Its officially a seller’s market.
There’s great news for home sellers across the country. Watch Kendra Todd’s latest Fox News report on where housing is headed and why sellers should put that for sale sign in the yard.
According to CoreLogic, homes prices ended 2012 with their biggest annual gain in six years. Values are up 5.8% year over year, prices rose in February for the 12th consecutive month, and inventory is at its lowest level since 1999. And in Fannie Mae’s most recent housing survey, consumers maintain their optimism toward home prices, while the share of consumers who said now is a good time to sell has reached a record high.
The result? One HOT sellers market. The housing bounce-back and the resulting demand from buyers has squeezed inventory to the point of bidding wars and offers above asking price. Spring and summer are generally periods of increased demand for homes, and this one is shaping up to be the best in years. If you’re a seller contemplating whether to the sell, the timing doesn’t get much better than now. If you’re in the market to buy be prepared to act fast, put your best offer forward, and expect some stiff competition.
This puts luxury home sellers in the best position of all, because higher-priced homes were the first to show price gains over the past year, and at a greater rate of appreciation than the rest of the market. Historically, the luxury market leads the recovery, as buyers tend to be better capitalized and the supply is even more limited.
This is also good news for underwater homeowners and those living in hard hit markets like California, Arizona and Florida, where some areas have experienced 20% + price gains while inventory has plummeted 27% or more.
Right now there are 10.7 million homeowners still underwater with their mortgage. Economists believe a home price increase of 10% or less would be enough to bring about 40% of underwater homeowners out of negative equity, which could lead to more homeowners listing their properties, easing the inventory shortage.
Most markets are deemed “under-valued’ with home prices still 21.9% below their peak in 2006. Delinquencies are on the decline, consumer confidence is strong, and interest rates remain historically low. Today’s buyers are able to afford 25% more house than they were 5 years ago!!! (Ex: A $1,000 mortgage payment today = a $225,000 loan amount. 5 years ago $1,000 only got you a $160,000 loan).
The latest housing figures are encouraging enough that some research firms have revised their home price forecasts upwards from a 5% up to 8% gain this year.
The question is whether the positive trends are sustainable? I’m cautiously optimistic about housing’s near-future, but it’s important to keep an eye on some of the things that could dampen the progress the market has made.
Inventory is going to be the predicating factor for housing’s future. With summer approaching, some markets could possibly overheat due to tight supplies, worsening home affordability and dampening sales numbers. Radar Logic attributes recent gains and inventory absorption to elevated investor demand and a higher than usual amount of all cash purchases – drivers that are not expected to last as housing prices increase.
There are also 5.3 million homes in delinquency or foreclosure that still need to work their way through the market. That said, foreclosures are down more than 20% since this time last year, and the discounts that come with them are too. Foreclosures currently sell on average 12% below similar non-distressed homes. This is a marked improvement from the 30% deep discounts at the foreclosure peak two years ago.
There is still some uncertainty as to whether housing’s turned the final corner on the road to recovery, but the short-term outlook – especially for sellers – is bright indeed.
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