Cincinnati market stats mixed in August

As expected with a stabilizing market, August's stats were something of a mixed bag. However, the trends for Cincinnati continued to be mostly positive. Some of the notable highlights from the Cincinnati MLS statistics include:

• The total number of sales transactions continued to match rates from 1996 - 1997. A trend we've seen for the entire year and possibly representative of a "normal" rate of sales.
  
• Inventory vs. sales (aka "absorption rate") came in at 7.5 months. Better than August '07 and '08, but slipping back above the '06 rate.
• Sales for August were up 2.0% year over year, but down from July. This reflected national existing home sales which slipped a bit on a month to month basis (down 2.7%) although they still gained 3.4% year over year.
  

See charts from August

As noted in previous columns, we are seeing that the rush is on for first-time buyers to beat the clock on the tax credit and we will probably see that reflected in September and October numbers - with a potential drop off in November. Since sales have to close by November 30th, the recommendation has been that buyers need to be under contract by Oct. 15th to make the cut. With some financial incentives ending, the statistics over the next few months will tell the tale on how quickly the market returns to a balanced state.

Financing incentives begin to wind down

As the housing market has begun to show signs of a pulse, banks and federal agencies are looking at taking the patient out of ICU. What's uncertain at this stage is how the market will react without the supports that were used to stabilize it.

First up is the first-time buyer's tax credit slated to end as of Nov. 30th. All evidence suggests this program has been significant in prompting sales at the lower end of the market. In the Cincinnati area, homes below $150,000 were a majority of sales in August while those above that price continue to languish (with an average of 68 days on market vs. 82 days, not accounting for listings that were renewed after expiration).

There is a fair amount of lobbying to extend the credit, but no indications that will happen. It's not unlikely that Congress will wait to see whether there is a significant adverse impact before any additional extension.

The second significant event is the winding down of the Federal Reserve's purchase of mortgage-backed securities. Earlier this year, the Fed initiated a $1.25 Trillion (yes, that's a T) purchase of the securities in an effort to lower mortgage rates. Again, all the evidence points to this being successful as mortgage rates have been at historic lows for the better part of the year.

At the Fed meeting that ended last week (9/23), it was announced the program would be extended through the first quarter of 2010, but no additional funds would be provided. In effect, the Fed stated they were aiming for a "smooth transition" to normal market operation. Economists expect that mortgage rates may increase by up to 1/2 a percentage point when this program ends.

While not an official incentive effort, the Federal Housing Administration also announced that it will implement several steps that effectively tighten its lending standards due to an increasing level of delinquencies. FHA loans have been an outsized portion of loans in the past year as it has become the financing of choice for low equity mortgages.

There are still a number of incentive programs that remain in effect. However, for many who are suffering from "bailout fatigue," the movement towards ending these programs has been welcome news. On the other hand, many homeowners as well as real estate and related professionals are concerned that sales and prices will once again begin to fall. High inventory rates and new foreclosures will continue to weigh on the market, but the therapy to get the market standing on its own feet may have just begun.

WaterSense label seeks Energy Star status

If you've been in the market for new plumbing fixtures recently, you may have noticed a lot more fixtures being identified with the WaterSense label. This EPA program seeks to do for water conservation what Energy Star has for energy efficiency. While there are specific criteria that apply, generally those products defined as meeting WaterSense guidelines are 20% more efficient than the average product in the same category. Additionally, rebates and other incentives are being offered in areas where water shortages are of concern.

The Wall Street Journal reported recently that new guidelines are now being published that will allow homebuilders to voluntarily label homes with the WaterSense label if they meet guidelines for overall usage. However, since much of a homeowner's usage comes from landscaping, the guidelines are creating a bit of angst among turf companies. Areas of the country such as the dry Southwest in particular have been instituting programs to rebate homeowners for converting their lush lawns back to a more natural desert landscape. The WSJ article goes into some great detail about the pros and cons of the program.

While the Cincinnati area does not currently have the same water shortage concerns that other areas of the country do, the practice of xeriscaping (landscaping using more drought-resistant and native plants) has been gaining traction. Some landscaping companies in the area, such as Marvin's Organic Gardens, have made xeriscaping and water conservation practices a key part of their service.

Water conservation practices may not be high on your priority list, but it's not out of the question we could see the cost of water usage continue to increase with population growth and other factors. From a purely practical standpoint, here are few water conservation practices that could help your bottom line:

• Look for WaterSense labeled products when installing new fixtures
• Fix any leaks as soon as possible. Leaky toilets can waste up to 500 gallons a day.
  
• Use a rain barrel for watering of plants when needed
• Use xeriscaping to reduce landscape water needs
• Let lawns go dormant during dry summer periods based on the type of grass you have. If watering your lawn, be sure to follow good watering techniques.
  

For more water saving tips, check out H20use.org.