15%
3. Family Room / Den: 11%

However, men really do want a “Man Cave”…
Interestingly, out of the 8 percent who indicated they would turn that spare room into an entertainment center, it was a preponderance of men leading the charge.  In fact, four times as many men as women said they would use the extra space for recreation / entertainment.

You can find out more about this survey here.

There have been several interesting trends happening in the local housing market as of late. Here’s a look at some of those trends, both for the month of September and year-to-date (compared to 2008 numbers).

Pending Sales Up

In September, Whatcom County’s pending home sales climbed 16.5% over the same results from a year ago (from 254 Pending Sales in Sept. 2009 to  218 in Sept. 2008). September’s performance brings a 9% increase in Pending Sales for the year so far (over 2008).

There are several factors leading to this increase in the number of Pending Sales we’re seeing locally: (1) low interest rates, (2) the first-time home buyer tax credit, and (3) lower home prices.

Closed Sales Down
Fewer Pending Sales are becoming Closed Sales locally, as Whatcom County Closed Sales are down 11.5% this year. The greatest obstacle to closing Pending Sales comes from the bank-owned and short sale properties. Lenders on short sales are taking anywhere from two to four months to make a decision on approving or denying the sale.

Despite the challenges with bank-owned and short sale properties, momentum is picking up in the market. Over the past few months, Closed Sales more closely match 2008 results.

Median Prices Down
The median sales price for a Whatcom County home is $260,000 this year: down 7% from the same time in 2008. In September, the median price slipped 9% (compared to September 2008). The following chart shows year-to-date median home prices in Whatcom County, by city.

The pace of local home sales is slowly but steadily absorbing the excess inventory of homes on the market. We are now at eight months of supply of homes for sale, which is still a buyer’s market, but the lowest since this time last year. The return to a better balanced market will bring back longer-term sustainability in Whatcom County.

Importance of Price
Of all the positive forces in the market, however, none is bigger than price. Where a home is well-priced, we are seeing it move in record time.  When the home is not well-priced, it languishes on the market months longer.  Even then, it sells only after reducing to the appropriate price.

Home sellers can save themselves a lot of headaches by pricing their home right, the first time.

Whatcom County Numbers By Community (year-to-date)

Here’s a year-to-date breakdown of the median price, average price, number of units sold and days on market for each area in Whatcom County:

Bellingham:  Median Price, $260,000 (down 7%); Average Price, $295,000 (down 3%); Units Sold, 662 (down 10%); DOM, 96 (down 3%)

Lynden:  Median Price, $266,000 (down 9.5%); Average Price, $281,000 (down 13.5%); Units Sold, 109 (down 26%); DOM, 115 (down 9.5%)

Blaine/Birch Bay:  Median Price, $221,000 (down 10.5%); Average Price, $266,000 (down, 3.5%); Units Sold, 187 (down 13.3%); DOM, 126 (up 15.5%)

Ferndale:  Median Price, $265,500 (down 8.5%); Average Price, $287,500 (down 7.5%); Units Sold, 188 (down 11%); DOM, 103 (down 3.5%)

Sudden Valley:  Median Price, $240,000 (down 10.8%); Average Price, $249,000 (down 9.8%); Units Sold, 106 (up 2%); DOM,  118 (up 9%)

Mount Baker:  Median Price, $130,000 (down 21%); Average Price, $152,000 (down, 17.8%); Units Sold, 80, (down, 20%); DOM, 93 (down 6%)

Nooksack Valley:  Median Price, $215,000 (down, 11.5%); Average Price, $231,000 (down, 16%); Units Sold, 67 (down, 16%); DOM, 82 (down 15.5%)

According to Freddie Mac’s Weekly Primary Mortgage Market Survey (PMMS), the average rate on a 30-year fixed rate loan came very close to hitting an all-time low again last week.

At the end of last week, the average rate was 4.94%. That is the lowest level since May 28, and it was awfully close to  the record low set on April 30, also of this year. To put that number into perspective, the average interest rate was 6.10% this time last year.

What This Means for Home Buyers
Since June, this rate has dropped by about 0.65% (from 5.59% in mid-June). To give a sense of what this size of a drop means for home buyers, someone with a $300,000 loan and an interest rate of 4.94% would save about $1,450 per year (versus a 5.59% interest rate), or about the cost of one mortgage payment.

What About Refinancing?
Hearing about low interest rates may make one consider refinancing an existing loan. But, before you do, remember there is more to think about than just the monthly savings. Lenders typically charge for the refinance, and that should be compared to any expected monthly savings.

If there’s a chance you’ll be moving in the near future, the costs may likely outweigh the savings. However, if you plan to stay long enough for the monthly savings to outweigh the upfront costs, then the refinance might be a smart move.

Average Rates Since 2005
The table below (from FreddieMac.com) shows how the average monthly interest rates have fluctuated since 2005.

Monthly Average Commitment Rate And Points On 30-Year Fixed-Rate Mortgages

It’s important to note that these rates are just averages. Actual rates are going to vary for each home borrower, as they are affected by the size of one’s down payment, type of loan taken out and the borrower’s credit score.

Fees and Points
Besides the interest rate, a borrower should keep an eye out for the fees and points a lender charges for the loan (displayed in the “Pts” column in the table above). Along with interest, those fees and points combine to make up the actual cost of the loan reflected in the Annual Percentage Rate (APR). According to the PMMS, the average fees and points charged on the 30-year-fixed rate loan has remained at 0.7 since October 2008.

More information on what mortgage rates have done historically can be found at FreddieMac.com/pmms.