Real Estate

Current Stats About the Residential Real Estate Market and What They Indicate

dianahill
Diana Hill
Professional Real Estate Investor Instructor

It’s been a few months since I wrote an article about the major real estate indicators. It’s a good time to take a look at them and where they indicate that we are headed for the peak residential buying season and the remainder of 2013.

One of the most interesting statistics I’d like to look at is the decline in sales of distressed homes.  For years, all I’ve heard about was this huge “shadow inventory” of foreclosures and distressed properties that was going to flood the market and send it into a bigger tail spin.  Well, it hasn’t happened and appears that it won’t happen this time around.  Here are the latest stats:

1)     NAR (National Association of Realtors) reported a 29 percent drop in the share of sales of distressed homes to just 18 percent of all sales in April, that is the lowest reading since 2008.

2)     A year and a half ago one-third of all existing home sales were distressed sales.  Just to put it in perspective: seriously delinquent (90 days or more past due) peaked nationally at 3.7 million in January 2010.  That figure has recently dropped by 33 percent to 1.2 million at this time.

3)      Corelogic reported that there were 55,000 completed foreclosures through March 2013, a decrease of 16 percent over the same period last year.

We are seeing a steady increase of non-distressed home sales. Those sales have increased 25 percent within the same time period that the distressed sales have decreased.

Capital Economics is optimistic that the worst of the supply problems are over and, “The market is starting to take on a semblance of normality.”  They go on to say, “While inventory is still very low, it’s looking increasingly likely that the trough in the supply of homes for sale lies in the past.”

So, know what low inventory does? That’s right, it drives up prices.

NAR shows that the median price for all homes was up 11 percent to $192,800 for the year ending in April. This is the 14th month of consecutive growth.  The last time there was consecutive year-over-year increases was from April 2005 to May 2006 right before the housing crash.

NAR said that the Pending Home Sales Index also raised 0.3 percent to 106. the highest level since April 2010.  Economists were expecting a 1.1 percent advance. The lack of hitting that number can be attributed to the tight supply of properties.

Most of the above information is related to existing home sales. What about new homes sales and building?

February of 2011 was the lowest sales rate in almost 50 years for new homes.  Sales were 273,000 annualized as compared to the peak that reached 1.4 million annualized in July 2005.  Things are on the increase as today new home sales are up 19 percent from a year ago (according to the U.S. Census Bureau data).

There are more positive indicators for the future and new homes:

1)     According to the U.S. Census Bureau and HUD (Department of Housing and Urban Development) residential building permits have increased 14.3% for the month of April.  This is almost 39% higher than a year ago.

2)     National Association of Home Builders (NAHB) says that the Wells Fargo Builder Confidence Index rose to 44 during the month of May.

“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies,” noted National Association of Home Builders (NAHB) Chairman Rick Judson, a home builder from Charlotte, N.C. “This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor.”

NAHB Housing Starts May 2013

All in all, I think we are headed in a positive direction but don’t forget that an increase in mortgage rates or lack of growth in the economy could send it back the other way in a heart beat.

Great Fortune,

Diana Hill

dhill@tradingacademy.com

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.