The Real Estate industry is a leading indicator of economic cycles. We are the first into a down cycle and also the first out. There are signs that the market is bottoming. There are other factors that could skew a recovery, but the activity reported by some agents on Active Rain throughout the country and in our own market is worth considering.
Historically, real estate values cannot be sustained long without income rising accordingly. This fact was lost in the boom years between 2003-2007 (in some areas of the country the years vary).
During 2007 one by one, sub-prime lenders folded. I remember when GreenPoint folded. They were the go-to guys for challenged buyers long before sub-prime was a buzz word. Apparently greed got the better of them.
The CEO and Founder of Watson Realty has hinted that we are at the bottom of the market. Sales in our office are up 18% over 2008 and we closed over $8,000,000 in January. Showings are almost triple since the first of the year.
Quote from Househunt article.
"- Delinquencies. Another indicator is the rate of late payments on subprime mortgages. Because the delinquency rate on each "graduating class" of mortgages tends to peak about 18 to 24 months after the loans were originated, the mortgages from 1999 to 2005 have already peaked, the class of 2006 is starting to peak and the class of 2007 is "still going through the roof with no sign of abating," Dotzour says. There is no class of 2008 because such mortgages have been virtually extinct this year.
"The party stopped in about July 2007, so if you take that out 18 months, that's the spring of 2009. At that point, the last class of subprime mortgages will have peaked in terms of delinquency ... so the pressure on prices coming from foreclosures is likely to peak" at that time or perhaps 90 days later, Dotzour says."
Since the first of the year, people have commented on Active Rain posts that investors are back in the market (John Novak, Las Vegas, mentioned this in a comment on a post), that there are declining inventories and rise in sales - (Elizabeth Weintraub, Sacramento)
and that properties priced correctly are selling quickly (Bill Gassett, Metrowest, MA)
Did I mention we have had multiple offers on several properties?
Here's a new post (concerning multiple offers) by Elizabeth Bolton in Cambridge, MA
Zip Realty noted inventory in 29 major markets was down 13 percent from January 2008 in the Wall Street Journal. In January, inventory normally climbs, recovering from holiday lag. Inventory must bottom first before prices stabilize.
While all real estate is local, these reports are coming from different areas of the country, not just one area.
Fannie and Freddie have extended the moratorium on foreclosures until the end of February. There is talk of banks allowing people to stay in their homes and rent them, or banks share equity when the properties are sold, or putting a balloon on the end of the mortgage for the amount the property is upside down. Banks are short selling homes back to the owners, refinancng them at the lower rate.
The Senate quickly passed a $15,000 tax credit incentive last week that is expected to also pass in the House. This is amended. The credit is now $8000 for first time homebuyers and as it stands as of 2/12/09, does not have to be paid back. There are guidelines that have to be met to get the full amount. This is still subject to another vote, so nothing is final yet. Please see below for full information:
If this passes, some of the buyers on the fence will return to the market, finding low interest rates and a tax free loan irresistible. Consider also the pent up demand that exists in the market place - people hesitant to buy until 'bottom.'
Are we seeing signs of the market bottoming, or is it a mere lull?
Please share what's going on in your market.
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Frank & Sharon,
This is a very interesting material. I would be shy to say that there is more activity, even though we see the phones to be more active and walk-ins are a little by little coming back. In our area it is usually more active in the spring, and we maybe still more dormant.
Jon - Thanks. We are definitely seeing more activity. We have received contracts on three of our listings this past month. Walk-ins and callers have been very active.
Frank & Sharon - we have been seeing multiple offers on listings for several months now...our prices are still declining but the amount of sales are definately increasing.
the market in the LC Valley has picked up, prices going down still ... but showings and pending sales are increasing!
activity is on the rise, i hope you are correct in that the market may be in an upward swing.
Frank and Sharon
I am VERY hopeful that we will start the upward movement now.
In my neck of the woods, we are seeing multiple offers (even on fixers), As long as the prices are aggressive or reasonable, there seems to be a number of buyers getting off the fence and actually exploring their options.
In our office, we celebrate every escrow that opens, by having a group email so that we can be inspired by the activity.
It's opportunity time. Make the most of it. Any agent who isn't focused on hard work at this time will probably have to get a job.
Sharon it is good to hear there are signs of recovery in your market. We have not seen it yet here where I am in Mass.
