When I am asked, “How’s the real estate market?” I often think I sound like a broken record: “Inventories are good, mortgage rates are at historic lows, now is the best time ever to buy.”
Yet, there are a lot of folks not listening to the message. Why? This quarterly column will explore the factors affecting the residential real estate market, industry predictions, as well as some possible answers to get buyers in the market again.
Some potential buyers mistakenly think they cannot get a mortgage. However, more than 12,000 homes sell every single day in the United States. Of those, around 75 percent get mortgages, which means approximately 9,000 buyers get mortgages every day, even though banks and mortgage lenders have indeed gotten stricter on their guidelines.
One word of caution to reinforce: Real estate is local. Do not let the national headlines blow you away.
You will begin to see more and more articles about something called shadow inventory. Shadow inventory is made of foreclosed homes that banks and mortgage companies have in the pipeline but are held up because of state and government pressure due to discovered robo-signing problems.
The holds on foreclosures are loosening up, and it is predicted that by the end of the year, this shadow inventory across the country is going to be hitting the market. In those areas with the most exposure, inventory supplies will go up, meaning downward pressure on home prices.
Good news for us is that in November, USA Today published a map showing their findings of shadow inventories across the country, dividing states into four categories: those with 0-5 months, 5-9 months, 10-50 months, and 50+ months of this shadow inventory that, barring some type of government intervention, will be hitting the market. Tennessee was in the lowest category of 0-5 months of inventory.
A significant variable to what happens in the real estate market is consumer confidence. As the consumer confidence index goes up, more buyers will “get off the fence” and into the market. It is important to keep a close eye on this number.
We believe rates will remain in the 30-year, 4 percent range until mid-year, rising to 4.5 percent by year-end. Inventory will be down, existing home sales and prices will be flat and maybe down just a little for first quarter; picking up from there, sales will likely be up about 4 percent for the year and sale prices ending up 2 percent to 3 percent for the year.
We predict new home starts and sales will be up considerably for the quarter (primarily in the up-to-$300,000 price range), rising to a 15 percent increase for the year, and we believe new home prices will increase 5 percent for the year.
All in all, an improving real estate market for 2012 with the breakout year coming in 2013.
Judy McLellan is a Realtor with Crye-Leike Realtors Inc. Her website is judymac.com.