Sales of previously owned homes fell by 0.6% in March from February, causing some analysts to second guess the housing rebound. What’s going on? Here are four takeaways from the National Association of Realtors’ report on Monday.

1) The problem for the housing market right now is a lack of supply—not a lack of demand. This isn’t a surprise to anyone who’s tried to buy a house in many parts of the country over the last year. The number of homes listed for sale rose by just 1.6% in March, meaning just 30,000 net new units hit the market. The 1.93 million homes for sale in March was down by 16.8% from one year ago and is the lowest inventory level for the month of March in 13 years. “Inventory is definitely gating demand,” says Glenn Kelman, chief executive of real estate brokerage Redfin. Monday’s report showed that sales were still 10.3% above last year’s levels on a seasonally adjusted basis, continuing a streak of 21 consecutive months in which home sales have increased from their year-ago level.

2) Rising demand and falling supply continue to push prices higher. The median home price in March rose 11.8% from one year ago to $184,300. (Changes in the median price often reflect a shift in the “mix” of homes being sold, meaning they can rise when more expensive homes transact in a given period.) In the West, median prices were up by 26.1% from one year ago, a clear sign that more homes are selling at higher price points. Median prices have risen from their year-ago levels in 13 straight months.

3) Buyers are getting frustrated, and some sellers are getting greedy. Some sellers are hearing that it’s a sellers’ market and are becoming more determined to ask for more. Inventory is low, of course, because many sellers aren’t willing or able to sell at prices that are down sharply from seven years ago. Some have a “reservation price”—a price at which they’ll sell. Ultimately, rising prices should lead more sellers to put their homes on the market. But until then, buyers may give up. “There are not enough homes to buy,” says Mr. Kelman. “We see so many people dropping out of the process because they’re tired of getting outbid.” Another problem: many sellers aren’t going to be willing to list until they’re more confident they can buy another home to move into.

4) The current market isn’t fun for real-estate agents, who make their living selling homes. But it is good for the home builders. If would-be buyers are motivated to buy now to take advantage of low prices and low mortgage rates but can’t find a home on the resale market, they’re likely to turn to the new-home market. Already, new home sales have rebounded from their depressed levels of a year ago, and Tuesday’s report for March sales will provide the latest indication of just how quickly builders are regaining market share that they surrendered as the foreclosure crisis worsened five years ago.

After five long years of bad news, the prognosis for the health of the U.S. real estate market in 2013 is surprisingly strong. The largest real estate social network in the world, ActiveRain, recently surveyed 2,430 real estate professionals and found that there is great optimism regarding the future of the U.S. real estate market and economy. Since U.S. economic recoveries often come on the back of the real estate market, a rebound in real estate is a great sign for the economy as well.

In February 2012, another survey on ActiveRain found that the bottom of the U.S. real estate market crash had been reached. Agents believed that 2012 would see an increase in real estate transactions plus a slight increase in real estate values. The results of this survey were used to create the “Recovery or Not?” real estate report and infographic.

A New Dawn in Real Estate

The future is bright for American real estate. A recent National Association of Realtors® (NAR) article[i] claims that existing home sales jumped more than 9 percent in 2012 (the largest increase in five years) and home inventory levels hit a five-year low in December 2012. CoreLogic’s Home Price Index shows an 8.3 percent increase in home prices from December 2011 to December 2012, which is the single largest percent increase since May 2006. This was also the 10^th consecutive month of national home price increases.

The results of the aforementioned ActiveRain survey shows that agents predict robust growth in the U.S. real estate market and the U.S. economy as a whole in the upcoming year:

• 84 percent of agents believe that real estate values and the number of real estate transactions will increase in 2013.
• 77 percent believe that new construction starts will continue to increase.
• 74 percent believe that their local economy will improve in 2013 compared to 2012.
• No market is expected to see a decline in home values or real estate transactions in 2013. Contrast this with 2012 when one-third of the markets expected to see house values decline.

The 2013 increase in industry confidence is particularly dramatic when compared to the 2012 survey. Last year, industry insiders believed real estate values and new construction starts would be flat, but the number of real estate transactions would increase slightly.

2012 vs. 2013 Real Estate Confidence

(On a scale of 1 to 5, 1 represents a significant decline, 3 represents no change, and 5 represents a significant increase.)

