"Home prices in November were 7.4% higher on average than a year earlier, according to CoreLogic. Real estate experts had expected that rising prices would spur more sellers trapped by years of falling prices." - Julie Schmit Prices Are Up But Homes Are In Short Supply
It is a more exciting time to be a seller than it was last year as prices have stabilized, and in some areas have gone up by 1%-2%. The problem is when you sell your house - what property are you going to move into? Inventory is getting snapped up on the market very quickly. Now is a great time to list your house. Read Julie Schmit's article from USA Today and see what you think. Then contact me with your real estate questions.
Talk to you soon!
Prices are up, but homes are in short supply
Julie Schmit, USA TODAY January 26, 2013
(Photo: Kevork Djansezian, Getty Images)
The supply of homes for sale has been shrinking for six months and shows no improvement so far in January — a bad sign for buyers.
New listings of existing homes for sale were down 14% year-over-year in the first two weeks of January, according to Realtor.com, which tracks 143 markets nationwide.
In Phoenix, where prices were up 24% in November from a year earlier, new listings through the first three weeks of January hit their lowest level in 13 years, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.
That's bad news for buyers, and it means "prices need to go up more" to bring more sellers to market, Orr says.
Nationwide, the supply of existing homes for sale fell to 4.4 months in December, based on the current monthly sales pace, says the National Association of Realtors. That's the lowest level in more than seven years. A six-month supply is generally considered balanced between buyers and sellers.
Home prices in November were 7.4% higher on average than a year earlier, according to CoreLogic. Real estate experts had expected that rising prices would spur more sellers trapped by years of falling prices.
Instead, January's listing data "is the same sad story," says Glenn Kelman, CEO of online brokerage Redfin. If sellers don't have to sell, "they're holding on, thinking they'll wait for prices to go up even more."
Redfin's data, covering 19 major markets mostly in the West, shows new listings down 29% the first two weeks of January vs. last year.
Scarce sellers aren't the only driver of shrinking supplies. There are fewer distressed properties for sale. Foreclosure sales were down 7% through the first nine months of last year from the same period in 2011, RealtyTrac says.
Meanwhile, demand is up. Existing home sales were up 9.2% last year, NAR's preliminary data show. New-home sales rose almost 20% in 2012, the government reported Friday, while supply fell to 4.9 months in December from 5.4 months a year before.
New home construction is still weak. In each of the past three years, builders completed fewer than 500,000 single-family homes. That's less than half the number built annually between 1993 and 2007, according to the Census Bureau.
Home builders would need to double production this year to alleviate the tight supply, estimates Lawrence Yun, NAR's chief economist. That's not expected.
Home supplies nationally will stay at about the five-month level much of the year, Yun predicts.
Some markets are far below that.
California's supply of existing single-family homes for sale stood at 2.6 months in December, the California Association of Realtors says.
"Nobody is selling because no one has anywhere to go," says Barbara Hendrickson, of Red Oak Realty in Berkeley, in the San Francisco Bay Area, which had a 1.8-month supply in December.
The low supply is feeding bidding wars. One of Hendrickson's clients recently lost a bid despite offering $130,000 above the home's $775,000 asking price, Hendrickson says.
Whether the supply of homes for sale will expand to meet rising demand is a "big question for the market" in 2013, says Jed Kolko, economist with real estate website Trulia.
This year is also the first since the housing bust began that falling inventories are not necessarily a good thing, he says.
Listings may still swell in time for the busy spring selling season, says Stan Humphries, Zillow economist.
He says listing activity next month will be key. If it doesn't pick up by then, the spring season is likely to bring a lot of price increases, he says.
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The article below by Steve Yoder of The Fiscal Times, brings some things we've been watching for a few years to the forefront. The rising interest rates, more first time home buyers, rising home prices and rising rents, and the rest of his listed trends say loudly that now is the time to purchase real estate and sell your existing property if you are looking to be a move-up buyer. Check out the article and then call me with your real estate needs/questions.
