We didn’t start the fire. . .
But we are certainly going to ride the wave! Since teh beginning of January the market has been more active than we’ve seen in the last 3-4 years. February did not disappoint! The number of homes sold are up 8% over Febrary 2011, and up 31% from the low of 2010! Pending sales in January (It’s too early to tell for February just yet) were up 16%. All very good signs.
In addition, the average sold price was up 8% from the same month last year. What this tells us, and we can confirm by experience is that the “Move up” buyer is a very hot segmant right now. A “move up” buyer is someone who is selling a smaller home to move to a bigger home, and there couldn’t be a better time to do it. Those are all local numbers.
We are also seeing the First Time Home Buyer come back into the market. Back in 2010 when the last incentive expired, it pretty much stole about a year and a half worth of buyers from the future. Those who were thinking of buying in 2011 were coaxed to buy in 2010, taking advantage of the tax credit.
Nationally there are some very good signs too. Housing affordability is the most favorable that it’s been on record. Affordability is defined as the percent of mean family’s income required to make mortgage payments on a median-priced home. In 2011 it dropped to 13.6%.
To put this inperspective, this means that your mortgage payment was the same as it would have been back in 1989!! Simply put, there has never been a better time, nor will there be, in our lifetime to buy a home.
Another impressive, telling national number is the home prices trend. Historically, Home prices have appreciated an average of 4% a year. If that trend were to be followed right now, the average price that a home would sell for would be $219k. Due to the current down turn, the average price in 2011 was $166 or 24% below the 4% appreciation trend. This tells you that more people should be buying homes right now. It’s time to get off the fence.
The key to getting the housing market to turn to the upside is employment or rather, unemployment. That is the number that drives all other numbers. Gary Keller in his Vision Speech to more than 7,000 Real Estate agents last month laid out the vision of how he see’s the housing market recovering. STEP 1 is to stabilize home prices. I believe we are seing that as I type this. STEP 2 is to stabilize the Banking system. Once home prices are stabilized , the banking system can be stabilized. STEP 3 is to create jobs. And STEP 4 is to stimulate the economy. The bottleneck in this process is going to be in creating jobs.
Gary Keller believes that job creation will come from one of two places: Either a new industry being created or it will come from demographics. Here’s what that means – the number of jobs that need to be created over the next 3 years, every month is just staggering. The only industry that feasibly could lead us out of this fast of jobs is the energy sector. Unfortunately there isn’t enough investment and growth in that sector to place hope there. The other option is going to be demographics. What that means is the “Baby boomer” generation is done making their contribution. The next group of spenders, those who are about 45- 50 years old are about 8 – 9 years away from replacing the Baby boomers in spending.
In the end, what this means that with out the creation of a new industry creating massive amounts of jobs, the only place we have to look to help boost “the system” is about 8-9 years away. This leads us to believe that we are going to see a very flat real estate market for the next 8-9 years. Sure, there will be some micro appreciation, some local markets doing well, others not so well, but nationally speaking, it will not appreciate as we might expect.
We know it seems like we just made two contradicting statements. One one hand we said it’s an amazing time to buy and on the other we are saying that things aren’t going to get a whole lot better for a while. That’s true. However, most people stay in their homes for about 7 – 9 years. Chester County is a VERY stable place to own a home, which will really help the market and it’s pretty much 100% certain that interest rates WILL NOT stay a the historical low they are at now. Inflation may take care of that later this year.
So for those who plan on staying in their home and not “flipping” it, it is still an amazing time to buy and take advantage of the tax advantages that owning real estate provides, plus building equity. Don’t forget, we believe we have seen the bottom or are pretty close to it.
All in all – it really is an amazing time to be involved in real estate, either as an agent or as a buyer or seller. If you have been thinking of making a move, we would love to speak with you and help you get a clear picture of reality – of the market, of opportunties exist for you and your situation, what threats there may be. So don’t hesitate to call us now. We love helping those we call friends!!
Monthly Numbers:
DEMAND
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SUPPLY
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PENDING
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AVERAGE SOLD PRICE
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LIST TO SALE PRICE RATIO
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National Home Prices
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Affordability Index
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1989 vs 2011
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Four Steps to Recovery
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What Does This Mean For ME?
IF YOU ARE SELLING OR THINKING OF SELLING:
Yes – it is still a difficult time to sell a home. However, our team continues to have great success getting homes sold. At the end of October , we’ve sold 41 homes. In the end, you must have an exceptional agent by your side to help you get the information and perspective you need to make this critical decision. We’ve helped many clients do just that over the last year and a half. Call us today to let us know you need help.
IF YOU ARE BUYING A HOME OR THINKING ABOUT IT:
There continues to be amazing opportunities there for those who have all their “ducks in a row”. If you do not have a home to sell, that means knowing the process, having your financial options figured out and knowing, clearly, what you are looking for. If you have a home to sell, that adds that you have met with Caleb to know what the SELL side looks like and then meeting with Chris to clearly nail down the buy side. Interest rates are amazing, hovering around 4.25%. So if you are thinking about buying, call us today to get that ball rolling.
NEXT STEPS:
BTW, We do have very specific data for every price range and area of town. Want specific data pertaining to your neighborhood or your own home? We have it! Please let me know if you would like a neighborhood-specific analysis by contacting me!
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