The Real Estate Market Is Speaking: Are You Listening?
Real estate is intensely local but national trends do influence some local behavior. Fannie Mae’s June 2012 National Housing Survey finds growing expectations of improving prices over the next 12 months, rents increasing 4.0 percent, mortgage rates rising, and 73 percent of those surveyed think now is a good time to buy. Confidence that the economy is moving in the right direction stalled at 36% but that was near a two year high. Even the percentage of those thinking it is a good time to sell is growing.
So what’s happening locally? There is no question that our local economy is improving. Unemployment is dropping, mortgage rates remain at historic lows, and home affordability has never been better. Last year the housing market here stabilized with unit sales up 2.3 percent and the average sales price dropping slightly by 2.6 percent. Buyers locally have apparently gotten the message. Unit sales for the first six months of this year rose 17.6 percent and dollar volume rose 23.8 percent. The average sales price actually rose by 5.2 percent and rose even more in some areas.
So what is the market telling us? There is no question that this is a great time to buy a home for a primary residence, vacation or retirement, or as an investment. Mortgage money is readily available for the employed with a reasonable credit score, and though inventory is dropping there is still is an adequate selection. Real estate sales have always been cyclical and it could be that we are at the beginning of an up cycle. Real estate investors were first to recognize the opportunity and have helped lead the recovery. The National Association of Realtors® says that investors purchased almost a third of existing homes last year. Increasingly, owners of single homes are choosing to move funds from paper assets or retirement accounts to the purchase of investment property. Given many poor investment options currently, real estate is increasingly being seen as one of the safer investments with the potential of strong returns.
It also could be a good time to sell. Yes, sell! Houses currently on the market that are priced accurately and present well are often receiving multiple offers. There is still pent up demand from first time buyers and sellers can take advantage of that now. Since prices have softened over the past four years sellers who want to move up to a more expensive home that has been beyond their reach in the past may now find it possible. Historically low interest rates can be locked in for 30 years before they begin their inevitable rise. Selection of homes is still good but declining, so acting now before a true sellers’ market emerges is important.
There is a caution, however, to potential sellers who are waiting for a market recovery to sell. Since the market is off the 2005 peak by as much as 33 percent, if prices increase by the pre-bubble amount of 3.6 percent a year, it could take more than ten years for a full recovery. During that time mortgage rates could change substantially as well as local economic conditions or other home ownership benefits. Waiting for a full recovery may be a flawed strategy.
We know that buying a home is rarely a pure financial decision and is primarily driven by lifestyle issues and life events. I think, however, that from a financial perspective we can find some comfort in the encouraging signs of a real estate recovery if we listen to what the market is saying.
It’s saying, “Now may be the time to make your move.”
| ||Debbie Barnett is president and owner of Tomie Raines, Inc. The company was founded in 1977 and Barnett has owned the company since 2002. She began her real estate career in 1985 after attending Michigan State University and was an award-winning agent with two other local firms before joining Tomie Raines, Inc. in 1995. Barnett also owns TRI Title Agency and Tomie Raines Home Warranty Company.|