2011 Yr. End Market Conditions -
It Depends on Where you live!
Every location is different in Real Estate, and you can not compare the East Coast to the Mid West, the North to the Southeast, etc. or in many cases, not even one part of a state to another, or one part of the same city to another. Some areas of the country have remained relatively stable/flat while others have dropped almost in half. All real estate is local, and one must compare apples to apples when comparing markets. After several years of double digit decreases, many markets including the Frederick area (tied to the Washington D.C. market) is showing signs of recovery with home inventory finally heading downward, and sales continuing at a brisk pace. No doubt the first time buyer tax credit (which was extended to "move-up" buyers who had been in their home for at least 5 of 8 years) helped in the recovery. There are also grant programs which give buyers as much as $7500 towards their down payment and closing costs. These grants are forgiven if the buyers remains in the home for 5 years.
Lawrence Yun, NAR's senior economist has offered several past examples and counter arguments to those who continue to promote the "wait and see" attitude. They are as follows:
Media Claim 1: The decline in new construction is a bad sign
RESPONSE: Home Builders are simply pulling back to avoid saturating the market and devaluing their product which is the responsible thing to do, and a healthy sign the industry is being managed intelligently.
Media Claim 2: The decline in construction jobs is a bad sign
RESPONSE: Job growth actually remains strong in many areas which is one of the factors that drive a healthy housing market.
Media Claim 3: The fact that housing prices have continued to drop is cause for worry.
RESPONSE: Overall and especially in certain markets this is simply 200 steps forward and 10 steps back. There has been so much short term gain - doubling and even tripling of values in some cases--- that a correction is no cause for worry for those who have been in their home at least 5 years or more and did NOT use their inflated values to refinance homes and use their equity on other things.
Some things to consider if you are considering the purchase of a home, but reluctant to take a chance.
You can NOT participate in the NEXT housing boom unless you are a HOME OWNER!
Home owners are not usually worried about fluctuations, new construction numbers, etc.
One of the reason for the recent decline is that speculators are leaving the market, and over time this should result in more stability.
Mortgage rates are stable and have even retreated further downward. Speculators waiting for even LOWER interest rates should NOT sit on the fence but ACT NOW if they find their home of choice.
Rents have risen or at least remained stable
Interest paid on a home loan is a tax deduction, rent is NOT!
Home owners accumulated an average of $184,400.00 between 1995-2004 while renters gained an average of only $4000.00.
Although there may be periods of highs and lows, in the long run owning a home remains one of the best investments one can make!
below is a recap of December 2010 and comment on the year
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Keeping you updated on the market! |
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Economic
Indicator |
Release
Date and Time |
Consensus
Estimate |
Analysis
|
|
S&P Case/Shiller Home Price Index |
Tues., Dec. 28, |
None |
Important. Recent data releases point to a slight drop in the October prices. |
|
Consumer Confidence |
Tues., Dec. 28, |
56.1 Index |
Moderately Important. Recent surveys reflect greater optimism on employment. |
|
Mortgage Applications |
Wed., Dec. 29, |
None |
Important. Refinances continue to abate, but purchases are holding steady. |
|
Pending Home |
Thurs., Dec. 30, |
90 Index |
Important. The index suggests a sustainable upswing in sales. |
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Don't Fear Rising Mortgage Rates
The most invoked argument against higher mortgage rates is that they lower the home affordability index. It's a legitimate argument, to be sure, in that mortgage interest is a significant cost of homeownership. But there are other factors to consider: Rising rates spur people to action, something we've been saying for the past six months that is showing some validity. Campbell/Inside Mortgage Finance surveyed 3,000 real estate agents nationwide on homebuyer activity and found a jump in first-time homebuyer purchases in November over October. The principal reason for the jump was nervousness over rates going higher still, which motivated many fence sitters to act. It is also worth noting – again – that higher interest rates reflect an improving economy and greater economic activity, which are, in turn, indicative of higher employment and higher wage rates. So even though the interest-expense component of the home affordability index might rise, it will be offset by more employment and rising incomes, which means more people can afford a higher-cost home. That's not such a bad thing. |
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Please feel free to comment on this article. I welcome your feedback.
