Time to Get Back into Real Estate

I know many of us have been saying this for some time now, but when the news media starts saying it – well, I guess that makes people stand up and take notice. A number of recent articles in the national press are now saying that it might be the right time for consumers, who have largely been on the sidelines, to jump back into the housing market.

I understand why potential buyers, whether first-timers or move-up buyers, remain cautious given all the economic headwinds and bad news out there. Economic growth has been slow, the jobless rate too high, and don’t even get me started about the politics in Washington, the euro-zone debt problems and the challenges facing Greece.

But I often urge buyers to examine what I like to call your “personal economy.” That is, if you have a steady job, reasonable credit, and enough savings for a solid down payment, you might want to take a deep breath and think about taking the leap into the housing market while prices and interest rates are so low.

Read what two of the nation’s top business publications, Fortune magazine and The Wall Street Journal, are telling their readers:

“Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.”

- “Real estate: It’s time to buy again,” Fortune Magazine article by Shawn Tully.

“Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income.”

- “It’s Time to Buy that House,” The Wall Street Journal article by Jack Hough.

Tully in the Fortune piece interviewed Mike Castleman, founder and CEO of Metrostudy, who has spent more than 30 years tracking data on the inventory of new homes in the United States. Each quarter, inspectors go through 45,000 subdivisions from California to Maryland. According to Fortune, inspectors examine 5 million lots and record whether they contain a house under construction or completed.

What has Castleman observed? The glut of new homes that the U.S. had a few years ago at the peak of the market has rapidly disappeared. Instead, he told Tully that he has seen a rapidly declining inventory that could force prices higher. In the 41 cities Metrostudy looked at, there are just 78,000 houses vacant and for sale, or under construction – less than a quarter of the 343,000 units at the height of the market in 2006 and less than the total a decade ago.

"The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses,” Fortune quoted Castleman as saying. “And in most markets the price of new homes is fixin' to rise, not fall."

Metrostudy collects figures on the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all them to determine whether individual markets have a surplus or a shortage of homes. "If we had anything like normal levels of buying, those houses would sell in 2½ months," Castleman told Fortune. "We'd see an incredible shortage. And that's where we're heading."

Fortune says that consumers may be confused by conflicting news reports on the housing market, and that could be impacting their confidence in buying a home. On one hand, housing affordability has never been better. But on the other hand, they continue to see housing starts falling and home prices still heading down in some markets.

Tully said economists Robert Shiller and Karl Case, authors of the S&P/Case-Shiller Home Price indices, have different views about where we are in the cycle. While Shiller remains pessimistic, Case is more optimistic that things are starting to turn around, telling Fortune that "the lack of new home building is a huge help that a lot of people are ignoring.”

In its analysis of the housing market, Fortune noted that it’s important to look at the economic fundamentals of home ownership to see where the market is headed. As home prices rose sharply over the past decade, Tully said the magazine warned that a bubble was forming due to the level of new construction and the cost of owning a home compared to renting one.

“Eventually reality set in, and prices plummeted,” Tully said. “Our current view focuses on those same fundamentals — only now they're pointing in the opposite direction,” Fortune noted. “So let's state it simply and forcibly: Housing is back.”

The Fortune article said what will drive the recovery of the housing market is a sharp drop in new home construction, as noted in the Metrostudy research, as well as a big drop in home prices. Home prices have fallen about 30% nationwide since 2006, Fortune said, and more than 50 percent in hardest hit markets. With unusually high affordability levels, the article noted, Americans will start returning to the market.

While no one can predict with certainty the future of home prices and sales volume, it is safe to say that a turnaround will eventually happen. Timing the market is very difficult because you will never know the absolute bottom until prices have started going back up again. My advice is to look closely at your own “personal economy” and talk with a professional Realtor to see if now might be a good time for you to take advantage of low prices and rates, and join others in taking the plunge into buying a home.

Monthly Mortgage Payments and College Tuition

Every so often, I read an article or blog that really gets me thinking. The chief economist at the National Association of Realtors, Lawrence Yun, recently posted about how a home buyer’s average mortgage payment today is not much different than it was 30 years ago. Though 1981 saw mortgage rates of 18 percent, home prices were much lower than they are now; and now that interest rates are so low, it is almost even.
Yun says, “Compare the chart below on the 30 year payment growth of the overall consumer price index, rent, food prices, gasoline prices, college tuition, and medical costs, versus the monthly mortgage payment. The rapid increases in college tuition bills may also imply too much demand, perhaps even a bubble in term of students not getting their money’s worth.  A recent spike in college student loans is due primarily to weak job market conditions, but may also be due to ‘over investment’ in education in relation to the cost.”

The slow growth in monthly mortgage rates and how cheap homes are on a per month basis makes a real value proposition for homebuying! Now is the time to buy an investment property, call me today at (303) 442-5001 to discuss your options.

Reasons to List During the Holidays

I often speak with homeowners who tell me they’re going to wait until spring to list their home. Anyone who has learned the law of supply and demand knows that increased competition drives down prices on any product, homes included. Here are 11 important reasons why now is the time to sell!

1. People who look for a home during the holidays are more serious buyers!
2. Serious buyers have fewer houses to choose from during the holidays. Less competition means more money for you!
3. Since the supply of listings will dramatically increase in January, there will be less demand for your particular home. Less demand means less money for you!
4. Houses show better when decorated for the holidays!
5. Buyers are more emotional during the holidays, so they are more likely to pay your price!
6. Buyers have more time to look for a home during the holidays than they do during a working week!
7. Some people must buy before the end of the year for tax reasons!
8. January is traditionally the month for employees to begin new jobs. Since transferees cannot wait until spring to buy, your home must be for sale now to capture that market!
9. You can still be on the market, but you have the option to restrict showings during the six or seven days during the holidays!
10. You can sell now for more money and we will provide for a delayed closing or extended occupancy until early next year!
11. By selling now, you may have an opportunity to be a non-contingent buyer during the spring, when many more houses are on the market for less money! This will allow you to sell high and buy low!

Economists Revamp Forecasts for the Better

In light of more positive news on the economy and housing market in recent weeks, economists seem to be updating their forecasts to be rosier. I’d think this fact alone would help boost consumer confidence, but the numbers are speaking for themselves.

Last week the Bureau of Economic Analysis released data indicating GDP rose 2.5% in the third quarter, due largely to consumer spending.  And, the Mortgage Bankers Association reported a 4.9% rise in mortgage applications last week, as both home purchases and refinances increased. Investors helped fuel the rise in activity, a positive sign for the housing market that that group is ready to buy again.

The National Association of Realtors is projecting a 1% rise in sales of resale homes this year and another 4.3% increase in 2012, with the existing-home median price rising – yes, rising – 2.6 percent in 2012.

Other economic indicators are relieving recession fears, and fortunately the “double dip” is looking more like a once-popular news sound bite rather than reality. Of course time will tell how this economy plays out, but when the media start sounding upbeat, that’s a win-win!