The European Debt crisis has been noticeably absent from the news this week. No the crisis is not solved…however it does seem like the imminent reports of a Greek debt default have gone away. The stock market investors don’t know what to do with themselves. The market continues to trade within a very narrow range. Gas prices are hurting at the pump but not enough to really have consumers changing their spending habits.
The housing market continues to be mixed in the recently released reports. Depending on how you look at the data, you can either feel that housing is improving, or it is worsening. Let me explain…
Contract signings for existing home purchases increased 2.0 percent in January which points to strength ahead for homes that actually reach the stage of a final sale. We must recognize that not all transactions reach the point of closing due to factors such as borrower loan rejections and low appraisals. However, if contracts are increasing, home sales should actually increase as well in the coming months. The greatest strength in housing is in the South. Contracts have jumped 10.5% from a year ago and so far in 2012 they are up 8.0%.
As I mentioned before, the mixed feelings on housing comes from the preliminary Existing Home Sale data confirmed by today’s S&P Case-Shiller Report. This report shows a very steep ½% decline in home prices for their 20-city index. Additionally the report indicates that home prices are down from the same time last year by 4%. My one comment about the S&P Report is that we have seen other housing reports in the past contradict their findings. The best thing you can do is look at what is happening in your neighborhood, or even better yet, speak to your local real estate professional and see what they say about your local market.
Some home purchasers believe that home prices will keep falling making a home purchase even more affordable. In my opinion the only catch to this is that housing inventory is continuing to drop. Sooner or later the critical mass of homes available for sale will drop below the necessary supply and that will ultimately reverse the trend of declining home values. I personally think we are closer to this equilibrium point than most people believe.
Despite the S&P Case-Shiller report showing declining home values, there are areas in the country in which we are already seeing multiple offers on properties and home values rising. Believe it or not, these bidding wars are not on amazingly low priced homes, they are on homes that are priced properly to sell at market value. Here is a real estate truth. A home priced right from the beginning, will sell within 30 days or less. Further evidence that home prices may soon begin a broad based increase, the Mortgage Bankers Association reported that last week applications for home purchases increased 8.2 percent.
Housing Recommendation: In our area of the country, I am seeing more homes going up for sale. This tells me that demand for housing is returning and that the spring buying and selling season may be starting a little bit earlier than normal. Mortgage rates are still amazingly low and home affordability is at a record high. If you are looking to purchase a home, waiting to see if home prices will drop another ½% or 1% before taking action in my opinion will most likely backfire. History has proven time and time again that unless we are in a recession, home prices always rise in the spring. We are not in a recession and we are on “Spring’s” doorstep. It’s time to ring the bell.
As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (209) 825-9383