What are real estate professionals saying to homebuyers and sellers about current market conditions? The successful brokers and sales associates are talking about the strengths that exist in the market. Below are positive angles that appeared recently in the media and underscore why it is a good time to buy real estate.
In the Right Markets, Housing Remains a Good Long-Term Investment
Historical data from the National Association of Realtors (and adjusted for inflation by Businessweek.com) show that in 18 of the 25 largest metro areas in the U.S., the value of homes purchased in 1990 had increased by 2010, often by double digits. This underscores the fact that homeowners who buy for the long term have historically seen the value of their investment increase over the years.
In inflation-adjusted terms, the median U.S. home sale price in the third quarter remains approximately 9.5% higher than in 1990, despite falling 26% from peak levels, according to calculations based on NAR data.
Based on data since 1968, nominal U.S. home prices have risen 5.5 percent annually and outpaced inflation by about 1% to 2%, says Lawrence Yun, NAR's chief economist.
Economists from NAR, Fiserv, and Moody's Analytics interviewed for this story expect home prices to continue to grow slightly more than inflation in the long term.
According to Greg Hebner, chief operating officer at Sorrento Capital, an asset management firm: "You should at least be looking at housing now," especially as interest rates are low and homeowners can deduct mortgage interest from their income taxes. "It's still a good game" if a buyer understands the risks, has consistent income, and purchases a house he can afford.
-- "Home Buying for the Long Haul Pays Off," by Venessa Wong, BusinessWeek.com, Dec. 9, 2010.
Pending Sales of Existing Homes Increases 10% in October
According to the National Association of Realtors, pending sales of U.S. existing houses unexpectedly jumped by a record 10% in October, indicating the industry at the center of the last recession is stabilizing as the job market improves.
"The fundamentals that are driving home sales are low mortgage rates combined with job and income growth and that’s why housing should be expected to grow in coming months," said Dean Maki, chief economist at Barclays Capital Inc. in New York. "Housing activity will still look low relative to the boom years, but we expect a solid growth rate to occur."
-- "Pending Sales of Existing Homes in U.S. Increased a Record 10% in October," by Courtney Schlisserman, Bloomberg, Dec. 2, 2010.
Freddie Mac: Conditions Exist for Housing Rebound in 2011
Interest rates below 5% and prices bottoming out in the first half of the year will drive two of the three main ingredients for buyer affordability to cyclic lows next year, Freddie Mac's chief economist, Frank Nothaft, said yesterday. "Buyer affordability is at the highest level in decades," he said. "With affordability high, many first-time buyers will be attracted to the housing market in the new year, likely translating into more home sales in 2011 than in 2010."
-- "2011 Outlook: Stars Align for Buyers with Low Rates and Prices," UPI, Dec. 7, 2010.
Fannie Mae Survey: Americans Still Aspire to Own a Home
A new study released by Fannie Mae finds that most Americans — both those who currently own their homes and those who rent — strongly aspire to own a home and to maintain homeownership, despite ongoing turmoil in the housing market. The most recent installment of this survey, released in November, showed that aspirations toward homeownership remain strong — well in excess of current homeownership rates — but decisions to buy are tempered by current consumers' cautious attitudes toward home buying in the current financial environment and a more conservative housing finance environment.
51% reported the housing crisis had little or no impact on their intentions to buy or rent
The substantial majority of homeowners (89%) and nearly half of renters (44%) believe they would be better off owning their homes, given their current financial situations.
-- "Homeownership Aspiration Remains Strong Among Americans," Fannie Mae Press Release, Dec. 9, 2010.
U.S. Mortgage Delinquency Rate Could Fall to 5% in '11
The percentage of U.S. consumers who are delinquent on their mortgages could fall to about 5% by the end of 2011, from an expected 6.2% at the end of this year, according to a leading credit bureau. A decrease in mortgage delinquencies, traditionally a precursor to foreclosure, could boost the faltering recovery in the U.S. economy and the residential real-estate market.
"We think that the mortgage industry isn't out of the woods yet, but it's starting to move in a better direction," said Steve Chaouki, a group vice president in TransUnion's financial-services unit.
-- "U.S. Mortgage Delinquency Rate Could Fall To 5% In '11," By Aparajita Saha-Bubna, Wall Street Journal (subscription required), Dec. 2, 2010.
Regional Update: News from Markets around the Nation
The number of Massachusetts single-family homes put under agreement in November was unchanged compared to the same time last year, the first time in six months that pending sales have not declined on a year-to-year basis, the Massachusetts Association of Realtors said.
"It is a positive sign that pending sales in November were the same as last year and didn’t decrease," association president Kevin Sears said. "It shows that there are buyers who are slowly getting back into the market and taking advantage of the conditions to purchase a home. Hopefully the economy will continue to improve, the snow holds off and doesn’t become a deterrent and pending sales continue to increase in December as well."
-- "Pending Home Sales in Mass. Hold Steady," Boston Globe, Dec. 7, 2010.
New York City
Overall, New York City housing prices grew a half percent in the third quarter, compared to the same period a year ago, according to new city data compiled by New York University's Furman Center for Real Estate and Urban Policy. Manhattan was the only borough to see double digit growth in prices. Meanwhile, sales activity in New York City was up. Manhattan saw the biggest jump in the number of sales, up 25%, followed by Brooklyn, up 6%.
-- "Housing Prices Rise in Manhattan, Fall in Queens," by Lisa Chow, WNYC News, Dec. 1, 2010.