Investment Opportunities in Real Estate

In 2012, ActiveRain’s “Recovery or Not” infographic predicted 2012 would be a “GREAT” time to invest in rental property.   The 2012 real estate boom was driven by investors looking for greater yield when compared to the low interest rates offered by Treasuries, savings accounts, CDs and bonds.

The opportunities available in the real estate market were not lost on hedge fund managers. In 2012, New York-based hedge fund The Blackstone Group L.P. spent $2.5 billion buying 16,000 homes and is expected to add another 2,500 homes to its portfolio every month in 2013. JPMorgan Chase estimates that $10 billion in institutional money will go toward some 80,000 single-family rental homes in 2013.[ii]

But the opportunity to invest in single-family rentals has peaked, at least in the major markets. The 2013 ActiveRain real estate survey looks comparable to the one conducted in 2012 in terms of high-level investment opportunities for real estate. The survey found top investment opportunities for 2013 to be single-family homes as primary residences, rental properties, and multifamily rentals, in that order.

The data shows that there is a very slight reduction in confidence when it comes to real estate being a good investment. The only categories seeing a jump in confidence are new construction single-family homes and newly constructed condominiums. Though agents are largely bullish on real estate as a go-forward investment, this slight reduction in confidence could indicate that 2012 was the best year to get into real estate, as inventory has fallen and prices have increased – and will continue to increase – in 2013.

Investors also seem to be reacting to overheated rental markets. USA Today says that investors like The Blackstone Group are cycling out of 2012’s hot real estate markets, like Phoenix, and are now moving into Atlanta, Tampa, Orlando, Chicago, Las Vegas, Charlotte and many Californian cities.

New Construction is Hot Again

New home construction became dormant in the wake of the 2007 financial crash but has recently picked up speed. NAR reports that December 2012 saw a 54-month high for new construction starts. The nation’s largest homebuilder, D.R. Horton Inc., reported that net home orders were up 38.6 percent in the fourth quarter of 2012 when compared to 2011.

Banks Held Back a Real Estate Recovery

During the financial crisis, shadow inventory was a major impediment to the real estate market’s recovery. Four million units of inventory were short sales, bank-owned properties and foreclosures in 2009. In 2010 and 2011, 33 percent of real estate inventory was held by a bank in some way. Shadow inventory accounted for 25 percent of the market in 2012. The decline in shadow inventory is expected to continue; NAR expects it to drop to a single-digit percentage of the market by 2014.[iii]

Now that inventory is tight, the market has shifted from a buyer’s market to a seller’s market. Today, managing the gap between unrealistic buyers and unrealistic sellers has returned to the forefront of real estate industry insiders’ minds as the U.S. transitions into a more “normal” real estate market.

The Real Estate Roller Coaster

In October 2012, RealEstate.com completed an exhaustive analysis of U.S. home prices from 2007 to 2012, showing a loss of $9 trillion from March 2007 to November 2011, and a subsequent and very promising gain in house prices of $3 trillion from November 2011 to June of 2012.

Real estate agents and brokers are optimistic that 2013 will be even better for real estate.The markets where agents are most optimistic about real estate values are also the markets that had some of the greatest price declines during the real estate crisis. When ActiveRain polled real estate agents in 2012, California was home to some of the most challenged real estate markets and economies – like San Diego, San Francisco, and Los Angeles. In 2013, the technology market, fueled by IPO’s like those of Facebook, LinkedIn and Qualcomm Inc., is driving new wealth creation and rapid real estate price appreciation in cities like San Francisco and San Diego.

Many of the markets that suffered the steepest price declines and worst issues with foreclosures and short sales are now rebounding strongly. Los Angeles, Fort Meyers, Phoenix, and West Palm Beach are working through their issues with shadow inventory; this process is helped by appreciating home prices and low interest rates. Oddly enough, many of the markets where agents are predicting the largest increases in home values are also markets with high costs of living; these include San Diego, San Francisco, Honolulu, and Los Angeles. This reversal may be another indicator of a strengthening economy as a whole, particularly in California.

Reasons For the Real Estate Recovery

The Midwest, South and Mountain States and experiencing population and economic growth in the midst of America’s economic doldrums. Because of the financial crisis and continuing economic woes throughout the U.S., Americans are moving from high-tax, high cost of living markets to lower cost regions. Corporate America is also relocating away from the expensive metropolises to states with low taxes and costs of living. The best overall real estate markets average a cost of living index score of 95 versus the national average score of 100. As highlighted last year, Texas’ low costs of living and great long-term economic prospects make it a popular destination for migrating Americans.

