Housing Sales Are Climbing and Housing sales up for the fourth consecutive month The month of August began cautiously with mixed economic news, but by the end of the month, the outlook for September housing was greatly improved. The Bureau of Labor Statistics reported that job losses were continuing, but at a slower pace. Housing continued to improve, largely driven by the first-time home buyer tax credit. The National Association of REALTORS reported that July existing home sales jumped 7.2 % — the largest monthly sales gain since 1999 and the fourth consecutive month of growth. If the current rate of improvement in existing homes remains at a steady pace, from 9.8 months on hand in June to 9.4 months on hand in July, the existing housing market could be balanced (on a national basis) in approximately eight months. On August 20, the Mortgage Bankers Association announced that mortgage applications were also up, as interest rates crept down to a five-week low, with purchase applications up for the third consecutive week. Among the reasons cited were the success of the first-time home buyer tax credit and price-to-income ratios falling below historical trends. Momentum in housing sales should continue, spurred by the end of first-time home buyer tax credits on November 30, 2009. With new banking and appraisal rules adding time to the typical closing process, first-time home buyers should open escrow by the end of September if they hope to close on time and qualify for these credits.
Reasons to Buy Now
The economy is improving The worst recession since the Great Depression may be winding down, said The Conference Board on August 20, 2009. The analysts found that leading economic indicators rose 0.6% in July, following a 0.8% rise in June. That's two consecutive months of improvement halting eight months of declines. While the indicators can certainly slide backward on new data, serious home buyers should realize the days of wholesale bargains may be numbered. This could explain why California entry-level prices are rising, and luxury home owners are starting to stick to their prices.
Inventory is being absorbed We appeared to hit bottom during the second quarter of 2009. Since then we have seen a steady rise in closed sales. Existing, or pre-owned, home inventories are being absorbed and are close to a balanced market at 9.4 months of supply. At their highest during the recession, new and existing home inventories hovered at 11 months on hand. A balanced market is approximately six months of inventoryon hand.
Average sales prices are starting to rise Lawrence Yun, chief economist for the NAR, says that improved affordability has driven sales, with first-time home buyers taking advantage of the tax credit. "The demand for foreclosed and lower-priced homes has spiked, and lack of inventory is becoming a common complaint,"he notes. In many Southern California communities, homes priced at or below conforming loan levels have little inventory on hand, allowing sellers to raise prices and entertain multiple offers.
Advice for Home Buyers Since May 2009, Federal Housing Finance Agency appraisal regulations have slowed home sales transactions. The National Association of REALTORS® has found that 76% of its members reported delays in closing. As the first-time home buyer tax credit comes to a close, banks will be inundated with loan applications for an already narrow production pipeline. Home buyers should allow at least 60 days closing, which puts some first-time home buyer loans at risk of not meeting the November 30, 2009, deadline if they are not in escrow by the end of September 2009.
Advice for Sellers Price your home for today's market, not what you think it will do in two or three months. Lenders are very cautious about appraisals. While demand is picking up, the percentage of foreclosures in the second quarter 2009 was the highest ever recorded by the Mortgage Bankers Association. The trade organization says foreclosures will continue to grow, peaking at the end of 2010 — placing continued pressure on pricing. To avoid delays in closing, make sure your home is in top repair and you have all your property disclosures ready for the buyer's inspection. You may see some buyers still waiting for signs of a bottom, but motivated buyers will respond immediately to a well-priced home in great condition.
SAN DIEGO COUNTY data shows: • San Diego County is experiencing a seller's market in affordable homes priced below $799K. Only homes priced above $900K are selling more slowly at 17.2 months of inventory on hand. • Sales volume in detached homes builds into a buyer's market at $800K and above. Those homes priced $900K and above have nearly 17 months of inventory on hand. • Sales volume in attached homes builds into a buyer's market at $600K and above. However, attached homes priced $900K and above have nearly 18 months of inventory on hand. • The disparity between active listings price per square foot and sold listings suggests there is plenty of negotiating room in detached homes, particularly in the luxury price ranges. • The price per square foot is much higher in active attached home listings than sold listings, and lower pending prices suggest that buyers know they have negotiating room. • Absorption rates are flat in detached homes, due to rising inventories. Sellers are testing the market while buyer activity is high. • As new listings enter the market in attached homes, absorption rates appear to be flattening, even though both new listings and sales are rising. • With prices down 22% year-over-year, detached home sales are trending much higher. Not only are sales volumes breaking a two-year down streak by Q-2, 2009, sold prices are rising too. • Prices in attached homes were down 30.4%, among the largest declines in Southern California. However, sales volume is up 5.7% as of June 30, 2009, stimulating the first price increase in Q-2, 2009 in two years.
