Real Estate’s Fresh Start
By Michael Ardolino, Broker-Owner, Realty Connect USA
Early January 2013
The year 2012 was the year of the turn-around. Real estate is now the darling of the national economy. Locally, our recovery is less profound, but we are definitely on the mend. During a year of steady progress, inventory decreased to a much healthier level, sales volume increased, and prices stabilized over most of Long Island. What can we expect in 2013?
For the year 2012, the 30-year rate averaged 3.66%--the lowest average in 65 years! According to the Mortgage Bankers Association, rates were expected to trend up in 2013. Instead, a late December announcement from the Federal Reserve unveiled a new program that will continue to keep rates low. This is good news for buyers and should continue to spur activity.
It is also good news for sellers. Consider a homeowner with a 6% mortgage who has been unable to refinance over the last few years. By selling this year and becoming a buyer, the homeowner may be able to lock in a 30-year loan at about 3.2%, or perhaps a 15-year loan at about 2.5%. A move like this can go a long way toward securing a family’s future financial health and stability.
Nationally, prices are increasing, and in some parts of the country significantly increasing. Our time will come, but don’t start the party just yet, and don’t expect huge increases. Locally, prices are expected to increase by perhaps 1.5% over the course of the year. Prospective sellers who may be hanging on, waiting for higher prices, would be wise to weigh their long-term goals against this realistic guidepost.
The Changing Attitudes of Sellers
Some Long Islanders who have owned their homes for a long time have found that there is a respectable profit to be made by selling now. Willing buyers are out there, motivated by low rates and record levels of affordability. Some homeowners with less equity have decided to sell at a lower price than originally anticipated, in order to reach another goal: to move to a better climate, buy in a better school district, take that new job, or be near grand-children. (See Exhibit 1.) A homeowner who sells now also gets a strategic benefit: being unencumbered. Purchasing one’s next home is much easier if the transaction is not contingent on the sale of a current home. An unencumbered buyer has much more leverage.
The Impact of First-Time Buyers
As the economy improves and the market gets tighter, more and more young people are expected to strike out on their own, settling down and buying a home rather than facing rising rents or living with parents. According to the US Census Bureau, household formation figures are way up. (See Exhibit 2.) This will give the market another boost, as first-time buyers spur move-up buyers, and move-up buyers in turn spur luxury home buyers or vacation home buyers. This is an important trend expected for 2013. It is also a classic illustration of how real estate builds wealth over time and why the American Dream is alive and well.
Local Stats Speak Volumes
The number of sales across Long Island increased by 4.2% in 2012 over 2011. For our area, sales volume increased by 17%. All signs point toward meeting or beating those figures in 2013.