America is currently experiencing an energy renaissance.  The United States will become a net energy exporter by 2017, according to the International Energy Agency, thanks to new oil extraction technologies. Shale and natural gas extraction in Texas, North Dakota, Oklahoma, Arkansas, Ohio, Pennsylvania, West Virginia, and Michigan will drive the production of low cost, plentiful electricity. The associated boost to the economies of these regions will provide a boon to their local real estate markets.

Inexpensive labor and electricity, combined with the United States’ strong patent protection and infrastructure, is expected to bring manufacturing back to the U.S. As The Economist and Barron’s magazine have discussed, many large multinational corporations are looking to build new manufacturing plants in the Midwest instead of offshoring manufacturing to China, Vietnam, or other low cost countries.

Other common trends among the top real estate markets are a good balance between large corporations and their small business bases, large and growing Hispanic populations, university and military populations, and high quality of life.

Detroit may be an outlier in this analysis. Population due to suburbanization and deindustrialization has made Detroit a shadow of its former self, but it has recently benefited from the renaissance of the American automobile industry. In any national discussion about real estate and job creation, Detroit is used as an example of how a city can turn itself around.

Cracks in the Canadian Real Estate Market

Since 2000, the Canadian real estate market has been on a tear. Based on data from the Canadian Real Estate Association, its real estate market accelerated from 2000 to 2007, suffered a mild setback in 2008 due to the financial crisis, but rebounded so that 450,000 units have been sold per year since 2009.[vii]  2012 was an average year for Canadian real estate with 453,372 units sold.

Despite these indications of strength, there are signs of a potential decline in the Canadian real estate market. According to the MLS Home Price Index, single-family home prices have risen since 2005 from $325,700 to $517,100, an increase of almost 60 percent.[viii] Rising consumer debt due to high real estate prices has caused Moody’s to downgrade six of the largest Canadian banks. Construction continues to be on a tear in Canada, causing concerns about overbuilding, particularly in large real estate markets like Toronto.

For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market, as it is in the markets for every other saleable item, will be determined by the concept of ‘supply and demand’.

According to dictionary.com:

“The relationship between supply and demand determines the price of a commodity. This relationship is thought to be the driving force in a free market.”

In real estate, supply and demand is represented as the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:

• 1-4 months supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
• 5-6 months supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
• 7-8 months supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

What is happening across the country right now?

In most parts of the country, home values are rising. This is for two reasons:

1. According to NAR’s latest Existing Homes Sales Report, raw unsold inventory is at the lowest level since December 1999 when there were 1.71 million homes on the market.
2. According to this month’s Pending Sales Report from NAR, houses going into contract reached levels last seen in April 2010 which was the month the Home Buyers’ Tax Credit expired.

This has resulted in a 4.2-month supply at the current sales pace which is the lowest housing supply since April 2005 when it was also 4.2 months.

http://www.kcmblog.com/2013/03/04/future-house-values-simple-as-supply-and-demand/

Bidding wars. Buyers paying cash. Homes selling for more than asking price.

Are we entering another housing bubble? No. But prospective buyers in many markets may be shocked at the competitive nature of the home-buying process these days.

The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.

“On a national scale, the market is clearly rebounding,” says Greg McBride, senior financial analyst at Bankrate.com. “It’s not that the prices are crazy, but the buyers outnumber the available homes for sale.”

There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors (that is, it would take 4.8 months to sell off the inventory at the current pace).

Six months’ supply is closer to normal, says Celia Chen, a housing economist with Moody’s Analytics, an economic research firm. In 2010, it went as high as 10 months. “Prices are starting to rise as a result of the strong demand relative to low supplies,” says Ms. Chen.

That said, prices still are about 30% below their peak, she says. And the reasons for the slim pickings aren’t good news. Lenders are taking their time putting bank-owned properties on the market, in part to keep prices up.

Plus, prospective sellers are waiting until prices rise before listing their homes for sale. About 11.9 million homeowners are still underwater—that is, they owe more on their mortgage than the home is worth—according to estimates from Moody’s Analytics.

“When you’re underwater, you’re much less likely to list your home,” Ms. Chen says.

And that means a potentially tough time for buyers. “You might have to look and shop around a lot,” says Keith Gumbinger, vice president of HSH.com, a housing-market data provider. “Competition for the most attractive properties is going to be stronger than you think.”

