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Construction will pick up too. The Federal Reserve just reported not just strengthening home sales but more construction across most of the country. Jobless claims declined sharply last week; consumer confidence still isn't strong, but posted a five-year high. Political commentators have wondered whether the much-improved unemployment numbers are a statistical fluke or a political conspiracy, but there is a third possible rationale: it's real estate, stupid.
Real estate will never grow to the proportions it had at the height of the Bush-era bubble, when it was two and a half times larger than it is today. But it is why things will get better. In fact, it's why they already have. Life is full of ups and downs, but after four years of bad news from the real estate industry, a few ups are ahead.
Well good! Now that we're all in agreement that housing prices can only go up from here, you better buy now, or you'll be priced out forever!!
Strategic Renter
2012 Oct 17, 7:54am
Redfin=Realtor site=What else would you expect them to say.
Fail!
Well, what I found interesting is that only 11% of survey respondents think real estate will go down. That's a huge shift from a year ago, and consumer sentiment tends to play a large role (speculation) in housing.
Well, what I found interesting is that only 11% of survey respondents think real estate will go down. That's a huge shift from a year ago, and consumer sentiment tends to play a large role (speculation) in housing.
I noticed that as well. As soon as everyone gets back on the bus, they'll flick the lights out
Nobody can offer any explanations as to why house prices will move upwards from here (as if that's even desirable). In order to have continual northward movement in house prices, you need people waiting in line to stick their head in the guillotine, and while I'm certain there's plenty of fools that still exist, I find it hard to believe there is enough of them that are credit worthy enough to allow for any kind of sustained up swing.
My personal observations here locally are still the same. Some shit hits the market and sits and sits until they pull it. Some stuff sells in decent amount of time, but only if its priced to sell from the gate. Most sellers are so delusional that they end up having to drop the price 15+% in order to actually close the deal. So I am not surprised that those with a vested interest are convincing themselves that their shacks are worth more then they actually are
The reality in my area is that sellers aren't getting their wtf asking prices despite the low inventory and low interest rates. For example, in a local market in Orange County California that I have been looking at for the past 2 years, sellers have been forced to drop their asking prices and even sell below the new list price.
Over the last 3 months 98 regular properties have sold. Eight at original list price, twelve above original list (+11k avg, +3k median), and 78 below (-$39k avg).
For the 12 that sold above list price, the average is skewed by two properties that sold for 50-65k above original list. So, the median is more representative of seller pricing power. Most sales above asking are in the 1-5k range.
29 of these regular sales had a price reduction for an average of -$80k. Two had price increases of +$43k, but sold for only +7k above original list.
These are the facts on the ground, despite a drop of 66% in listed inventory over the last year (110 houses now versus 300+ a year ago). Source: Redfin. Location: Yorba Linda, CA.
And, these price reductions don't include the homes that are pulled off the market and re-listed at a lower price. Redfin and the MLS for obvious reasons don't track this data. The only way to track how many homes are listed and then delisted and relisted at a lower price is to manually track every home for sale in the area and compare the listings/pendings/sales. I've done this for Yorba Linda. It's very time consuming, but I have seen that 2-5% of the inventory is constantly being pulled and relisted at generally lower prices.
Just got this from Redfin. It touches on price forecasts as well as banks holding back inventory. Bears won't like it much, and its from redfin, so take it for what its worth...
Moving Up from the Bottom
You may remember back in February, Redfin was one of the first to call the bottom of the U.S. housing market, even as others were still revising their 2012 forecasts further downward. Who was right?
Well, even the sometimes-bearish Goldman Sachs just predicted that home prices will increase 2.0 percent over the next 12 months, rising another 2.8% in the following 12 months. JPMorgan CEO Jamie Dimon said on Friday that housing has turned the corner.
Only 11% of consumers now expect home prices to decline. U.S. home prices jumped 5.4% in September over last year. Over that same time, inventory declined 29%.
The Number of Homes for Sale in 2012 Is Way, Way Down
Many Buyers, Few Sellers
And from here on out, the inventory crunch will only get worse. With less than eight weeks before Thanksgiving, few sellers will jump into the market now, so supply will keep falling.
But demand so far has shown little sign of slacking off; in September, when back-to-school usually slows buyers, 3.5% more Redfin home-buyers toured U.S. homes for sale and 4.5% more wrote offers to buy them. Mortgage applications for home purchases hit the highest level since June, though we expect that to slow starting this week.
Shadow Inventory, Shadow Demand
The market just now feels like the last day of summer camp, when everyone tries to hook up; most campers end the ride home staring out the window of Mom's station wagon. Home-buyers are headed into the holidays feeling the same frustration.
The result is a relatively new phenomenon. Just as economists have long worried about shadow inventory -- the reserve of foreclosures banks haven't yet put on the market -- we now see shadow demand, with hundreds of thousands of would-be home-buyers from 2012 going into 2013 still looking for a place.
The Conspiracy Theories and the Truth
But hold up, you say, what about that shadow inventory? For months now, we've been duking it out with suspicious readers about whether the banks have been conspiring with one another to dump more foreclosures on the market once prices rise. But every month it has become more clear that the conspiracies are canards.
True, foreclosures are continuing to rise in the judicial-foreclosure states, where a court runs the foreclosure process. It turns out that foreclosures can be fair or fast, but not both. The states that are fast, like Arizona, mostly shrugged when a resident lost his home in a rigged foreclosure, but now Arizona will recover three years ahead of the states that were fair, like Florida. Nationwide, foreclosures hit a five-year low.
The Rise of Short Sales
Short sales, where the bank lets a home-owner sell the place for less than he owes on the mortgage, have been the safety valve. As we predicted more than a year ago, in the most distressed parts of the country there are now three times more short sales than foreclosures. These sales are far better for local real estate prices than a foreclosure, mostly because the home hasn't been left for dead over 18 months.
It's making a big difference: shadow inventory has declined over the past year more than 10 percent. For underwater home-owners who want to stay where they are but just need a lower rate, government programs are finally helping too, as people are now paying off their old mortgages at a rate not seen since 2005.
Interest Rates Keep Falling
And interest rates keep falling. One area where we were dead wrong, partly out of some misguided political conviction, was about how long the government could keep rates down. As economists like Paul Krugman never tire of noticing, it turns out the government can keep rates low for a long, long time:
Interest Rates Are At Historical Lows
Our Bold Prediction: The Empire Strikes Back
So if real estate is doing so great, when will it help the rest of the economy? U.S. banks have already benefited, with the two biggest just reporting record profits. Finally, inventory has started to increase in at least one market, Phoenix, as higher prices induce owners to put their homes on the market, which will in turn increase sales volume.
We think this trend will broaden in 2013. Next year will be the first year in the last seven to begin with a wide consensus that home prices are rising. Given the backlog of people who have wanted to move for years but couldn't, we think there will be a flood of new listings after the SuperBowl, which will create far more sales and far more jobs in the real estate industry. Already, Redfin is hiring like mad.
#housing