Home sales and prices are up. Can you take advantage of today’s buyer’s market?
Fewer homes for sale
Fewer choices are out there for home buyers. The number of homes for sale is the lowest it’s been since 2001, and amounts to only a 4 ½ month supply nationwide. Despite short supply, sales in December were nearly 13 percent higher than one year earlier. Home sales are up in many cities, as prices, unemployment and vacancy rates have come down.
Prices are rising
Pent up demand is sustaining the housing market recovery and pushing prices higher – up 4.3% over last year. That’s a larger increase than most analysts were expecting. Despite rising prices, buyers are buying. Nearly a third of all existing homes sold in December spent less than one month on the market. The average time to sell was 73 days, down from 99 a year ago. And fewer for-sale homes on the market now have had their prices reduced, as compared to one year ago.
Foreclosures are down
Foreclosures were down in 2012 – quite sharply in some areas and 36 percent nationwide when compared to 2010. Rising prices have allowed some homeowners to come out of negative equity and either sell or refinance at a lower rate, avoiding foreclosure. Short sales and loan modifications have helped many others. The number of homeowners with underwater mortgages fell by almost 2 million between the end of 2010 and the end of 2012.
November marked the 26th consecutive month with an annual decrease in foreclosure activity (more evidence that the worst of the foreclosures is behind us). Nationally, foreclosures and short sales made up a quarter of all homes sold in December, offering discounts of around 16 percent below market value.
Consumer credit is on the mend
Other than a slight uptick in the default rate for first mortgages, all other types of credit have seen steadily lower default rates for most of the year. That means people are paying their bills, and paying them on time. Those habits will inevitably lead to higher credit scores, and probably better debt ratios, resulting in more would-be buyers qualifying for loans.
What it means for you
If you’re a first-time home buyer, you have your work cut out for you. First-time buyers currently make up a smaller than usual percentage of home purchasers (31 percent, down from a norm of about 40 percent), according to two separate recent real estate industry surveys. That’s because tighter lending guidelines make it harder to qualify. Also, investors, eager to snatch up real estate before prices climb, make the marketplace more competitive than usual. A third reason is that FHA loans are more costly than they have been in the past, presenting yet another obstacle for the first-time buyer to surmount.
All of these factors combined create a climate in which hopeful buyers should get serious. Prices, and possibly rates, will only be higher next year. In cities where the supply of for-sale homes is short, buyers face competition from each other and from investors, particularly at the lower price levels that more people can afford. Indeed, multiple offers on some properties have pushed purchase prices significantly above the asking price.
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