We have spoken to many buyers this week in our pipeline.
Many of them are in Wait and See how the final bill comes out and is signed into law.
December was an awesome month here the first time ever for me between Thanksgiving and Christmas.
I hope we have hit the bottom, but you never really know until it is on the way up. I think buyers are jumping in now because they may be thinking it is the bottom .
Lori - That is great news. It is what we are seeing. Our inventory is down over 2,000 units from September 2008.
Patty - Prices will decline until inventory stabilizes but showings and pendings are the first step!
Doug - I'm just reporting the facts. Numbers are impartial and they indicate an upswing.
Pacita - What a great idea to celebrate each sale! I'm going to mention it to my broker.
Lenn - I ran into a former agent in our office who has a job and a builder's rep who detailed almost 10 agents vacating ther company within the last few weeks. Our office is down 20+ agents from 2005.
Bill - It is good news. We need good news when it is out there, especially since we don't get much of it from the mainstream media.
Frank - interesting information, I will have to pay closer attention to the market around here. We trailed the country on the downturn, hopefully we won't trail as far behind on the upturn.
Mike - look at your inventory from last fall and definitely check out pending sales and the % of inventory that is short sale/preforeclosure. You may be closer to coming out than you think. Perhaps your area didn't have as many subprime loans.
Great post Sharon! I can't believe how you and I seem to be on the same wave length on so many occasions. I have been writing a similar post since last week. Some of the comments here will be quoted in that future blog.
Our oceanfront pendings have multiplied ten fold since the beginning of the year. Amazing!
This is now featured on the Optimist group.
Thank you!
I re-blogged it. May I also post it (with your by-line and link, of course) on my company blog?
I wonder, though, if these aren't anomalies, a combination of areas that are not suffering horrific unemployment but are attractive to people with some money on the sidelines (e.g. baby boomer executives on the cusp of retirement). Not throwing cold water, but just wondering.
I would not overstate the potential impact of the Stimulus bill's $15,000 tax credit. While the bill got rid of the ridiculous repayment provision of the last version, the $15,000 is still only available over 2 years ($7500 per year) and is not a "check" from the government (it's a tax credit - reducing taxes owed to the government). Since it is not a cash infusion, it still requires buyers to come up with the money to put a down payment on a home and pay for closing costs - sometimes a struggle for folks. I know that some folks are waiting on the sidelines to see if this bill passes before they make a home buying decision, but given its impact at the time of sale I would question how this could literally stimulate the housing market, other than psychologically.
I believe that we are nowhere near the bottom. Ann Arbor, Michigan is not indicative of the overall economy in our state. It is an economy onto it'self.
Here in Jackson, Lansing, Hillsdale, and around most of the state, we are still losing jobs. Our Town, (soon to be a village) is on the front end of another 1600 manufacturing jobs either leaving or being bought out. Ann Arbors cheap homes sell for around $100,000.00, ours you can get for $4,000.00.
Mirela - Of course you can re-post my blogs anytime! It is an honor that you consider them worthy of reposting. Thanks! And yes, we do seem to travel on the same wave length, and that's a good thing I think :)
Larry - Real estate is local and some areas have not had serious overages of inventory like Florida, California, Nevada, or losses of jobs like Michigan and Ohio. I appreciate your input. This is a forum for discussion. Boomers are a factor, but here the buyers we are working with are mostly local people. Some are Navy inbound, but a lot of local people are coming back into the market.
Michael - I did not intend to overstate it. You are correct, people still have to have some funds to come to the table unless they are VA and have all closing costs paid. It is exactly the psychological impact that will give buyers an extra boost of confidence.
Ray - Sounds like your area would be supporters of the Fair Tax. Yesterday I heard someone talking about it and how it would bring manufacturing jobs back to America. It really distresses me to see how many jobs are going overseas due to all the constraints that have been put on companies.
Unfortunately, there are areas where the slump will continue due to job losses. We do have jobs coming into our area and that is no doubt helping, but as I said, the buyers we are working with are mostly people who are already here who have the confidence to jump back into the market. All real estate is local, that's why I asked the question about what's going on in your market. Thanks for commenting.
It's nice to see so many areas doing well. I've commented on several posts over the past few months that things are turning around here, but I've felt like people were blowing me off - didn't believe it! Well, we have 25% less inventory, shorter days on market, 3 to 4 month absorption rate, multiple offers on properly priced homes in decent shape. Everything but the prices going back up! Jobs are coming into our area too - I feel for those areas that are losing jobs. We have family in Detroit.
