South Philly Real Estate Blog

Anatomy of a Recovery

 

America’s economic rebound depends on a real estate recovery, but many are asking –“what’s it going to take to get it all going?”

Housing always leads the economy in recoveries, and this one will be no different.  In fact, already there are signs that housing is perking up. 

The most important factor driving home sales is affordability.  With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved. 

While it’s true that unemployment is rising, it’s important to remember that 93 percent of working households have jobs, compared with 95 percent during good economic times.  Those people who are working, respond to incentives and attractive affordability conditions.

Measures like the new first-time homebuyer tax credit and the increased number of mortgage loans qualifying to be purchased by Fannie Mae, Freddie Mac and the Federal Housing Administration are helping to bring homebuyers into the marketplace.

An early indication that buyers are responding to incentives was the solid jump in pending home sales in August, to the highest level in more than a year. 

Nationwide, existing-home sales likely will break out from a seasonally adjusted annual sales rate of 4.8 million to 5 million to 5.2 million by the end of this year, according to economists at the National Association of Realtors®.  By 2009, existing-home sales likely will total 5.4 million, up from about 5 million in 2008.

New home sales will not fair as well, according to NAR.  There is an oversupply right now and home builders in most areas are being forced to cut back sharply.

The total inventory of new and existing homes combined remains elevated, so further reductions in building will be a good thing.  The lower level of housing starts this year will keep new-home sales under 500,000 in 2009 – far below the 1.2 million peak in 2005, according to NAR analysts.

NAR’s economists are not expecting a prolonged and deep recession.  Fortunately, the economic downturn appears manageable.

Previous housing recoveries have shown that rising sales will thin out the housing inventory and begin stabilizing home prices.  The credit markets will loosen up once home prices have begun to recover.

Fortunately, policymakers and both Presidential candidates recognize the need to get the housing market moving.  The two housing stimulus bills this year (which include the homebuyer tax credit and higher loan limits), as well as the $700 billion U.S. Treasury plan and the Federal Reserve’s recent actions are all designed to assure a steady mortgage flow and help revive the housing sector.

Home buyers and sellers should take a good look at the opportunities that exist in today’s market.  For qualified buyers, this could be just the time to take advantage of the lower interest rates, affordable prices and incentives like the tax credit.  If you’re a seller who has only owned your home for a couple of years, remember that any loss you take on the sale is more than likely to be made up on the new purchase.

Real Estate Is a Solid Long-Term Investment

The news media is all abuzz these days with information about what is happening in the real estate market.  But if you rely on your national newspaper or TV network to tell you whether now is a good time to buy or sell, you may be missing some great opportunities.  To get the proper perspective on the value of real estate, you have to go right to the source, and that means talking to a REALTOR in your local market.

 

According to 2007 NAR President Pat V. Combs, “Perceptions about real estate have been skewed in recent months due to the overwhelming focus on national figures.  While average sales and prices help us identify trends, the fact is all real estate is local – conditions vary greatly from one city to the next.  Unfortunately, that news is largely unreported.”

 

Here are the facts on three popular misperceptions in the real estate market:

 

Misperception:  No one is buying a home, and home prices are falling rapidly.

Fact:  According to the National Association of REALTORS, home sales are expected to reach about 5.5 million this year – about the same level of home sales we saw in 2002, which was a record at the time. 

Fact:  While it’s true that home prices are down slightly from last year, the median home price has increased more than $50,000 since 2002.  And, two-thirds of metro areas showed price gains last quarter. 

 

Misperception:  Foreclosures and delinquencies are rising rapidly in every state. 

Fact:  According to the Mortgage Bankers Association, four states – California, Nevada, Florida and Arizona – are responsible for most of the increase in foreclosures. 

A total of 34 states saw a decrease in rates of new foreclosures in the second quarter. 

Fact:  The reasons for foreclosures vary from state to state, but many lenders have pulled back from the market across the board, forcing buyers to sit on the sidelines.

 

Misperception:  Stocks are a better investment than real estate. 

Fact:  Houses are not like stocks.  Homeownership is designed to build wealth over the long term.  Studies show that homeowners have an average net worth of $184,000, compared to just $4,000 for renters.

Fact: Owning a home also helps strengthen our families and our communities.  You can’t put a price on that.

 

When you consider the facts, it’s easy to see why 5.5 million people are choosing to buy a home this year.  There are some challenges in the market, but overall there are many more opportunities in local markets today.  Real estate continues to be a solid long-term investment.

 

Members of the Greater Philadelphia Association of Realtors are working in several ways to help you understand conditions in your local market and take advantage of the opportunities to invest in real estate:

 

• We provide consumers with the latest information on home sales and prices and what factors are likely to drive the market in the months and years ahead

• We can help educate prospective homebuyers about the various loan products available to them; and

• We are working with lawmakers to provide more affordable financing options that will enable homebuyers and homeowners to keep their homes for the long term.

 

For more information on the opportunities here in Philadelphia and how you can build wealth through homeownership, contact a REALTOR in your community.

 

 

 

 

.