Real estate is local, of course. Inventories aren’t as tight in Michigan and Ohio, for example, where many distressed homes are on the market, or in Oklahoma, where the market is more stable. But buyers may find their choices limited in parts of Arizona, Florida, Colorado, Texas, California and the Washington, D.C. area, among other places.

If you’re in a tight market, consider these strategies to smooth the process:

1. Stay calm

Don’t spend more than you can really afford.

“There’s a renewed frenzy” in the market these days, says Christy Dean, a real-estate agent with Walt Danley Realty, focused on the luxury market in Paradise   Valley, Ariz.

Buyers can get caught up in the hype, and that can mean spending too much, she says.

“I’ve seen it happen so many times. The wife is about to have their first or second baby. They have to have a house on this street,” she says. “Don’t get house poor. Be conservative.”

2. Make your best offer

Remain calm, yes, but be realistic. When bidding on a home with multiple offers, you need your offer to stand out.

“Be bold,” says Hal Lehrman, owner of Brooklyn Properties in New York. “Usually, the best buyer we have on a bidding war is the guy who lost the last bidding war. He’s ready. He doesn’t want that to happen again.”

The danger is overpaying, but if it’s the right house for you, that risk is tempered by other considerations. “In a rising market, you look back five years from now, you’re not going to care about that extra $5,000,” Mr. Lehrman says.

3. Check credit

Before setting foot in an open house or lender’s office, check your credit reports at AnnualCreditReport.com (you can get one free report annually from each of three credit-reporting companies at this website). “If you see anything that doesn’t appear correct or needs updating, a good time to make those changes is before you’re in the process,” says Mr. Gumbinger.

Consider buying your credit score as well. (One option is MyFico.com.) With your score in hand, you’re in a position to negotiate, he says. You can say to the lender: “I’m looking for a 30-year-fixed [mortgage], I have a Fico [score] of 760, I can put 20% down. What sort of interest rates and closing costs can you offer me?”

4. Account for assets

In competitive markets, buyers need a lender’s preapproval in hand before looking at homes.

“Preapproval is absolutely a must,” says Vince Malta, a Realtor in San   Francisco and a regional vice president for the National Association of Realtors.

Be prepared for a stringent underwriting process. Lenders want to see a consistent income stream. And a gift or funds transfer must be well documented, Mr. Malta says, in part to ensure you’re receiving a true gift, rather than a phantom loan. “If it’s not properly documented, it won’t be counted toward your down payment,” he says.

One benefit to a preapproval is that it sets a price limit on your home shopping, Mr. McBride says. “There’s no sense falling in love with a place you can’t afford to buy because you can’t get approved for the loan.”

5. Bring a big down payment

If possible, bringing more than 20% to the table will help your offer remain competitive.

“Anything that helps the down-payment side of it is a persuasive thing for a seller,” Mr. Lehrman says. “It reduces the possibility that there will be a bank problem.”

6. Be nice

If you’re competing for a house with other buyers, stand out by making life a little easier for the seller. For example, be flexible about the closing date.

“If all things are equal—the seller is getting the same dollar amount from me or the next person—but I give the seller the flexibility of the settlement date that he prefers, maybe the seller is going to say, ‘Money’s not everything,’ ” says Dominic Cardone, a partner at Keller Williams Real Estate in Media, Pa., and a regional vice president with the National Association of Realtors.

7. Find a good agent

An experienced real-estate agent may alert you to homes before they come on the market. Plus, if your agent is respected, that can help you stand out with the seller’s agent.

http://online.wsj.com/article/SB10001424127887324048904578316022419262576.html

WASHINGTON (Reuters) – U.S. home resales edged higher in January and left the supply of homes at its lowest level in 13 years, a sign that steam is gathering in the U.S. housing market.

              The National Association of Realtors said on Thursday that existing home sales rose 0.4 percent last month to a seasonally adjusted annual rate of 4.92 million units.

              That was the second highest rate of sales since November 2009, when a federal tax credit for home buyers was due to expire.

Analysts polled by Reuters had forecast a 4.9 million-unit rate.

The U.S. housing market tanked on the eve of the 2007-09 recession and has yet to fully recover, but steady job creation helped the housing sector last year, when it added to economic growth for the first time since 2005.

The nation’s inventory of existing homes for sale, which is not seasonally adjusted, fell 4.9 percent from December to 1.74 million, the lowest level since December 1999.