Here in Sussex County, DE we have seen an increase in interest this year 2009. I have had more showings on my listings in the last 5-6 weeks than I had the last 6 months of 2008. No offers to date but definately seeing the activity. I am hopeful for a good spring.
Joetta - Congratulations! You are trending to a buyer's market. I feel for the areas where so many jobs are being lost also. Those cities are getting a double hit.
Katie - That is the kind of activity that precipitates contracts. If you are getting showings but no offers, look at your comps and maybe it's time to adjust the price or incentives being offered or condition of the home. How exciting!
Things are starting to turn in Denver. Our market started down sooner than the rest of the country.
This all looks very promising. I hadn't heard any cases yet in which a bank short saled and then refi'd a customer at the lower rate- interesting concept. I also heard on NPR this morning that the tax credit is only going to be for first time homebuyers.
Again, it's so local. We have seen traffic increase tremendously at a new construciton site (55+ community) and i've submitted and received multiple offers.
Very comprehensive compilation. In my area, homes are still seeing appreciation - and the "overstocked" inventory that was on the market over the past year is decreasing. Market activity has increased dramatically over the past two months.
In the San Antonio area, we are seeing the investors from out of state starting to come back. There is much more activity overall than just a month ago. Investors and home buyers are realizing this is a great time to buy with lots of inventory, motivated sellers and great rates....Thanks for the encouraging words....
Well kids, our wonderful senators and congressmen killed the $15,000 home buyers tax credit. I thought one of the main features of the plan was to breathe life back into our housing market. We sure could have used it here in Michigan. I heard it was determined to be a needless and too expensive to include. I am not feeling too stimulated from the stimulis bill myself right now.
My wife has been on the phone all morning to one senator or another's office and the Whitehouse. It probably won't do much good, but it lets them know we are watching and aren't happy campers.
Larry Mennetti Grand Rapids
Maybe I am missing something. Sure, in a normal economy, the $15,000 credit would seem like a spur for the residential market. But at the lower to middle end of the market, folks are either out of work or scared they will be. Assuming, under the current strict lending environment, that they would even qualify for a mortgage, they aren't going to buy now no matter what tax credit you offer. And as you go up market, the $15,000 credit doesn't mean as much to the better heeled and certainly would not be in the top two or three criteria for making the decision to stay put or sell and move. The $7,500 credit apparently didn't inspire that many people before the onset of the catastrophic job report numbers. Again, maybe I am missing something, but it would seem that job creation and some creative approach to the foreclosure mess would be a much quicker path to a healthier market. That said, most of the posts here say the local markets are/may be turning around, so maybe the tax credit issue is moot. Let us hope so...
Mike - That is great news. Clark Howard talked about how we are nearing the bottom of the market, that it is months away. He is a very conservative guy so if he is speaking it on the radio, there is definitely something to it. He said sales in Las Vegas are up 15% over last year.
Danell - It is called a 'short refinance' and it is a relatively new concept. Banks are beginning to work with distressed homeowners, finally figuring out it's cheaper to refi with them than go through the whole short sale process. It refinances into a lower mortgage based on what the house is worth today. It's a new concept and will help keep homes off the market.
Janice - That is great news. Glad to hear you are having multiple offers and increased showings!
Penny - Still appreciating? That is truly amazing! Florida Association of Realtors just reported that December sales rose more than any month since the downturn began. Sales jumped 16% over Dec. 2007.
Joe - You're welcome. Sounds like your market is similar to ours. Investors seem to know when to jump back in, don't they?
Larry - I wish we had never even known about it since it didn't go anywhere. I think $15,000 is a significant enough figure for FHA buyers to bring some off the fence. Granted, they would have to come up with the cash up front, or some of it (think negotiate closings costs into the deal), but there would be some money for the inevitable purchases triggered by a new home.
Larry G - I have sold a home to two people who are going to take advantage of this tax credit. I have three other people who are excited about it. Sure there are people who will hesitate, but there are others who are ready to buy and the stimulus is an added incentive, much as a builder's paid closing costs, or a seller's carpet allowance. For the better heeled, it would still give them cash to put down new flooring or countertops.
