After the housing market bust we experienced across the country in 2008, many experts have been quick to warn that a new bubble may be forming in some areas.
One particular example of this is a recent article pointing toward the California Bay Area’s price gains over the last 18 months.
The quickest and easiest way to show how far we’ve come and how far we still need to go in regards to the ‘Peak’ is to share CoreLogic’s Price & Time Since Peak figures, used to create the map below.
Even with the high performance of prices in the Bay Area, the state of California as a whole is still -14.4% below their Peak, experienced in May of 2006.
The biggest challenge facing the housing market’s recovery right now is the lack of inventory available for sale. Prices are determined by supply and demand. Right now buyer demand is out-pacing seller supply, across many price ranges, driving prices up.
Traditionally the Spring months have been the most popular dates sellers choose to list their homes. With additional inventory coming to market soon, meet with a professional in your local market to evaluate your best course of action.
Now that the market has showed signs of recovery, some sellers may be tempted to try and sell their home on their own (FSBO) without using the services of a real estate professional.
Real estate agents are trained and experienced in negotiation. In most cases, the seller is not. The seller must realize their ability to negotiate will determine whether they can get the best deal for themselves and their family.
Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies which work for the buyer and will almost always find some problems with the house.
- The termite company if there are challenges
- The buyer’s lender if the structure of the mortgage requires the sellers’ participation
- The appraiser if there is a question of value
- The title company if there are challenges with certificates of occupancy (CO) or other permits
- The town or municipality if you need to get the COs permits mentioned above
- The buyer’s buyer in case there are challenges on the house your buyer is selling.
- Your bank in the case of a short sale
The percentage of sellers who have hired a real estate agent to sell their home has increased steadily over the last 20 years. Meet with a professional in your local market to see the difference they can make in easing the process.
There have been some who have voiced doubt as to whether or not the younger generations still consider buying a home as being part of the “American Dream”. A recent study by Merrill Lynch puts that doubt to rest. According to their research, every living generation still maintains that owning a home is in fact important. Here are the numbers:
This should not surprise us as many studies have revealed the benefits enjoyed by the families who own their own home. One such study was done by the Joint Center of Housing Studies at Harvard University that addressed a major financial benefit to owning your own home: forced savings. The report explains:
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
The Merrill Lynch study proves this point with the following data on home equity (a form of savings):
There are many reasons that owning a home makes sense. The financial reasons are powerful. As one participant in the Merrill Lynch study put it:
“When I was younger, I always worried about that monthly mortgage payment. Now that I am retired, I have the peace of mind of knowing I own my home free and clear.”
A recent Bloomberg Business article reports that both Lowes & Home Depot experienced fourth quarter profits that beat revenue projections by the most in six quarters. So what does that mean to the housing market?
Lowe’s Chief Executive Officer Robert Niblock said,
“Consumers are feeling better about their jobs, their wages and certainly feeling better about the value of their home, they are re-engaging in projects that they have put off.”
Sales to professional contractors have increased significantly as well, and were a driving factor in the quarter. Home Depot’s Chief Financial Officer Carol Tome calls this a “sign of health. If they are putting more items in their basket, it means they have work coming at them.”
Home Values Rising
In a quarterly consumer survey conducted by Lowe’s since 2007, the percentage of respondents who said that the value of their home is rising increased to its highest value ever, at 50%.
Whether Americans are finally adding that man-cave they’ve always wanted, or renovating a master suite, an increased confidence in the value of one’s home often sparks homeowners to invest in big-ticket projects.
The National Association of Realtors (NAR) reports that the median price of an existing home (for all housing types) rose year-over-year for the 35th consecutive month.
Not all who are renovating are planning on staying in their home. The Demand Institute reports that “nearly half of American households plan to move at some point in the future.”
For those who are planning on listing their home this spring, spending the time and money needed to update that 1950’s bathroom or kitchen can fetch higher prices in today’s market.
Meeting with a local real estate professional can give you insight into the small (or big) improvements your home could use to draw the highest price and return on investment this spring.
That headline might be a little aggressive. However, as the data on the 2015 housing market begins to roll in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME!
We realize that existing home sales stumbled in January compared to December. But, if we compare the current September-January time period to the same period a year ago, we can see that existing home sales have outpaced last year every month with the January sales numbers 200,000 homes greater than last January:
Pending home sales (houses going into a contract) as reported by the National Association of Realtors has also done much better in the last five months compared to a year earlier:
And, buyer demand is continuing to skyrocket:
At the same time, the amount of housing inventory coming to the market compared to last year is plummeting:
With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Call in a local real estate professional today to see whether that is the case in your neighborhood.
Just like our clocks this weekend in the majority of the country, the housing market will soon “spring forward”! Similar to tension in a spring, the lack of inventory available for sale in the market right now is what is holding back the market.
Many potential sellers believe that waiting until Spring is in their best interest, and traditionally they would have been right.
Buyer demand has seasonality to it, which usually falls off in the winter months, especially in areas of the country impacted by arctic temperatures and conditions.
That hasn’t happened this year.
Demand for housing has remained strong and is currently three times stronger than last year at this time.
The National Association of REALTORS (NAR) recently reported that the top 10 dates sellers listed their homes in 2014 all fell in April, May or June.
Those who act quickly and list now could benefit greatly from additional exposure to buyers prior to a flood of more competition coming to market in the next few months.
If you are planning on selling your home in 2015, meet with a local real estate professional to evaluate the opportunities in your market.