Archive for category Real Estate News
Today’s release of the Standard & Poor’s / Case-Shiller Home Price Index showed that home prices declined for the fourth consecutive month nationally. For December, prices dropped in 18 of the 20 metro areas surveyed by the index.
As I stated last month, what does this mean if you are a buyer? With home prices off 34% from their highs and mortgage rates at record low levels, on a national level this is a phenomenal buyer’s market.
And if you are seller? First understand that 73% of the transaction reported were for houses below $250,000 where foreclosures and short sales are pressuring the market. Also, If you are local to the San Marino and Pasadena area, you can take solace in that our property values have held up much better than a lot of the rest of the country. Our area is now one of the most sought after by foreign, in particular Asian, buyers looking to relocate to the United States. Often cash buyers, this helps mitigate the biggest hurdle in today’s market which is the difficulty some buyers are still having getting mortgages. Make sure that your Realtor and sales strategy are lined up to take advantage of this demographic trend.
Echoing a point that I have been making recently in other posts, the Wall Street Journal published an article discussing the nationwide decline in inventories. Inventories of homes listed for sale declined 6.6% in January, marking the eighth straight month of declines. Realtor.com showed fewer listing versus one year ago in 145 out of the 146 markets that they track.
The same phenomenon has occurred locally here in the greater Pasadena area as well. In general, inventories have declined for a couple of years now. For graphs and examples, see my monthly reports on the market trends for Pasadena, San Marino and Arcadia. While it may be frustrating for the home buyers short term, long term this should be a healthy sign for the stabilization of housing prices in the future.
This morning we received one more positive report on the housing market. The National Association of Realtors reported that existing home sales increased 4.3% to an annual rate of 4.57 million units. This is the highest figure since May of 2010 and the third increase in four months.
Maybe of more significance was that the inventory of unsold homes came in at a 6.1 months supply, down from 6.4 in December. This is the lowest number since April of 2006.
Zillow announced this week that they set a new record for web traffic for the month of January. 31.7 million unique visitors for the month was an increase of 102% year over year. Some in the media are pointing to this as yet another sign of recovery.
As I stated in a prior post, let’s adopt an attitude of rational optimism. Is the increased web traffic from prospective buyers a positive? Of course! Does it mean that we are going straight to the moon? I don’t think so.
Understand that Zillow, just like my website, is benefiting from a rising tide. By some estimates as many as 80% of buyers are beginning their search online now. It wasn’t too many years ago that this was near 0%.
The challenge with the case that this surge in web traffic indicates a strong spring season coming up is that the lead time for web shoppers is much longer. When I hold open houses, some percentage of individuals who walk in the door are ready to buy now. They have done their homework and have been out looking at houses already. Buyers start their internet search much earlier in the process. A new lead coming in through my website typically is six months away from a purchase. For example, an individual considering moving out from the east coast based on a possible career choice might begin by spending Sunday evening online seeing what the cost of housing in Pasadena is if they decide to move out there at some point. On average, they are still months away from going to open houses etc.
The bottom line: Zillow’s traffic is another positive for the market and is inline (proportionally) with what I have seen on my own site. However, I think that it points to a healthier market for the second half of the year and beyond due to the lengthened lead time of the internet home shopper.
Marc Faber, famed stock market bear and editor of the Gloom Boom & Doom Report was on CNBC this morning sharing his thoughts. It’s not often that you hear Faber bullish on anything so it was noteworthy this morning when he singled out housing as an attractive investment right now. His reasons can be read here.
I have to agree with Faber. Rents have been rising while home prices have not. Combine this with the interest rates being so low still, it makes investing in income properties more competitive and attractive versus different asset classes. And as Faber points out, this is an area where the small nimble investor can outperform large firms that have to put billions of dollars to work.
This morning the Commerce Department released better than expected housing starts data. Builders began construction on a seasonally adjusted annual rate of 699,000 homes in January. That figure is an increase of 1.5% from December. Construction on single family homes was actually down 1% but an increase in apartment construction more than compensated for it. Read the full report here.
This figure was right in line with yesterday’s post about the rise in homebuilder confidence levels. The builder’s are getting increasing optimistic. Also worth noting is the continued trend towards building rental properties. This is a result of the rising rents and demand for rental units that is an aftereffect of the crisis. Of significance to home buyers and sellers is that the supply of single family homes is not being increased as much as it may appear at first glance. Long term this should be a positive for home prices.