By Dave Parrish
I was attending a funeral last weekend and ran into a realtor friend from Lake Jackson, Texas. As you might expect, our conversation eventually ran into a discussion of market conditions. Like so much of our country, she too had that experience of a tough market with an abundance of foreclosures, short-sales and steeply declining market prices. However, things had recently changed. She was experiencing a seller’s market. They have a shortage of inventory. Move-in ready homes are going under contract within 30 days.
If you’re a regular reader, you know all markets are not the same. As a matter of fact, the much spoken of averages that are used to simplify discussions about market conditions are more than misleading. All markets are unique and for the most part independent. What is happening in one market has little if any effect on another.
Even so, what is happening in distant or even nearby markets can be an indicator of what is possible and the general direction of markets.
Recent industry headline (Bloomberg.com): “Home Prices Rise in Half of U.S. Cities as Markets Stabilize.” A May 9, 2012 report citing recent reports from the National Association of Realtors stating that: Prices for single-family homes climbed in half of U.S. cities in the first quarter as real estate markets stabilized.
The median sales price increased from a year earlier in 74 of 146 metropolitan areas measured. This being a further improvement over an increase of prices in the fourth quarter in 29 of the 146 markets measured.
While we have not seen an increase in prices locally, we have seen a noticeable reduction of homes for sale and a moderate decline in the rate at which prices are falling, which is often a precursor to market stabilization and eventually price increases.
In other news, the often maligned Fannie Mae on May 7 reported “Confidence in Economy and Home Values Increasing.” In this report based on Fannie Mae’s April 2012 National Housing Survey, both the expectation for home prices and the percentage of those who think the U.S. economy is on the right path reached record highs for the current era. Americans continue to expect home prices to go up, with the projection averaging 1.3 percent over the next 12 months, the highest value recorded. At 71 percent, a high percentage of Americans still say it is a good time to buy while the percentage that said it is a good time to sell was 15 percent, a one-point increase from March.
A recent CNN Money report stated, “Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market. With home prices down 34 percent nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable — but it won’t stay this way for much longer. Stuart Hoffman, chief economist for PNC Financial Services, said he expects home prices to flatten out by the third quarter and start climbing by next year.”
Other financial institutions agree that the market is improving and see an increase in prices, albeit a small increase in 2013. While the expiration date on the fire sale of housing is still in question by location, when you look at these trends and the fact that housing affordability has reached its highest level since record keeping began in 1970, combined with even lower interest rates, now increasingly looks like the time to buy.
Even so, I remind you of the three most important factors in real estate: Location, location and location. Alabama as a whole remains one of those locations where the impact of the down market is still being felt. According to the CoreLogic index the states suffering from the highest level of average housing deflation in the last year were Delaware, Illinois, Alabama and Georgia.
But it does look like the market is turning
. It looks like we are bumping along the bottom of the market with gradual improvement on the horizon, but remember that varies from location to location, from neighborhood to neighborhood.
The big question is will this good news hold or will another wave of foreclosures cause a further market decline before the next bottom is felt. This shadow inventory is the topic for our next conversation.
May the market be with you.