10 Signs of the Housing Market Recovery

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The housing market is well on its way to recovery, and the signs are present in 2014—you just have to know how to spot them. Below we outline 10 signs of the housing market recovery and overall real estate trends, according to the Urban Land Institute’s Emerging Trends in Real Estate report. Find out what they are and what they mean to the real estate consumer.

10 Signs of Housing Market Recovery 10 Signs of the Housing Market Recovery

1. Recovery is Contingent on Job Growth

According to CBS News Money Watch, “the slow pace of job growth as well as income and wage growth is still holding back the real estate recovery and that’s not likely to change quickly.” Cities such as those in Texas and San Francisco have seen strong housing recoveries due to the strength of their economies. Areas that currently have low unemployment rates can expect better housing recoveries as the year progresses.

2. Millennials are Moving the Market

Millennials are moving the real estate market, but not in the way you might expect. They’re not buying up property all over the country, but they are physically moving to certain areas, increasing economic activity and calling for more real estate development. The Urban Land Institute (ULI) reports Millennials driving an increase in activity in the real estate sectors particularly in Seattle, Portland, Austin, and Minneapolis.

3. Urban is Trumping Suburban

The interest in developing suburban areas is waning. The interest that does still exist, however, is focused on developing areas surrounding more “urban-minded” projects, according to Money Watch. Such urban-minded areas include those with easy access to public transportation and amenities.

4. Inventory is Returning

The Emerging Trends in Real Estate report predicted that 2014 would be the last year that low inventory would help property prices. According to CBS, “distressed inventory is drying up and sellers are looking at better profits than they have in years.”

5. Sellers Have the Upper Hand

Sellers know they can take advantage of buyers that are eager to buy a home before home prices and interest rates go up. Therefore, homes are priced to please sellers and test the pockets of buyers.

6. “Second-Tier” Cities Lead the Recovery

Builders, developers, and investors still show interest in top tier cities (think San Francisco, New York City, Boston, and Washington D.C.) but are beginning to focus more on second-tier cities like Austin, Houston, Seattle, and Dallas. The ULI reports that there are more housing deals to be had in these cities due to consistent job growth and advantages offered to Millennials.

7. Multi-Family Apartment Buildings are on the Decline

Due to the increased demand for apartments from homeowners-turned-renters during the recession, multi-family apartment buildings flourished. However, now that supply and demand have swapped places, the development of and interest in multi-family dwellings will decrease.

Emerging Market 10 Signs of the Housing Market Recovery

via http://www.uli.org/

8. Smile Investing Returns

According to Money Watch, “smile investing” is gaining popularity among real estate developers once again. Smile investing refers to when:

Developers and investors start looking at cities in the Northeast and [move] south to cities along the Sun Belt—Florida, Texas, Arizona—and then coming back up to the Northwest—Northern California, Oregon and Washington state.

This means that there will be an increase in housing market activity in the aforementioned areas and less in the Midwest.

9. Shadow Banking Arrives

Although lending standards have not quite loosened up as much as most people had hoped by now, a new lending concept called shadow banking has emerged to soften the blow. According to Investopedia, the term “shadow banking” means:

The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight.

Shadow banking is similar to traditional bank lending, but done outside banks, therefore getting around bank regulations. According to CBS, “borrowers going this route will find a hodge-podge of private funds, wealthy individuals, family offices, and refugees from other lending markets.”

10. The Condo Market is Still Taking a Back Seat

Unfortunately, the condo market recovery is not up to par to that of the single-family market. Developers are unwilling to risk building more condos, and are instead focusing on building rental apartment buildings that can be switched to condos within 12 to 16 months if the market calls for it.

Conclusion

The ULI concludes that housing will remain troubled until “unemployment rates fall, worker earnings power recovers, the market clears its foreclosed/defaulted properties, and banks loosen up credit standards just a bit.” The report continues by stating that the recovery is in fact underway and more buyers should gain confidence in the market. Furthermore, it concludes that more buyers will be encouraged to do more house hunting due to high rental rates in the foreseeable future.