Frank & Sharon, I hope what you (and some others) are seeing is a leading indicator, but Fleming Island seems like an anomaly. It is still about jobs and job prospects most everywhere else. If the market on Fleming is mostly inbred and self-sustaining, as you indicated earlier, that's terrific for you all, but it seems less reflective of America at large than it does of, say, The Truman Show (sorry for that). I hope the $8,000 tax credit for first-time buyers will help, but it won't for the 600,000 who lost their jobs last week, the 600,000 likely to lose them next week, or the millions who fear the same fate. There are millions of others who can afford to move (and may want to) but wonder if they might have to use their resources to support their kids who can't find a job. The $15,000 would have been helpful at the margins, but the market needs more than a marginal stimulus. Let us hope that what the President signs is enough to at least start to put the brakes on job loss. That, with some creative response to foreclosures, will do a lot more for the housing market.
Larry - Your opinion is well taken. There are areas of the country that will be more affected by job losses than others. Some areas are near bottom, some have further to go. As you can see from the comments above from people all over America, there are real estate markets that are picking up. I don't know where you are located physically, so your local perspective may be different. That is why I asked for people to comment what was going on in their market.
Frank/Sharon, I appreciate the discussion you have supervised here and your thoughts. I live in Avon, Ct, outside Hartford, and am also familiar with the market south of Myrtle Beach, SC where we have a second home. The market in this part of CT has done okay; never went up too fast or far, and hasn't fallen that way either (maybe 15 - 20% from peak). Myrtle Beach is a different case because so many jobs depend on tourism (and golf) and travel has dried up pretty much. The jobs situation there is more my frame of reference, although Hartford is dependent on insurance and aero manufacturing, and we are anticipating more pain regarding jobs. My urge to my fellow boomers up north, those who have pointed toward relocating south but are now reluctant because of the loss in value of their primary homes, is to look at their equity, consider taking what the market will give them, and move. Based on sheer demographics, the population is moving south (batten down your hatches) and prices will re-appreciate there much faster than up north. The longer the boomers wait, the greater the spread will be between their selling and buying prices. Waiting is a fool's paradise, if their long plan goal had been to relocate anyway. But uncertainty rules all markets now, causing the kind of gridlock that I do not think the tax credit would have addressed.
I've pondered the question of the bottom of the market continually. There's a pricing bottom... and a quantity of sales bottom. Where I live, we passed the quantity of sales bottom already as tranasactions continue to rise. However, the pricing continues to fall in most neighborhoods but is rising in some. It sort of reminds me of the example of unemployment statistics... it doesn't matter what the figure is for a state or nation... there's two possibilities for a person it's 100% or 0%. The bottoming of the market is very much a local issue... some neighborhoods are rising while others are falling... and some are currently in the bottom
Larry - We have many people who have sold their homes up north and paid cash here with money still in the bank. We are battening the hatches for the population to come. I lived in Atlanta when it was 'livable' before 4 million more people moved there. I know what you mean! I had a closing today and asked the lender if she thought the tax credit had helped some people make a decision to buy. She said she thought it had but didn't give any real examples. Jacksonville has 10% military jobs, health care, education (which most cities have), shipping, and financial/insurance jobs. I would say we have a fairly broad spectrum which helps us weather declines better than some areas. What do you think about the inflation we could possibly have in a few years that will increase home values everywhere?
Chuck - Agreed. The market will bottom in number of sales before it bottoms in prices. We are already seeing it. Sales are up but prices are still dropping. There is more downward pressure in areas with higher foreclosure rates. One community with 46% short sales has a huge price decline, while my neighborhood with 13% short sales has only declined about 15% from the peak. It is very much a local issue and even a hyper local issue, to wit the two communities above-mentioned.
I believe we will see the bottom of the market in 2009. Already buyers are showing us that they believe that is what is happening. There is greater activity on the buying end. Buyers are paying attention and they are scooping up the deals. This is different from late last year when they were still sitting on the fence not sure whether they wanted to buy or not. I have great hopes for finishing up 2009 with an uptick.
Activity is up in this area too. This is a good sign.
Marian - that's what many people are saying. I just read a financial analyst's newsletter whom I respect greatly, and he thinks the financial markets are going to bottom this year also.
Tony - Glad to hear your area activity is up also. It is a good sign. Buyers who are able are finally willing and ready to get off the fence :)