Real Estate Blog
Wednesday, May 30 2012
Record After Record Shatters as
By Michael Ardolino, Broker-Owner, Realty Connect USA
It seems that virtually every week, mortgage rates defy the expectations of bankers, economists, and consumers. It has happened again. Rates have hit yet another all-time low, for the third week in a row: The 30-year fixed rate is at 3.79%, and the 15-year is at 3.04%. These rates, along with equally impressive record levels of home affordability, increased hiring, and rising consumer confidence, are spurring sales. Nationally, homes are selling at the rate of 12,474 per day. According to the National Association of Realtors, existing-home sales increased by 3.4% in April from March.
There is more good news:
Foreclosure rates are at their lowest level since 2007. This is due in part to the fact that many banks have begun offering incentives for homeowners to opt for a short sale rather than hang on until the home is foreclosed. A short sale is less expensive for the bank, less damaging to the homeowner’s credit, and less of a drag on neighborhood home values. The number of foreclosures is also being lessened by investors, who are snapping them up in some parts of the country in an effort to beat price increases.
Pending home sales are way up all over the country, reflecting both continued market momentum and pent-up demand of sellers who are ready to move. (See Exhibit 1.) This is certainly true locally; our sales volume is much improved and more people are coming to open houses. MLS recently reported that Long Island’s pending sales for April were up by 13.8% over last April.
The supply and demand equation is changing for the better. In some parts of the country, inventory is back to a 5 or 6-month supply, indicating a balanced market. Locally, our inventory remains on the high side but is declining. According to MLS, the number of properties available on Long Island went down by 7% in April from one year ago.
We still have a way to go in terms of prices. Home prices in some parts of our region have begun to show signs of stabilization. In certain neighborhoods, here and there, prices may have hit bottom, or are likely very close to it, which would mean that our market can begin to strengthen. We won’t return to the boom years of double-digit home price appreciation. Those levels were unsustainable. Our movement now is toward a flatter, more balanced market, which is the healthy, historical norm.
Today’s market is summed up by Celia Chen, Director of Housing Economics for Moody’s Analytics, as follows:
“The residential property market is recovering, as the factors underlying demand and supply strengthen. Even after accounting for unusual seasonal patterns brought on by the unusually warm winter, conditions have not been this strong since the government ended homebuyer tax credits in 2010.”
The changing market is changing the attitudes of both experts, such as Mark Kiesel of PIMCO global investments (see Exhibit 2), and average Americans. The bears are turning into bulls.
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