The ULI does caution that the upswing in the housing market is extremely susceptible to any interest rate hikes or economic reversals. However, “given housing’s significance to the overall economy, the country will be back on track when homebuilders can get back in gear.”

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Home Prices Continue to Rise – Market is Stabilizing

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2Q 2014 2 Home Prices Continue to Rise   Market is StabilizingAccording to the most recent Current Market Conditions national grass roots survey conducted by HouseHunt.com, home prices continue to rise in most areas of the country with 93% of the communities surveyed showing year over year price appreciation up from 92% last quarter and 88% from one year ago. Our members surveyed indicated that home price appreciation is beginning to slow with 37% of the communities surveyed reporting double digit annual home price increases compared to 42% in the 1st quarter 2014 and 43% one year ago.

According to the National Association of Realtors (NAR) housing prices are expected to rise between 5.5% and 6% in 2014; however, the latest report by NAR in June showed the national median home price increasing only 4.3% year over year. This is confirmed by many HouseHunt members who are reporting that price increases are flat in June compared to earlier months in the year. HouseHunt members in many areas of the country are indicating there is more inventory on the market. However, in most areas homes that are priced at market price and are in good condition are selling very quickly with many receiving multiple offers. HouseHunt’s Second Quarter Market Report bodes well.

Buyer activity remains strong with HouseHunt members reporting that buyer activity is increasing in 71% of the markets compared to 72% in the 1st quarter of 2014. Seller activity has increased significantly in the 2nd quarter of 2014 with 57% of the markets reporting increased seller activity compared to 45% in the 1st quarter of 2014. Repeat buyers once again dominated the most active buyer segment with over 77% of the markets reporting repeat buyers as the primary drivers of activity compared to first time buyers, which only made up 23%. Investors and all cash buyers continue to hurt the number of first time buyers who are able to purchase a home as sellers generally will select the offers from the most qualified and largest down payments, assuming the offering prices are similar. Additionally, HouseHunt members are reporting issues with high FHA mortgage insurance premiums, home appraisals, student loans and jobs as reasons why first time buyers remain at historic lows.

HouseHunt’s random survey of member-agents conducted in the 2nd quarter of 2014 found the following:

93% of the local markets surveyed reported home price increases over the last year with 37% of the markets reporting home price increases in excess of 10%, a decrease of 5% from last quarter and a 6% decrease from the 2nd quarter of 2013.

Activity remained steady in the 2nd quarter of 2014 compared to the previous quarter. Buyer activity is increasing in 71% of the markets in the 2nd quarter compared to 72% in the 1st quarter of 2014. Buyer activity decreased in 13% of the markets and remained unchanged in 16% of the markets. Seller activity increased in 57% of the markets compared to 45% in the 1st quarter of 2014, while 19% of the markets reported a decline in seller activity and 24% reported no change.

Home buyers reported the main reasons for purchasing were still low interest rates and rising home values. Consumer surveys report there is a high level of confidence that today is a good time to invest in a home. Because of increased homeowner equity, it is expected that many new buyers will be repeat buyers that will need to sell their home before they can buy. Our survey reports that in 77% of the markets, move up buyers are the primary drivers of activity. Good economic news, low interest rates and increasing prices are the primary reasons for activity. Population and job growth were also factors in certain communities especially in Texas, California, Florida, Louisiana and the Carolinas.

First time buyers continue to lag with only 23% of the markets reporting strong first time buyer activity compared to historical standards of between 35% and 40%. Additionally, first time buyer activity may continue to decrease in 2014 with rising interest rates and rising home prices, as well as tougher mortgage qualification rules. Repeat buyers and investors represented primary activity in 77% of the markets.