Many Americans are holding back from putting their homes on the market because they owe more on their mortgages than their homes are worth. A sharp drop in inventories over the last year has given developers more incentive to build homes. Home building is expected to boost the economy more in 2013 than it did last year.

Inventories were down 25.3 percent from January 2012.

At the current pace of sales, inventories would be exhausted in 4.2 months, the lowest rate since April 2005.

The low inventories are also helping pushing prices higher.

Nationwide, the median price for a home resale was $173,600 in January, up 12.3 percent from a year earlier.

http://news.yahoo.com/existing-home-sales-edge-higher-inventory-13-low-150623696–business.html

Real estate is “zip code” specific so for a full free and comprehensive analysis on your home, please call The Toombs Team and we would be delighted to assist!

Local inventory in the Somerset Hills and Morris Hills area is at a level of about 5 or 6 months supply.

Basking Ridge, for example, is very tight – 41 homes came on the market last month and several are already in Attorney Review.  As of today, there are 100 homes Actively listed in Basking Ridge, with another 45 that are under contract.

The Spring Market appears to be here sooner than usual.

Low inventory and low rates means a potentially interesting spring for home buyers and sellers, and agents too, as we seek to match them up together and keep everyone happy.

Many potential buyers are waiting until they can be 100% sure the real estate market has fully recovered before making the move to purchase a home. Here are five reasons why waiting might not make sense any longer:

1.) Prices Are on the Rise

The latest Case Shiller Home Price Index revealed that home prices have appreciated 5.5% over the last year. This is occurring across the nation as increases were reported in 19 of 20 metros. The Home Price Expectation Survey, which polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts, calls for continued appreciation over the next five years.

2.) Mortgage Interest Rates Are Expected to Increase

The Mortgage Bankers Association has predicted that, after reaching record lows in 2012, mortgage rates will creep up slowly in 2013 to 4.4%. Rates have already increased by 2/10 of a point (3.32 to 3.53) in the last two months.

3.) Rents Are Continuing to Skyrocket

Recently, Zillow  reported that rents in the U.S. increased by 4.2% over the last year. Increases were 5% or more in many major metropolitan areas including Chicago, Boston, San Francisco, Detroit, Baltimore, Denver, San Jose and Charlotte.

4.) New Mortgage Regulations Will Be Announced Later This Year

Six regulators, including the Department of Housing and Urban Development, the Office of the Comptroller of the Currency and the Securities and Exchange Commission, are currently drafting the new Qualified Residential Mortgage (QRM) rule. They will decide on two major requirements for buyers looking to qualify for a mortgage: minimum down payment and minimum FICO score. Many experts believe the new rules will be more stringent than current requirements.

5.) Timelines Will Be Shorter

The dramatic increase in transactions caused many challenges to the process of buying or selling a home in 2012. We waited for inspections, dealt with last minute appraisals and prayed that the bank didn’t ask for ‘just one more piece of paper’ before issuing a commitment on the mortgage. There are fewer transactions this time of year. That means that timetables on each component of the home buying process will be friendlier for those involved in transactions over the next 90 days.

http://www.kcmblog.com/2013/02/04/5-reasons-you-should-buy-a-home-now/

The real estate market is in the midst of a major comeback. Sales are greater than any time since 2007. Consumer confidence is increasing. Economists are now saying housing is the major tailwind to our nation’s overall economic recovery.

However, there is one major challenge that could stall the housing market: a lack of inventory.

According to the National Association of Realtors (NAR) latest Existing Home Sales Report:

“Total housing inventory at the end of December fell 8.5 percent to 1.82 million existing homes available for sale, which represents a 4.4-month supply at the current sales pace, down from 4.8 months in November, and is the lowest housing supply since May of 2005 when it was 4.3 months, which was near the peak of the housing boom.

Listed inventory is 21.6 percent below a year ago when there was a 6.4-month supply. Raw unsold inventory is at the lowest level since January 2001 when there were 1.78 million homes on the market.”

A recent survey by Redfin reveals that the challenge seems to be continuing into 2013. New listings taken in the first 14 days of the year decreased by 30% as compared to the first two weeks of 2012.

A lack of supply will be good news for prices in the short term. However, for a long term recovery in housing, an increase in current inventory is crucial.

http://www.kcmblog.com/2013/01/29/housing-inventory-only-challenge-to-the-real-estate-recovery/