10 Real Estate Trends to Watch in 2013
Read more at
By STEVE YODER, The Fiscal Times
December 6, 2012
Five years and 16 million foreclosures after the 2008 housing crash, most Americans have not lost faith in real estate. In a survey this summer of more than 2,000 adults by home buyer website Trulia, 61 percent of respondents predicted that prices in their local market would rise next year, 58 percent thought prices would take 10 years or less to get back to their pre-crash peak, and almost 80 percent of current renters said they plan to buy a home someday.
Whether or not that enthusiasm has merit, the signs of a turnaround are hard to ignore. National home prices have been on the uptick for eight straight months and jumped 6.3 percent year-over-year in October – the largest increase since June 2006, according to CoreLogic. In California, one of the hardest-hit states, 57 percent of homes for sale have attracted multiple offers this year. Bidding wars on houses are making a comeback in Florida, and in Phoenix, realtor Marge Peck says that “everything under $150,000 sells in a heartbeat.”
RELATED: Will Housing Recover at the Expense of Your Privacy?
Will that pattern hold in 2013? To find out, we talked to real estate economists and insiders and reviewed industry reports that assess next year’s outlook. Most experts said their predictions depend on the mainstream forecasts of economic growth next year being correct and assume that the economy won’t experience an earthquake from falling off the fiscal cliff. Others emphasized that all markets are local—real estate conditions in coastal metro areas vary wildly from those in mid-sized Midwestern towns. Those caveats aside, here are 10 real estate trends they forecast for next year.
1. Rising home prices. The slow pace of new-home construction is pushing prices up, a pattern that will continue in 2012, according to several sources. Calvin Schnure, an economist at the National Association of Real Estate Investment Trusts, says construction of new homes and apartments needs to be between 1.25 and 1.5 million a year just to keep up with population growth. But since the housing crash, new construction has been at 500,000 units or fewer for 6 years running—that’s actually created a shortfall in available homes. A National Association of Realtors (NAR) report in October showed a 5.4 months’ inventory of homes for sale at the current pace, 22 percent below where it was a year ago and the lowest inventory since February 2006. (A 6-month inventory is generally considered the sign of a healthy market).
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“I think we’re going to look back three years from now and say that 2012 was the year the housing market turned the corner in America, says Mark Dotzour, chief economist at Texas A&M’s Real Estate Center. Overall, the NAR forecasts average home prices to rise 5 percent next year, after a projected increase of 6 percent this year.
2. Rising rents as more young people enter the market. Schnure says there’s a shadow demand in the rental market—the 3 to 5 million people, most in their twenties and thirties, who have been riding out the shaky economy by moving back in with their parents or staying with friends. Now, as they start to get jobs, they’re looking for their own apartments. Schnure says they represent a pent-up demand for rentals that’s twice as big in percentage terms as the country has ever seen. For next year, “that means that for people looking to rent, good luck… it’s going to be a challenge,” he says. This year, average rents have been rising nationally at about 4 percent a year and in many metro areas by 7 to 9 percent, says Barry Habib, chief market strategist for mortgage lender Residential Finance Corporation. A recent Zillow analysis also found that buying beats renting in 59 percent of markets after three years or less.
3. Fewer foreclosure bargains. The chance to snap up a bargain-basement foreclosure could be fading. Sales of those homes fell to about 11 percent of all sales in June 2012, down from about 28 percent in March 2011. In part that’s because the Federal Housing Finance Agency (FHFA), the Federal Deposit Insurance Corporation, and banks have been selling off hundreds of distressed home loans in bulk to purchasers who agree to work out new terms with borrowers rather than simply foreclosing, says Philip Feder, chair of real estate practice at global law firm Paul Hastings. Foreclosures have also dropped because the equity position of thousands of borrowers has improved with rising home prices, righting many upside-down loans.
