Good News For Home Sellers and Investors:
Savvy Buyers Aren’t Waiting

Another year has passed and the real estate market and the future of our economy remain at the top of many of our lists of concerns. Some predict a strong stock market uptick this year and that businesses will begin hiring as the tax cuts have been extended. Some predict a further drop in home values, but if we take a look at the figures for 2010, there may instead be cause for optimism in the forecast.  California is the only state that has shown, year over year, gains in real estate sales. 

The West led the way in pending sales in November and the National Association of Realtors forecasts a gradual improvement for 2011.  The LA Times reported in their December 30th issue that “all of the economic indicator trends are pointing to a gradual recovery.”

Now more than ever, the location of a property and the community in which it is located will play an important part in the future appreciation of that property’s value.  The supply of low to mid-priced homes has dwindled during the last 12 months.  With a high percentage of qualified buyers able to purchase entry level homes and the interest rates predicted to remain low through 2011, foreclosed homes should be absorbed with less negative impact to home values. Overall, homes sales are up and even better news for our higher-end home sales is that the increase in sales in the over $500,000 range is continuing. 

Taking into consideration that many homes sold over the last year no longer fall in the $1 million dollar-plus category, sales in the high-end may actually be healthier than they appear based solely on numbers.   Sales of homes that were originally valued three years ago at far more than their current sub-million dollar price tag, are not included in our reports for the $1 million-plus category.   

Savvy buyers and seasoned investors aren’t waiting to see the bottom of the market, they are buying now. 

Existing Home Sales Up, Inventory Down

Demand for existing homes is on the rise, according to a December report published by The National Association of REALTORS (NAR). Existing-home sales rose 5.6 percent in November to a seasonally adjusted rate of 4.68 million units. These transactions, which include single-family, townhomes, condominiums and co-ops, have risen steadily since bottoming in July of 2010.

Lawrence Yun, NAR chief economist, is optimistic about the direction of today's market. "Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable," he said.

Total housing inventory fell 4 percent in November to 3.71 million existing homes available for sale, representing a 9.5 month supply at today's current sales pace. NAR President Ron Phipps explains that even with reduced inventory, winter buyers can find good opportunities. "Traditionally there are far fewer buyers competing for properties at this time of the year, so serious buyers have a lot of opportunities during the winter months," he said.

First-time home buyers accounted for 32 percent of existing homes purchased in November, down significantly from the 51 percent share in November 2009 when first-time buyers were anxious to take advantage of the expiring tax credit. Investors were responsible for 19 percent of November transactions, while repeat home buyers accounted for the remaining balance.

Mortgage Rates Inch Upward

As the real estate market continues its recovery, Freddie Mac reported that mortgage interest rates have inched upward from the record low of 4.23 percent in October. The national average commitment rate for a 30-year, fixed-rate, conventional mortgage rose to 4.3 percent in November; the rate was 4.88 percent in November 2009. NAR chief economist Lawrence Yun expects affordable financing will continue in 2011. "In the short term, mortgage interest rates should hover just above recent record lows, while home prices have generally stabilized following declines from 2007 through 2009," Yun said. "Although mortgage interest rates have ticked up in recent weeks, overall conditions remain extremely favorable for buyers who can obtain credit."