The news is so up and down these days! Here’s a quick breakdown of the recent housing news and what it means for us…
The National Association of Realtors home resales figures for October showed, as expected, a real boost from the First Time Homebuyer credit as people rushed to get to the closing table under the uncertainty of whether the federal tax credit would be extended. (It was.) Existing home sales surged 10.1 percent to 6.10 million units, seasonally adjusted, compared to the 4.94 unit level recorded in October 2008. This was the highest activity level in resales since February 2007.
Lawrence Yun, NAR chief economist, warned that the heavier than expected October sales will probably spell declines during the month of December. Some potential home buyers will take a break for the holidays, while others will gather their resources for a spring onslaught of the housing market before the homebuyer tax credit program expires in the spring.
NAR also reported that certain areas have received such a strong surge of buyers that multiple bids are frequently coming in. Some of these hot markets include metro Washington, D.C., parts of Florida, and the Southwest. First Time Buyer inventory is becoming tight in many cases, however, because many retail buyers are still reluctant to run the risk of waiting for a Short Sale. Just be sure that your first time buyers are qualified and that they will not need to seek loans and make sure to weed out FHA or other seasoning requirements for your Buyer’s loan if it is a short sale.
Unsold inventory is down 14.9 percent from a year ago. The average days on market has dropped from 8 months in September to 7 months in October for MLS listed properties. The median residential home price is now $173,100, which is down 7.1 percent from a year ago. Distressed property makes up 30 percent of the market.
These indicators are showing that in many markets, we should be focusing on newer homes. People are going to be a little more wary of buying an older house when there could be a newer one coming on the market due to a foreclosure or short sale for the same price or even slightly less. Of course if you are in a market full of older homes, this isn’t as big of a factor.
Many experts believe the housing market is not out of the woods and that there will be a double-dip in the housing recession. Prices are expected to continue to fall in many markets by another 5 to 10 percent by spring. Harvard economist, Howard Glaeser, for example, believes that cities in the cold, industrial Northeast and Midwest will never fully recover from the housing crisis; the Sunbelt will gradually sop up the oversupply of homes because these areas of the country are still going to continue to grow. (See “
Will Your Hometown Be a Boomtown Again?” in
Money Magazine (November 25, 2009).)
Reason for pessimism is seen in the foreclosure statistics. The Mortgage Bankers Association said last week that a record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. Driven by rising unemployment, fixed-rate loans made to borrowers with good credit accounted for nearly 33 percent of new foreclosures last quarter. That compares with 21 percent a year ago.
The Wall Street Journal points out that it is new construction and new home sales that are tied to measures of economic health in the GDP calculation, not home resale. Thanksgiving week the Commerce Department reported that new home construction dropped 10.6% in October to 529,000 units on an annualized basis, the lowest level since April. This poor showing in the new housing market caused many economists to lower their estimates of the 4th quarter's GDP to around 3% instead of 3.5%. This is just another indication that the economy is still weak and that we cannot count on a steady improvement in the resale housing market necessarily. There are plenty of bumps, twists and turns in the road ahead.