4. More short sales. Short sales are deals in which a home sells for less than what the borrower owes on the mortgage, with the bank agreeing to accept the sale in lieu of going through an expensive and time-consuming foreclosure. On November 1, the FHFA issued new rules on short sales for Fannie Mae and Freddie Mac—among other measures, those reduce the documentation that borrowers have to show to demonstrate hardship, and borrowers now aren’t necessarily required to pay the difference between what they owe on the mortgage and the final sales price. So while foreclosure sales will keep falling, the number of short sales should rise, says Polyana da Costa, senior mortgage analyst at Bankrate.com.
5. More first-time home buyers. A report from consulting firm Deloitte & Touche on key issues in commercial real estate for 2013 predicts that growth in demand for single-family homes next year will likely be driven by first-time home buyers. That trend is visible in an NAR survey of buyers and sellers released in November—39 percent of borrowers were first-timers, up from 37 percent in the 2011 survey.
6. Higher home construction costs. Building materials like sheet rock, lumber, and copper are at high prices even though levels of home construction remain low, says Dotzour. The same is true for construction labor costs—after the crash, many qualified construction workers migrated out of the country or into other industries, he says. As a result, “you’ve got the possibility of some pretty potent price increases in [the cost of constructing] new homes,” Dotzour says.
7. Property management boom. It’s a great time to be a property manager. Earlier this year, the FHFA began selling foreclosed properties in bulk to large institutional investors who agree to hold and manage them as rentals. That intensified the trend already underway toward investors snapping up distressed properties to rent--the number of homes purchased as investments rose 65 percent in 2011 over 2010, according to real estate data provider RealtyTrac. Many of those investors are now using professional property management companies to rent and maintain their purchases, which has created huge demand for their services, according to a July story by UPI.
8. Rising mortgage interest rates. Mortgage rates have been at historic lows this year, so there’s only one direction for them to go. The NAR predicts that rates will gradually rise to average 4 percent next year, up from about 3.5 percent in September of this year. The Urban Land Institute’s 2013 Emerging Trends report, which surveys industry experts, concludes that “’there’s no way the low-interest-rate environment lasts,’ and your low-rate mortgage could be a ‘huge future asset’ as soon as interest rates begin to pop.” Greg McBride, senior financial analyst at Bankrate.com, agrees there could be minor increases in the coming year since the market drives rates, and economic growth or rising inflation would allow bond holders to command higher rates, but “I don’t think anybody is expecting a shoot-the-lights out type of economic environment that would cause a more pronounced increase.”
9. Easier credit standards. On average, would-be borrowers now need a FICO credit score in the 760s to get a mortgage, much higher even than the years before the easy-credit housing boom began, according to the FHFA. That should start changing next year--qualifying scores will start dropping as more qualified buyers come into the market and lenders compete to offer them loans, says Luis Vergara of Mission Capital Advisors in New York City. That downward shift in standards will be strengthened if the Obama administration, as has been rumored, replaces FHFA head Ed DeMarco, a Bush-era holdover and advocate of tight credit standards, says Richard Green, head of the University of Southern California’s Lusk Center for Real Estate.
10. Two-tiered home-building industry. Banks have been reluctant to make construction loans—only 22 percent of the country’s largest banks are making them, according to a 2012 survey by the Office of Comptroller of the Currency. That, says Dotzour, is producing a “bifurcated market”—a few publicly traded large builders with access to capital who are able to tackle big projects, and many medium and small builders who rely on loans from regional and community banks but aren’t getting the capital they need to launch projects. The result could be more consolidation in the home building industry next year and, ultimately, less competition and higher prices for everyone.
This piece was updated at 1:35pm on December 6, 2012 with additional information on rising mortgage rates.
Read more at http://www.thefiscaltimes.com/Articles/2012/12/06/10-Real-Estate-Trends-to-Watch-in-2013.aspx#97HuK0wZTOTD0uGG.99
In addition to the 6 Reasons Nick Timiraos has as to why the Housing Inventory Keeps Declining I have to add that Generation X and Generation Y people are buying the inventory at a faster pace now that the economy is stabilizing, the interest rates are historically very low and many of these buyers did not have inventory to sell in order to buy. The home prices are still quite low compared to 2008 and couple that with the low rates and buyers have great reasons to buy.
