Wednesday, August 29, 2012

Existing Homes Sales Improve as Prices Rise

According to the National Association of REALTORS®, resales of single-family homes, townhouses, condominiums and co-ops increased 2.3% in July from June to a seasonally adjusted annual rate of 4.47 million after an unexpected fall in June.

Resales jumped 10.4% compared with the same month last year. Economists at the association believe sales could reach 5 million next year.

Nationwide, prices have increased substantially, with the median rising 9.4% from a year ago to $187,300 last month. The increase is the largest since a 10.2% boost in January 2006.

According to economists, demand is stronger due to low mortgage interest rates and rising rents.  Distressed homes, which include foreclosures and short sales, made up 24% of sales in July, down from a quarter the previous month and nearly 30% a year earlier.

The median price of a single-family home was $188,100, up 9.6% from the same period in 2011. Sales of such properties rose 9.9% over the same period to an annual rate of 3.98 million.

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Thursday, August 23, 2012

National Housing Shortage

As we see signs of a housing market recovery and the glimpse that things seem ready to return to normal, major markets across the U.S. are about to be impacted by a new housing crisis… a shortage of housing.

According to the National Association of Realtors, a comparison of the second quarter of 2011 to the second quarter of 2012 indicates:
  • Existing home sales are up 8.6%
  • Existing inventory for sale is down 24.4%
  • Median home prices are up 7.3%
Individually, each of these statistics indicates a major market transition. Collectively, they show unprecedented one-year movement in the housing market.

According to the U.S. Census, the recent history of housing construction has been relatively consistent (between one and two million homes produced since 1968):
  • Between 1968 and 2008 at least one million homes were constructed each year
  • The year with the greatest output was 1973 at 2,100,500 homes
  • The year with the lowest output was 1982 at 1,005,500 homes
  • The average output between 1968 and 2008 has been 1,531,900 homes
In 2008, there were 1,119,700 homes constructed. Of course, we now know that 2008 was a pivotal year in the housing market. In 2009 these numbers began to change dramatically.

Between 2009 and 2011 there have only been an average of 647,600 houses built, and every year since the number of homes built has declined. According to the Joint Center for Housing Studies at Harvard University, this year's report estimates we need between 1.18 million and 1.38 million housing units per year to meet the demand for new household development that will occur between now and 2020.

Based on these numbers, one can draw the conclusion that we will see a constrained inventory market in the immediate future. Couple this with the fact that housing is more affordable than it has ever been, and interest rates are at record lows, and the picture of an oncoming national shortage becomes much clearer.

Real estate professionals have been shocked by how quickly markets across the country have transitioned from excess inventory to having constrained inventory. The first markets to experience the housing crisis in 2007 and 2008 have been the first to experience the housing shortage in 2012. Markets in Florida, Arizona, Nevada and California are already experiencing constrained inventories. Year-over-year sales in the sub $100,000 price category has plummeted in these areas by as much as 40%.

The severity of the housing crash is affecting the speed with which the home construction markets are responding to a housing shortage. Companies in the construction supply chain have downsized or disappeared in record numbers. Given the lead times in housing construction due to permitting, manufacture of supplies (drywall, lumber, etc.) and the availability of skilled labor, the speed with which the market can react to demand has slowed considerably.

If you are one of the millions of Americans that have been sitting on the fence waiting for the ideal time to purchase a property, this may be the time to seriously consider making your move. This is true of individual homebuyers, but it is also true of real estate investors as well. In 2010 investors represented 17% of the housing market; in 2011 they represented 27%, and all indications are that we are in the midst of another major investor purchase increase in 2012. 34% of all homes purchase today are purchased all-cash.
For investors, housing today represents an investment class that outperforms every other class of investment in both cash returns and, for the past year, in appreciation of equity.

It may hard to imagine a housing shortage in the middle of what many consider a housing crash; however, the numbers, market conditions and major market inventories are starting to make this startling prediction real.

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Saturday, August 18, 2012

The Impact of Supply & Demand on the Housing Market

For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market, as it is in the markets for every other saleable item, will be determined by the concept of ‘supply and demand’.

According to, “the relationship between supply and demand determines the price of a commodity. This relationship is thought to be the driving force in a free market.”

In real estate, supply and demand is represented as the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

Most real estate professionals know, or at least have a good idea of, the month’s supply of inventory in their market. But why? Because of its effect on pricing moving forward.

