It’s estimated that 10% of the homes sold in 2013 will be to buyers who lost a home in the past five years. Approximately 500,000 buyers who may have thought they wouldn’t own a home anytime in the near future will be homeowners again.
It’s estimated that several million of these previous homeowners will purchase again in the next eight years. This kind of activity will contribute significantly to the housing recovery.
Some people thought that the housing crisis would cause a shift in values placed on owning a home but the boomerang buyers definitely don’t support that theory. Having a home of your own, where you can raise your family, share with your friends and feel safe and secure is still part of the American Dream.
The rising rents, increasing prices and low, low mortgage rates are also influencing buyers into the market. In many cases, it is cheaper to own that to rent.
All new buyers, including those who have experienced foreclosures or bankruptcies, must have good credit history and the ability to repay the loan. It just may not take as long to reestablish the credit as some would-be buyers might have thought.
Low inventory is a relative term depending on how you’re comparing it. Would the comparison be to total number of homes on the market last year, homes in a certain price range or homes in a certain area? In some situations, it’s a combination of all of those things.
In any given market, inventories will fluctuate based on area and price range. The National Association of REALTORS® considers a balanced market to be six months’ supply of homes. If it takes longer than six months to sell, it is thought to be a buyer’s market and less than six months, a seller’s market. Most buyers and sellers probably feel inventory equilibrium is more like three month’s supply of homes.
Inventory has a direct impact on price. During the housing bubble, demand decreased, supply ballooned to four million houses and prices dropped dramatically. Increased inventories due to foreclosures, bank’ revised lending practices and builder’s lack of new housing starts each contributed to the dramatically lower prices.
As the market has recovered, economic conditions have improved, banks have loosened their requirements, interest rates have remained low, foreclosures have slowed and gradually, the inventory has been reduced to approximately two million houses. When demand is constant but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.
Based on the low mortgage rates that have been inching up each week in 2013 and an improving consumer confidence level, most markets are experiencing some increase in demand. With inventory decreasing, buyers in the marketplace can see that prices are increasing.
Just as signs of spring can be seen to be just around the corner, it should be recognized what direction prices will be moving. Hindsight is 20/20 but we can’t purchase or sell in the past. We need to make decisions today on what we think will happen in the future.
If you’re curious to know what inventory conditions are for your specific market, send me an email with the price range and area and I’ll send you a report. ckraus
There are common rules of thumbs that homeowners and agents use such as not refinancing more often than every two years or there must be at least 2% savings from your previous mortgage rate may not always be accurate.
The reality is that if you can refinance for a lower rate and you’ll be in the home long enough to recapture the cost of refinancing, it should be considered. The costs of previous refinancing that haven’t been recaptured by monthly savings may need to be added to the costs of the new refinance.
Take a look at the chart that shows the average rates according to Freddie Mac for 2012. They are lower today than they were in January of 2012 and for the ten years before that.
Refinancing may save you a substantial amount of money, especially if you’re going to be in your home for a long time. It is definitely worth investigating. To get a quick idea of what your savings could be, use this refinancing calculator.
Since statistics became available online in 1998 we have compiled sales statistics for Anne Arundel County, MD real estate sales. This historical comparison allows a look back at six categories of statistics including the median sales price and total units sold each year. It is interesting to note how certain things lagged behind as the market corrected to conditions affecting it. The total number of units peaked during the government induced housing bubble in 2004, while total dollar volume peaked afterward in 2005, with average sales price and median sales price peaking a year later in 2006. By 2008 the total dollar volume had fallen well off the last year (2007) before the bubble burst. 2012 shows a return to higher total dollar volumes.
With interest rates still at historic lows, it is a great time to buy before mortgage rates rise. It is our personal opinion* that price of homes still do not reflect the devaluation of the dollar due to the Quantitative Easing initiatives 1, 2 and 3 of the Federal Reserve, which should push prices upward. Since 2008 average prices, median prices and average list prices have remained fairly stable. With a return of prosperity this could change. One factor that could affect prosperity is ENERGY production. The coming explosion of shale oil production in the continental United States which is currently predicted to reach historic levels by 2017, coupled with the recent historic production levels of natural gas (which has chemical industry production that had fled the US shores returning home), may propel our economy back to prosperity despite the profligate spending of our politicians.
* Note: This is our personal opinion and should NOT be relied upon for making financial decisions. Please consult professional financial advisors of your choice before making any personal financial plans or decisions.
Anne Arundel County Annual Market Statistics
|Year||Total Dollar Volume Sold||Average Sold Price||Median Sold Price||Total Units Sold||Average Days on Market||Average List Price for Solds|