MARKET SPOTLIGHT:  2011 OFFERS GOLDEN OPPORTUNITY

HISTORY IS IN THE MAKING

It’s difficult to believe the average mortgage rate near the end of 2010 was less than half the 30 year average of 9.0%.  Many Americans have now grown accustomed to low interest rates, but the Freddie Mac Survey that began tracking rates in 1971 registered a new and dramatic low of 4.19% in October, 2010.  Historically low rates make it possible for more people to purchase a home or refinance a mortgage and enjoy reasonable payments for years to come.

HOUSES ARE ON SALE

Buyers throughout the US are finding attractive home prices, and some are able to take advantage of significant markdowns on distressed properties.  The extent of the discount varies widely by region, but according to the most recent data, foreclosures sold for 26% less than similar homes in the second quarter of 2010.  Properties are in default, many of which became short sales, had their prices reduced by an average of 13%.   

IS OWNERSHIP WITHIN REACH

Rock-bottom interest rates and lower prices together mean it is more affordable to buy a home today than at any other time in the last 40 years.  In 2010, the mortgage payment required to purchase the median priced home in the US fell below 20% of the median household income for the first time since 1971. 

INDICATORS HINT AT BETTER DAYS AHEAD

Everybody needs a place to live!  As employment conditions and consumer confidence improve, a greater number of potential buyers will return to the housing market

Only 357,000 new households were created nationally in 2010 – down more than 70% from 1.3 million per year recorded from 2002-2007.  This 63 year low resulted from lower immigration rates and the fact that more Americans moved in with family members or doubled-up with friends during a time of greater economic instability.  New household information is expected to return to more normal levels as the recovery continues.   In Houston, we are fortunate that our employment continues to grow and additionally, Houston (as well as Texas overall) have been consistently highlighted as one of the top places to move to.  Our population is expected to almost double according to local projections – 10 Million by 2030.   

A HOUSING SHORTAGE IS ON THE WAY

In response to the economic weakness, tighter credit and higher resale inventory nationwide, builders slammed on the brakes and slowed the pace of new home production by 70% in recent years.  Overall, new homes have been built at less than half the rate needed to match the natural population growth over time – and a lengthy development process means it usually takes time for builders to ramp up production again.    Housing starts have dropped below 1 million units only three times since World War II – 2008, 2009 & again this year – 2010.  Therefore, some economists and industry experts have predicted that buyers may encounter a more limited supply of homes and rising prices in certain high-demand areas as soon as the end of 2011 and more broadly into 2012.

Members surveyed by the National Association of Business Economists (NABE) expect the hiring situation to improve and the national unemployment rate to fall from 9.7% to 9.2% by the end of 2011.  The NABE has also forecasted economic growth, measured by Gross Domestic Product, of 2.6% and a nationwide housing price increase of 1.2% for 2011.

Forecasts for this year suggest the housing sector will continue to stabilize and the rare and fortunate combination of bargain prices and cheaper financing spells opportunity for buyers, but the window of time is very limited.  If you are considering buying a new home, a retirement property, or looking to invest – contact me or your trusted Real Estate Advisor to explore your options and make 2011 a great and prosperous year!