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. 1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
  2. 5-6 months’ supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
  3. 7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.
When you discuss home values with either a seller or buyer, you should be prepared to show what the supply of, and demand for, homes is in the same category of home they are thinking of selling or buying. You should also be prepared to discuss any projected change in those numbers (such as a potential shadow inventory of distressed homes or a projected increase in demand because of a new plant opening).

Wednesday, July 18, 2012

Could the Housing Crisis Be Over?

According to forecasters surveyed by The Wall Street Journal, the housing market has reached bottom. Of 44 economists surveyed only three said they didn’t think the market had reached bottom yet.
The recent momentum in housing has many economists and forecasters convinced that the worst is behind us. Many real estate indexes indicate that home prices are up, sales of existing and new homes are picking up year-over-year, and inventories of for-sale homes have fallen dramatically.

Many economists believe that the decrease in for-sale inventory is the key and will likely help maintain the rise in home prices.  According to the Wall Street Journal, the number of vacant homes is at its lowest point since 2006.

Now that the “bottom” has been reached, economists admit there’s still a long way to go for a full recovery.  In particular, more than one in every four home owners with mortgages are still underwater, owing more on their loan than their home is currently worth. However, analysts note that rising home prices are chipping away at that number. Also, shadow inventory of unsold homes and foreclosures still threaten the momentum of the recovery as well.

Many economists note that going forward housing is unlikely to drag the U.S. economy down further and will instead reflect the strength or weakness of the overall economy.  The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses.

Saturday, February 18, 2012

Think Like a Buyer

As you gather up your belongings and pack them away to prepare your home for potential buyers, try to picture your home through the eyes of a buyer. Consider which items should be left out for buyer appeal.

Often the wrong items are left on display -- things like family photos, personal keepsakes, and treasured belongings. All of these items should be safely packed away which very often creates open space (a plus for buyers) on shelves, refrigerator doors, and desktops.

Buyers often make a decision within just seconds of seeing your home about whether or not they want to buy it. So What do you see in about 10 seconds?

When you walk up do you see children’s toys scattered across the front lawn. Do you see overgrown shrubs and weeds? Do you see chipped paint on the front door, a screen that’s torn? Do you spot oil spills on the driveway?

Answering yes to just one or two of these questions can be damaging to the buyer's first impression of your home -- before the buyer has even entered your home. Sometimes, those seconds are all the buyers need to decide to simply do a "drive by" and not even stop to go inside.

Of course, the goal is to get the buyers inside -- to get them to spend time, feel like your home could be their home. Here are five tips that can make your home appealing to buyers:
  • Check all the screens and molding around your windows and doors. Even slightly torn screens send a careless message to buyers. It gives an unconscious uneasiness that there has been a lack of care for the home.

  • Add artwork to long hallways. You don’t have to buy artwork that costs thousands of dollars but, if your home has long hall ways, it’s nice to break up the monotony with some tasteful artwork. Use contrasting shades and hues to coordinate with the flooring.

  • Make the kitchen a focal point. Whether they cook or not, the kitchen is of primary interest to many buyers. Winning over buyers with an appealing kitchen can often convince them that they must have the home. Make sure your appliances are clean, sparkling, and working. Return on investment in the kitchen is usually high and worth every penny.

  • Put the "ah" in the bedroom. The bedroom needs to look like a bedroom. Many people use their bedroom for other things such as an office or storage. Boxes or newspapers are scattered or stacked in a corner. There’s no "ah" or sense of relaxation with that kind of room. So even if that’s how you’ve been living, understand that’s not how you should show a home.

  • Clear out the clutter. Remove excess furniture. It doesn’t matter if you use it. You can walk to another room to get what you need if it means you sell the home faster because it now looks more inviting and spacious.

Making your home more appealing is about seeing your home through the eyes of your potential buyers. When it comes time to consider an offer, you’ll be glad you did.

For more helpful tips for sellers, visit my website or click here.

Friday, February 17, 2012

MaineHousi​ng Rate Decrease

A lower cost funding source has allowed a reduction in interest rates for MaineHousing. The interest rate decrease is effective immediately.

MaineHousing offers programs and services that make housing more affordable to Maine people. For more information on a mortgage visit the MaineHousing website or click here.

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