optimism for the housing market 2014
DESCRIPTION
Most of the major housing indexes have turned positive and have stayed on that upward trend for months. • Home Building is beginning its recovery. New home sales hit a 5-year high this summer. • In April 2013, home prices saw a 12.1% rise, the highest year-over-year increase in 7 years. It just might be time to dip your toe into the water again.TRANSCRIPT
Most housing experts and economists are agreeing that the housing bust is over. “The market
has turned – at last.” ~ The Wall Street Journal. There is growing optimism for the housing
market in the Summer of 2013.
Most of the major housing indexes have turned positive and have stayed on that upward
trend for months.
The CoreLogic/Case-Shiller Index is
one of the most sourced measures of
U.S. residential real estate prices. It
tracks the values of homes in the top 20
metropolitan regions, as well as
tracking values nationally. The
CoreLogic data has shown average
home prices on the rise since March
2012 in most metropolitan areas. Most
recently, areas that were the hardest
hit have shown the largest year-over-
year price increases: California - 20%,
Arizona - 17% and Nevada - 26%.
In April 2013, home prices saw a 12.1%
rise, the highest year-over-year
increase in 7 years. Most housing
experts attribute this to low inventories
and increased demand. This lack of
inventory is affecting the building
market...
Home Building is beginning its
recovery. New home sales hit a 5-year
high this summer. For the last six
quarters, home building alone is
responsible for 20% of GDP growth,
according to NAHB, National
Association of Home Builders. As a
result of this growth in home building,
the housing industry's overall share of
the economy is increasing slowly back
to historic norms. This, in turn, is
adding to job growth.
The National Association of Home Builders/Wells
Fargo builder sentiment index has risen above 50, the
level which indicates more builders view sales
conditions as good, for several quarters, with a jump
to 57 in June. This is the highest it has been since
January 2006.
According to the National
Association of Realtors, NAR, home
sales in May of this year increased
above the 5 million number, which
had not happened since July 2007.
Challenges and Changes in Today's Real Estate Market
Every market has it's challenges, whether a buyer's market, a seller's market, or those real
estate markets that are in transition. Sometimes, the challenges are in appraisals, lack of
inventory, distressed housing, or in financing. Whatever they are, the market eventually
recovers. We're now seeing the market recover from the effect of distressed properties, or
short sales and foreclosures.
Although the number of
mortgage defaults has
been decreasing over the
last several months, there
are still a great number of
distressed properties out
there today, both short
sales and foreclosures.
Banks seem to have
learned their lesson and
are not dumping bank
owned properties on the
market at once, but
releasing them gradually.
Hedge fund managers are buying homes in bulk, like a financial instrument, especially in
states that have been hit the hardest in the crash. These investors are looking for long-term
price appreciation and will most likely rent the homes, doing minor repairs, then sell when the
market will return a profit. It would seem that Hedge Fund investors certainly are betting on
the return of the housing market!
Although the words "hedge fund" may bring negative connotations to some, these investors
are actually helping the real estate market by scooping up large portions of the distressed
inventory in many major markets. This reduces the surplus and reduces neighborhood blight.
You would think that there
would be more
foreclosures on the
market... in our market,
for instance, less than 1%
of the listings are bank
owned properties. The
answer might be that
private equity firms are
buying up huge numbers of
single-family houses and
turning them into rentals,
or flipping them.
Goodbye Fannie, Goodbye Freddie
Five years after the $190 billion bailout and the
Conservancy of Fannie Mae and Freddie Mac,
Congress and the Administration have started to
address the issue of housing reform this year. Both
sides of the aisle and both the House and the Senate
are working on bills that call for the disillusion of the
Government Sponsored Entities, or GSE's.
While both parties agree that Fannie and Freddie are
outdated models that don't work anymore, as you
may expect, the differences lie in how much of a roll
the government should play in the housing and
mortgage industry. Many believe that the
securitization of mortgages by these GSE's has
increased the housing financial industry in a way that
private companies could not accomplish, while others
believe that they created, or at least contributed to the
troublesome bubble in the first place.
Either way, all parties seem to agree, for now, that
Fannie Mae and Freddie Mac will be phased out,
probably within a five-year timeframe, and be
replaced with more modernized organizations which
will still support the housing market, and encourage
home ownership for as many Americans as can
reasonably afford it. What exactly those will look like,
will be played out in the next few months. We might
even see this reform by the end of this year, or the
beginning of 2014.
Is it Safe to Venture Out into the Real Estate Market Again?
Since the Great Real Estate Bust of '06,
we've seen many swings in the real estate
market. First we saw buyers leave the
market in larger numbers, watching home
prices fall like Newton's apple. Then we saw
home sellers with their arms crossed in
stubborn denial, their homes languishing on
the market for 1, or even 2, yes, and even 3
anniversaries. Good news... it looks pretty
safe again out here!
Just recently we've seen first-time buyers
back in the market, and some move-up
buyers, ready to take advantage of the
historically low rates and the circa 2002
home values. Here's the positive truth...
people become adults, start families, and
want to buy houses. We call it the "Circle of
Life"... real estate life, that is. Experts might
call it "Pent-up Demand".
Supply and Demand
After hitting bottom in the fall of 2012, interest rates have started to increase, although gradually. We
also saw the bottom of the market as far as home values in most communities around the country. While
there are locations and price points that are still seeing falling values, most are seeing the bottom in the
rear view mirror.
With a lack of equity in their homes, many homeowners still cannot sell. The lack of inventory in many
markets is evidence. However, this lack of active listings added to the increased demand has resulted in
rising prices. As we see values increase over the next year, we will see more homeowners above water on
their mortgages and able to sell. We expect more move-up buyers able to enter the market as this upward
cycle continues. However...
As the economy heats up, we will see
rising interest rates. The cost of
buying a home will increase, thereby
decreasing the purchasing power of
home buyers. When the real estate
market is on the upward climb, the
question for buyers is always this: buy
now, when I have fewer choices, or
buy later when interest rates are
higher and I can afford less?
Consumer Confidence On the Rise
As the real estate market continues on its path of recovery, more and more people are gaining
confidence and entering the market. Rising rents are making the thought of a home purchase
more attractive to many. If you're thinking of getting your feet wet, this is certainly a good
time, with low interest rates and home values just beginning to rise.
Search for Homes for Sale in Frederick Md * Frederick Real Estate Online
Home ownership has proven to be the biggest and safest investment most people
will ever make... as long as they stay in it for the long haul. It just might be time
to dip your toe in the water again. If so, consult your local RealtorR today!