You have to love the media. One day they will be reporting doom and glooom, the next day it’s all sunny skies. So, who’s right?
When it comes to the real estate market, realtors are supposed to be at the helm of the ship, so to speak. They need to be able to navigate the waves of housing prices rising and falling, interest rates increasing and decreasing, as well as the temperaments of buyers and sellers. It’s a tough job, and, without the facts, many realtors abendoned ship when the market began to tip into uncharted waters at the beginning of the recession.
A lot of what I will be sharing with you is Courtesy of the great Steve Harney, a real estate expert that Amy and I have been following for the past few years while we worked through the “housing crisis.” Thanks to this man and his great insights into the market, we have not only been surviving the storm, we have been thriving with our clients. It really pays to keep current on what is going on in the market, and Steve’s real estate blog KCM.com is a valuable resource.
The big question of the day is: Is the housing market really making a recovery?
TWO STEPS TO HOUSING RECOVERY:
1. SALES (The rise in sales must come first)
2. PRICES(Then the rise in prices will follow)
According to the National Assoication of Realtors (NAR), pending home sales are up 8.6 %. Okay, so that may not seem like a lot, but any rise at this point in time is a rise to celebrate. Buyer confidence is increasing, and with that, so are home sales. Amy and I have been telling everyone over the past 3 years that NOW is the time to buy. It still is. Fannie Mae is projecting sales to continue to rise for new construction, which is phenomenal. Over the past few years, builders were halting home production, because there was just too much inventory on the market as far as new homes were concerned. Builders were having to sale the houses for a song. Since sales are up now in new construction, they are able to get back to building for a profit, but they are still adding plenty of incentives for buyers. It’s a win/win! Fannie Mae is also predicting a slow and steady increase for exisiting home sales.
Remember, slow and steady wins the race.
Steve Harney puts it in perfect perspective with how inventory on the market affects home prices.
While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline by which to go:
- 1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
- 5-6 months’ supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
- 7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.
According to KCMBlog.com, we are at about 6 months of inventory, which means that the market is balancing out. This is good news for sellers. There is a 1.5 % projected increase in home prices over the next year, 2% increase for 2014, and prices will be up by 3.6% by 2015. The increases in home prices are slow, but again, slow and steady will win the race in the end.
I am sure you are wondering about foreclosures, and how they are affecting home prices. Appraisers have had to use foreclosures as comparables in their reports, which has brought the home prices down. The good news is that the foreclosures are beginning to balance out, as well. there will be a few more months of foreclosures hitting the market, but at least the inventory is beginning to deplete. Banks are also more willing to work with home owners and sellers, as well. Short sales are on the rise, in lieu of foreclosures.
The good news is that, even though there will be a slight increase in foreclosures hitting the market (shadow inventory), South Carolina as well as North Carolina are not in the red. Which means that in the next few years we will see an uptick in prices.
WHAT DOES THIS MEAN FOR BUYERS?
I am going to stress this…you buyers that are sitting on the fence, wondering when the perfect time to buy will be. NOW! NOW! NOW! Here’s why. No one knows exactly when the housing market will be officially recovering, but when it does, not only will home prices be on the rise but INTEREST RATES, as well. To put it in perspective for you, I need to break it down by monthly mortgage payments.
2001….Sales Price $250,000+7.13 % APR(Interest Rate)=$1700 Monthly Payment
2012…..Sales Price $250,000+4 % APR= $1200 Monthly Payment
That’s a monthly savings of $500…yearly savings of $6,000…and over the life of a 30 year mortgage, you are looking at saving $177,000!
Convinced yet? I tell you what, those interest rates will be rising soon and you are going to wish you had bought your house when you did.
WHAT DOES THIS MEAN FOR SELLERS?
As a realtor, I understand that it is a frustrating process selling your home during this time when housing prices are either falling or they are slowly stabilizing, which may not be to your advantage. Especially if you bought your home when the market was at its highest, chances are that you will have to bring money to close or opt for a short sale. House prices are up nationally 1% from last year. And I have already told you, sellers are looking at the additinal 1.5% increase each year. As a seller, you need to ask yourself how important is moving on with your life versus the money you will make from the sell?
An example: If you are intending to sell you home for $300,000 in a housing market that is only supporting sales between $250,000-$275,000, you are looking at years and years of waiting for the pricing to pick up to the number that you need. Is waiting 5+ years for the market to pick up worth the $25,000 you’d eventually be getting at closing? For a lot of sellers, it’s moving to that new city to obtain a better job that they could be sacrificing. For others, they are denying themselves being closer to loved ones. And for what? For a few more bucks in their pockets? This isn’t a judgemental thing, but sellers need to realize the value of moving on with their lives vesus waiting for the market to improve enough to their satisfaction.
Right now may not be the best time to sell, but right now IS the best time to buy. If you have decided to sell your home, accept the fact that your realtor will get you through as quickly and painlessly as possible, but you may have to sacrifice a little at the closing table to gain a lot in your next purchase and your life. Sell low, buy low.
In review, the facts are there. The market is making a recovery, however, it will be a slow and steady one. Right now, we are seeing the market stabilize. In the future, we will see the housing market in full recovery mode.
Want more real estate information? Keep Current Matters Blog
My Realtor Site: Morgan Overcash, Realtor/Licensed Assistant