Is The Real Estate Market Recovering? Low Inventory Is Creating Demand
It seems like it was just yesterday when the recession had a dramatic and negative effect on real estate market. The result of this impact could be directly observed by the large amount foreclosures, short sales and active homes on the market. This nationwide epidemic apparently has taken a change for the better and in the past couple of months, the declining number of available homes for buyers to purchase has dwindled down to record lows. This positive story is clearly evident when examining the sales and inventory statistics for Brevard County Florida. For instance, Brevard had nearly 10,000 single-family homes available when the recent recession first hit in December of 2007. Today’s number of only 2750 homes available is stark contrast to those dismal numbers of days past.
For nearly 5 years, the real estate sector faced excess inventory leading to falling prices and as the economy sank, consumers became even more wary of buying property. Now, the economy is slowly inching its way back to normalcy and buyers are trying to find permanent addresses for themselves. The problem though is that now there is a shortage of good houses for the interested and qualified buyers. This translates well for potential sellers, since they now get to talk within their terms. Well priced homes are seeing multiple offers and the sellers no longer have to respond to lowball offers.
People who are renting homes could be feeling the squeeze in the near future. Rent is bound to increase for a large number of households because of the pent-up demand for rental homes. The end result will most likely encourage landlords to hike up their leasing rates. The ensuing rental inflation will inevitably require many families who were renting, to buy a home of their own. Apart from this, there is the administration-initiated program that stipulates that homes obtained under Fannie/Freddie financing can be rented out but not sold for the next 5 years. The same goes for bank-foreclosed homes that until some time back were being sold off the courthouse steps to individual investors. Now, the banks are retaining those homes and may eventually attach them to the Fannie and Freddie packaging program selling them to large pools of investors with massive amounts of capital meaning these would be available for rent but their sale restricted for the next 5 years.
The economy is gradually improving and more jobs are becoming available. Consequently, families who were living in rented homes, doubling up or living with their parents are gradually able to stand on their own two feet, regain their former freedom and have a home of their own. Add to this the HARP-2 refinance program, which is kicking in that allows those who continued paying their mortgage to be automatically refinanced and their current rate which is historically low will be applicable to the new finance. This again translates to even less inventory of available homes to purchase.
Shifting focus on Brevard County once again; so far in 2012 there has been an average of 550 homes purchased each month. With the economy’s upswing in momentum, now more than ever people and investors believe that no investment gives better returns than real estate. The current “Market Absorption Rate” is less than 4 months. A 6 month or less absorption rate is considered a healthy market. Buyers who are sitting on the fence deciding on whether or not to purchase may regret not acting now. If you are thinking about starting your search for your next dream home, the clock is ticking.
Central Florida Market Trends
The following are highlights and my market observations from today’s market trends:
• From the peak of the Real Estate market in early 2006, real estate prices in general have declined nearly 50% and in some markets more than 50%. Real Estate remains a neighborhood business and prices can fluctuate greatly between communities and there are many variables that do affect prices positively as well as negatively.
• January and February Central Florida Sales Reported, 1,820 and 1,847 units sold – I would like to make a comment with respect to looking at reported sales numbers, which in reality is like looking into the rear-view mirror.
• Central Florida February reported new contracts written were at nearly a four-year high with approximately 4,000 new contracts written, which will result in higher reported sales numbers in the months ahead.
• Since the beginning of 2010, we have seen an increase in consumer confidence and a great deal more optimism than we experienced in 2008 and 2009. Buyers are returning to the market.
• 2010 will be viewed as the market transition period with prices stabilizing and sales increasing.
• Overall listing inventories have dropped from a high of over 26,000 listings in February 2007 to 16,000 in February 2010.
• We are sensing that mortgage financing will become more competitive and new mortgage products will be introduced this year, which will help to improve sales.
• In February, all cash sales peaked out at 54% of all closed transactions. This is partially due to some real estate products being difficult to finance and partially due to some consumers becoming more frugal and not wanting to take on new debt.
• Distress Sales will remain active through 2010 and beyond as many homeowners elect to step away from their properties that are presently worth substantially less than their outstanding mortgage debt. This trend will be further supported by The Treasuries new initiative taking effect on April 15th that will require all mortgage lenders who have received TARP funding to more aggressively facilitate short sales for homeowners who are in financial trouble but do not qualify for The Administrations mortgage modification program. Under these new guidelines lenders will be required to preset short sale acceptable pricing before a home is listed for sale and will be required to accept an offer above the stated price. Buyers who submit an offer to purchase a short sale should also receive a response within two weeks as opposed to many months. This will greatly assist in removing distressed properties from the market.
• Central Florida’s $1 million-plus home inventory appears to be more stable than it was in 2009 with the high-end home inventory being reduced from very high numbers in 2009, which is a true reflection that sellers are adjusting to the new market norm and adjusting their sale prices accordingly.
