It is my belief that when we look back at 2012 10 years from now, it will be known as the year that started our market rebound. I feel confident that we hit bottom sometime 1-2 years ago and will (hopefully) never see home prices that low again.
Rates: Hit Historic Lows. 4% at beginning and 3.25% at year’s end.
Inventory: Extremely low. As low as it’s been in over 8 years
Sales: Sales were steady & buyer demand strong
Foreclosure Activity: New filings & inventories down
2012 Detailed Notes:
As noted, rates started the year around 4%, which is historically a great rate. By the end of the year, rates were hovering around 3.25% for a 30-year fixed loan with good credit. Many buyers were able to afford higher priced homes for the same monthly cost because of the rate drop and this is one of 2 primary reasons for the increase in home values that we saw this past year. Here is a chart showing the last year’s activity:
You can view long-term rate trends here:
If you are a current homeowner and your mortgage is 4% or higher, you should speak with a lender about refinancing your home (even if you are upside down, there are govt programs that you may qualify for). I can help you find a good lender – just ask!
Inventory is as low as it’s been since mid-2004 when prices were going up 15-20%/year. Inventory was steadily declining all year, which resulted in a very high-paced market by year’s end. Low Inventory is the 2nd primary reason prices are on the rise. It’s very basic supply vs demand economics.
There are a few factors causing this low inventory. First, there has been very little new homes/condos built in the last 5-8 years since the market crashed, but population has grown about 1% a year for the last decade. The actual number of homes for sale is lower than it was almost 10 years ago, although our population has grown, making the supply/demand curve even more pronounced than it was in 2004. Secondly, foreclosure inventories are down. We appear to be nearing the end of the foreclosure boom. Most people that should have never owned the home they bought or were horribly upside down have lost them to foreclosure (or short-sale). Thirdly, sales numbers were up, which slowly but steadily ate up the inventory over the year.
Sales activity was strong most of the year. Sales numbers were up about 20% over 2011 and every month of 2012 had more sales than the same month in 2011. Buyer demand was fueled by historically low home loan rates and a growing consensus that our market has already hit bottom. Economic stabilization & lower joblessness may have also contributed, but that gets into more detailed economic analyses which I am not qualified to do as a real estate broker.
This is probably the #1 reason for our market turnaround. Just look at these stats! Filings and foreclosure inventories were down about 50% in 2012!! And even with less inventory in the foreclosure process, foreclosure cancellations were up (i.e. completed short-sale, loan mod).
1. Notice of Defaults were down (~50%)
2. Foreclosure inventories down (~45%)
3. Foreclosure cancellations up (~10%) (i.e. short-sale, foreclosure, loan mod)
For more detailed data, visit: Foreclosure Radar
Summary, Predictions & Thoughts:
My summary is pretty easy on this one. Inventory is very low, sales are strong, foreclosure inventories are declining and rates remain very low. Prices have already gone up 5-10% in the lower end detached market in 2012 and that is working it’s way into the higher end detached market as well as the condo market. Barring any natural disasters or huge rate increases, prices are on the rise and will continue to be in the short-term (3-6 months).
Our listings are selling in days right now with multiple offers and they are selling for more than the last sale. That is the current market status – it is definitely a seller’s market right now!
If you’d like to know more specifics about your home’s value or your local neighborhood stats, just let us know!
Adam & Aubree
73 Degrees Realty