May 10, 2012 Vol. 5, Issue 4
What are real estate professionals saying to homebuyers and sellers about current market conditions? The successful brokers and sales associates are talking about the strengths that exist in the market. Below are positive angles that appeared recently in the media and underscore why it is a good time to buy real estate.
Home Prices Stabilizing
New reports from several real estate research firms signify that home prices are finally stabilizing. The data reinforces a notion already asserted by many an economist, real estate agent and Wall Street investor: that 2012 is the year of the bottom.
The National Association of Realtors reports that in the first quarter of 2012, the median existing single-family home price, or final sales price, rose in 74 of the 146 metro areas (51%) that the association tracks.
Housing inventory levels have been shrinking across the U.S., leading to bidding wars and modest upward pressure on prices in some areas.
David Stiff, chief economist at Fiserv, notes that non-price metrics like home sales volume, increased spending on home improvement and more multi-family construction indicate that the housing sector has bottomed.
"This spring the housing market is responding to an improving balance between real estate supply and demand which is causing stabilization in house prices," notes Mark Fleming, chief economist for CoreLogic, in the report. "Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales."
-- "Home Prices Are Stabilizing, Signifying A Housing Market Bottom," by Morgan Brennan, Forbes, May 9, 2012.
Some Economists Say that It’s a Good Time to Buy a House
Mark Kiesel, the Pacific Investment Management Co. managing director who sold his home in 2006 when he deemed the market a bubble, says it’s time to buy. "I was one of the most negative on housing," Kiesel said in a telephone interview. "I finally came to the conclusion housing is looking pretty decent."
Economists including Mark Zandi of Moody’s Analytics Inc., Bank of America Corp.’s Michelle Meyer, CoreLogic Inc.’s Mark Fleming and Chris Rupkey of Bank of Tokyo-Mitsubishi UFJ said last month that housing prices are close to a trough.
"For those of you renting or on the sidelines, I recommend you at least consider getting ‘back in’ and buying a house," Kiesel wrote. "The future is hard to predict, but U.S. housing is healing and is probably close to a bottom."
-- "Pimco Housing Bear Kiesel Says It’s Time to Start Buying," by John Gittelsohn, Bloomberg, May 4, 2012.
For today's homebuyers, the weight of the monthly mortgage bill is the lightest it's been in decades. In 98 of the top 100 metro areas, it's now cheaper to buy than rent. "If you have good credit," says IHS Global Insight economist Patrick Newport, "this is the best time in 40 years to buy."
-- "Mortgage Payments at Lowest Level in Decades," by Beth Braverman, CNNMoney, April 23, 2012.
Fiserv Forecast: U.S. Home Prices Could Rise 4% a Year for the Next Five Years
Average U.S. home prices — down by a third since 2006 and still falling — will rise almost 4% a year for the next five years, according to a new forecast. Market watcher Fiserv sees prices stabilizing by summer's end and then climbing, quickly in some places until gains taper off. The forecast is based on an analysis of leading home price indexes. Investors will drive much of the momentum, as they are now in cities such as Las Vegas and Phoenix. First-time and trade-up buyers will eventually follow.
-- "U.S. Home Prices Could Rise 4% A Year, Forecast Says," by Julie Schmit, USA TODAY, May 9, 2012.
Pending Sales of U.S. Existing Homes Increased 4.1% in March
Signed contracts to buy U.S. homes rose more than forecast in March as low interest rates drew buyers back into the market. The index of pending home purchases rose 4.1% to 101.4, the highest level since April 2010, the National Association of Realtors reported. The median forecast of 43 economists surveyed by Bloomberg News called for a 1% rise in the measure, which tracks contracts on previously owned homes.
"It’s good news," said Sean Incremona, senior economist at 4Cast Inc. in New York. "It does suggest that improvement in the housing market is continuing."
-- "Pending Sales of U.S. Existing Homes Increased 4.1% in March," by Lorraine Woellert, Bloomberg, April 26, 2012.
