The recent Realtors® Confidence Index survey shows that the residential real estate markets continue to recover. Respondents continued to note problems associated with real estate transactions:
- Obtaining a mortgage continues to be difficult for individuals with lower credit scores or individuals with non-standard credit characteristics, e.g., self-employed.
- Bargain hunters and low-price bids continue.
- The short sale process continues to be slow and frustrating.
- Pricing continues to be a challenge.
- The appraisal process continues to be a problem.
However, fewer respondents noted major problems than had previously been the case. In contrast, a growing number of respondents indicated a growing number of cases of multiple offers, fewer seller concessions, low inventories, and some increase in buyer interest. Many respondents noted that correctly priced properties sell quickly.
The graph for “Total Home Sales” on a twelve month roll (i.e., total sales for the current and previous 11 months reported monthly) shows a market achieving stability from a sales viewpoint, with modest improvement expected based on continued economic and employment expansion. This is consistent with the survey conclusions.
The media has discussed home prices in detail for the last four years. The graph “Prices By Month” indicates that home prices have been headed towards stability. NAR’s forecast is for the attainment of stable prices this year.
The available data indicate continued expansion in residential real estate markets. Like all forecasts, this conclusion is subject to market risks affecting the outlook:
Potentially Negative News
- The Economic Recovery is slow and weaker than normal: Unexpected and unfavorable economic news (i.e., a European bond default, an additional run-up in gas prices) could have a negative impact on the recovery.
- Credit standards imposed by financial institutions in making a mortgage are reported as excessively stringent.
- Job gains are well below normal.
- Consumer Confidence is lower than would otherwise be expected.
Potentially Positive News
- Falling Inventories of homes for sale.
- Stabilization of Distressed Sales in the neighborhood of 30 to 35 percent.
- Home Affordability: Low interest rates and attractive prices continue to facilitate home purchases.
- Demographics: Sales are at a level of approximately 10 years ago, but the population has increased significantly.
The economic recovery is clearly weaker than the historical norm, but appears to be proceeding. Realtor® confidence and price expectations are higher than was the case a few months ago, rising rental rates have favorable implications for home sales, and time on market continues to decrease. Prices and interest rates continue to be lower than has been the case in the past. These are the reasons that we continue to view the outlook as favorable for home purchases.
Given that the typical homeowner will occupy a house for approximately 8 years and that home ownership is basically a lifestyle decision, one can make a very good case that this is a good time to buy a house, remembering that staying within a reasonable budget and acceptable mortgage is important. Additional information on a variety of topics related to current residential market conditions may be found at http://www.realtor.org/reports/realtors-confidence-index.
Jed Smith is Managing Director, Quantitative Research with the National Association of Realtors®. He has worked on real estate issues for the past 20 years, providing input on a variety of housing, commercial real estate, tax, and planning issues. Recently he has been involved in several international studies.
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