Read more reasons below and contact me for all of your buying needs. Have a fantastic day!
WSJ Blog: 6 Reasons Housing Inventory Keeps Declining
By Nick Timiraos
The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November.
Home sales in December dropped by 1% from November, the National Association of Realtors reported on Tuesday, but still stood nearly 13% above the levels of one year ago. That means home sales have risen from the year-ago month for 18 straight months.
For 2012 as a whole, sales were up 9% to 4.65 million units, the highest annual total since 2007.
Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains. The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November and a 21.6% decline from one year earlier, the Realtors’ group said on Tuesday.
Here’s a breakdown of why inventory has continued to drop this year:
Many homeowners are underwater: More than 10 million homeowners owe more on their mortgage than their homes are worth, according to CoreLogic Inc. CLGX -1.94% That pencils out to around 22% of homeowners with a mortgage, or 15% of all homeowners (since not every homeowner has a mortgage). Underwater owners aren’t likely to sell unless they need to move due to changing life (marriage, divorce) or financial circumstances, and they’ll take a hit on their credit for pursuing a short sale, where the bank allows the home to sell for less than the amount owed.Data from CoreLogic show that inventory has been the most constrained in housing markets where there’s the largest concentration of underwater borrowers.
Others don’t have enough equity to “trade up”: Another 10 million homeowners have less than 20% equity in their current residence, meaning they can’t easily “trade up” to their next house. Traditionally, homeowners have relied on home equity to make the down payment on their next home, and to pay their real-estate agent to sell their current home and buy their next one. These “under-equitied” homeowners—meaning they don’t have enough equity to make a move to a more expensive home—have added to the drag on inventory.
Everyone wants to buy at the bottom, but few want to sell: Even those people who do have plenty of home equity are likely reluctant to sell if they think prices will be higher tomorrow. Would you sell your largest asset today if you thought it might be worth 5% more next year? This helps explain why markets such as Denver and Dallas, which didn’t have huge housing bubbles and thus had smaller shares of underwater borrowers, have also seen double-digit inventory declines.
More purchases from investors of all stripes: From the big institutional investors that have been grabbing all the headlines, to the mom-and-pop landlords that have traditionally played a much larger role renting out homes, investors have increasingly bought homes that can be rented out rather than flipped and resold for quick profits. This is further keeping inventory off the market in two ways: homes that are bought at courthouse foreclosure auctions never show up on multiple-listing services when they’re initially sold. They’re also held out of the for-sale pool because they’re being rented out.
Banks have been slower at foreclosing: Banks and other companies that process delinquent mortgages have had trouble proving that they’ve followed state law in taking title to homes ever since the “robo-signing” scandal surfaced in late 2010, and they’ve also had to meet a host of new state and federal rules governing loan modifications and foreclosures from settlements spawned by the robo-scandal. Banks have also become better about approving short sales and loan modifications, which has curbed the flow of foreclosed properties onto the market.
Builders have been putting up fewer homes: Housing starts were severely depressed from 2009 through 2011 and have only recently rebounded off of those low levels. Consequently, there’s been much less new home inventory being added to the market at a time when demand (boosted by increases in household formation) is picking up. If more homes are held off the market—for any of the five reasons above—you can bet that builders will move in to fill the void.
Many of these factors that have been dragging down inventory aren’t signs of “normal” or “healthy” housing markets—but then, we probably haven’t had a normal market for around a decade now. If anything, declining inventory shows that normal supply-and-demand dynamics are returning, which is an important step towards putting a floor under home prices and giving markets time to get back to health.
Liz Lewis Sandwick grew up in Duluth, is married to her husband Robb, has three kids: Caroline (5) Cooper (3), and Max (1) and would love to help you find your next home!