MBA: Mortgage Applications Rise – Rates Fall
Applications for home mortgages rose last week, with purchase demand improving for the third week in a row as loan rates fell to new lows, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, gained 1.7% in the week ended May 4.
The MBA's seasonally adjusted index of refinancing applications was up 1.3%, while the gauge of loan requests for home purchases climbed 3.4%.
Fixed 30-year mortgage rates fell to the lowest level ever recorded by the survey, averaging 4.01%.
-- "Mortgage Applications Gained Last Week: MBA," by Reuters, May 9, 2012.
Economists Upping Their Forecasts for 2012
The U.S. economy will grow faster than expected this year, despite the headwinds of higher gas prices and Europe's financial crisis, according to USA TODAY's quarterly survey of economists. The economy is strengthening enough that two-thirds expect the Federal Reserve to raise interest rates sooner than its late-2014 target, although none expects it to happen at this week's Fed meeting Tuesday and Wednesday.
"Things are getting better," said Jeff Rosen, an economist at Briefing Research in Chicago. "The economy is picking up and hiring is going to be on the rise."
-- "Economists Upping Their Forecasts For 2012," by Tim Mullaney and Barbara Hansen, USA TODAY, April 23, 2012.
Regional Update: News from Markets around the Nation
Las Vegas, Nev.
Home prices rose for the third straight month in April and the inventory of listings shrank to a five-week supply, the Greater Las Vegas Association of Realtors reported Monday. The median price for 3,185 single-family houses sold in April was $127,900, up 4% from the previous month and up 2.3% from April 2011.
It is the first time prices have increased on a year-over-year basis since August 2010, said Kolleen Kelley, president of the Realtors association. "Of course, this has a lot to do with our shrinking housing inventory," she said. "Based on current demand, our housing supply is down to about four to six weeks."
-- "Las Vegas Home Prices Rise with Fewer Homes for Sale," by Hubble Smith, Las Vegas Review-Journal, May 8, 2012.
The state’s resilient housing market continued to show signs of recovery in March, as buyers chased discounted prices and posted the eighth consecutive month of single-family home sale increases.
"I’m excited about what’s happening," Karl Case, co-creator of the Standard & Poor’s Case-Shiller Index told the BBJ."Over the last six months there have been lots of positive numbers: housing starts are up, inventories are down, first-time and speculative buying is on the rise."
-- "Real Estate Market Getting More Competitive," by Thomas Grillo, CBS Boston, April 23, 2012.
Zillow.com, a Seattle-based real estate website that reports home values aren't just stable but rising in Miami-Dade, Broward and Palm Beach counties. Prices in South Florida reached their low point at the end of 2011, according to Zillow. The optimism extends beyond Zillow. The Sun Sentinel interviewed a dozen builders, buyers, analysts, real estate agents and other local housing observers, and 10 agreed that the region has reached a housing floor, despite concern that another wave of bank-owned homes will hit the market.
"For people who have been waiting to time their home purchase close to market bottom, it's time to start shopping," said Stan Humphries, Zillow's chief economist.
-- "South Florida Housing Market Has Hit Bottom, Zillow Says," by Paul Owers, Sun-Sentinel, May 6, 2012.
Ocean County, Calif.
It looks like there's spring in the spring homebuying season. The Orange County home inventory report from Steve Thomas and ReportsOnHousing.com — data as of April 26 includes – showed soaring demand and tight inventory.
Thomas calls the report "staggering." He notes that: "Listing Inventory is at its lowest point since June 2005; Demand is at its highest level since June 2005; The expected market time is at its lowest level since June 2005; Closed sales have not been this low since October 2006 (May 2010 was at a similar level, but only temporary due to the expiration of the first time home buyer tax credit); The distressed property inventory is at lows not seen since September 2007.
"The sleeping giant, housing, has awakened. The most fascinating aspect of this latest shift in the market is that absolutely nobody forecasted this major step in a housing recovery."
-- "There’s Spring in Homebuyers’ Steps," by Orange County Register, May 4, 2012.