Housing inventories remain tight but are increasing in the 2nd quarter with 72% of the markets reporting that there is a tight supply of homes for sale compared to 76% in the previous quarter and 76% one year ago. Conversely, 28% of the markets reported an ample supply of homes for sale compared to 24% last quarter and 24% one year ago. Overall, it is still a seller’s market with 91% of the markets reporting that sellers are receiving greater than 95% of asking price and multiple offers were commonplace in 86% of the markets. Homes are selling slightly faster in the 2nd quarter with 63% of the markets reporting that homes are selling in less than 60 days compared to 60% in the 1st quarter of 2014. Short sales and foreclosures represent more than 15% of the inventory in only 21% of the markets, slightly more than last quarter where 17% of the markets reported over 15% of inventory as short sales and foreclosures.

Our 2014 2nd quarter survey results are a clear and early indicator that housing prices are on the rise but at a much slower pace, and that the housing market is in the early stages of becoming a more balanced normal market with more options for the buyers and less negotiating strength for the sellers.

Consumer confidence is high on both the buyer and the seller side so we expect that home sales activity will work its way back to normal from historic standards in the next year or two. Most predictions have home sales estimates at 4.9-5.1 million units selling in 2014. There are a few potential obstacles to continuing on the pathway to normal with those being employment, rising interest rates and rising home prices, as well as tougher qualification rules and regulations for obtaining a mortgage. Most experts, including the National Association of Realtors, predict home prices to rise about 5-6% in 2014.

HouseHunt’s Quarterly Comparison Chart For the U.S. | 2nd Quarter 2014 Results in Red
2012 2013 2014
Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd
Buyer-Seller Ratio
More Buyers 39% 55% 58% 64% 76% 67% 57% 51% 61% 54%
More Sellers 35% 23% 21% 15% 10% 17% 26% 21% 19% 24%
About Even 26% 22% 21% 21% 14% 16% 17% 28% 20% 22%
Average Days On Market
0-60 Days 30% 31% 39% 40% 46% 65% 65% 57% 60% 63%
Sold in 60 Days Plus 70% 69% 61% 60% 54% 35% 35% 43% 40% 37%
Unsold Inventory
Good Supply 62% 48% 47% 34% 29% 24% 26% 32% 24% 28%
Tight Supply 38% 52% 53% 66% 71% 76% 74% 68% 76% 72%
Annual Price Appreciation
Up 0-5% 24% 26% 29% 35% 33% 21% 18% 29% 24% 27%
Up 5-10% 9% 7% 19% 16% 21% 24% 17% 31% 26% 29%
Up 10% Plus 7% 10% 6% 18% 29% 43% 54% 31% 42% 37%
Unchanged 10% 9% 18% 9% 7% 6% 5% 3% 3% 3%
Negative Appreciation 50% 48% 28% 22% 10% 6% 6% 6% 5% 4%
Buyer Types
Repeat / Move-up / Investors 71% 73% 67% 73% 74% 81% 85% 78% 79% 77%
First-time Buyers 29% 27% 23% 27% 26% 19% 15% 22% 21% 23%
Ask vs. Sale Price
Less Than 95% 54% 44% 38% 37% 31% 30% 23% 30% 23% 9%
More Than 95% 46% 56% 62% 63% 69% 70% 77% 70% 77% 91%
Multiple Offers?
Yes 66% 76% 76% 77% 87% 88% 91% 87% 83% 86%
No 34% 24% 24% 23% 13% 12% 9% 13% 17% 14%


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Benefits of Downsizing [Infographic]

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The micro-living movement has been gaining a lot of momentum recently. People across the globe are discovering the perks of living off less. Even if you don’t feel like living in a house that could fit on a truck-bed, however, you can still experience the benefits of downsizing. Whether you’re looking for a home to retire to, or simply want to cut the bills, this infographic will show you some of the best reasons to move counter to the American dream!

Benefits of Downsizing Benefits of Downsizing [Infographic]

Benefits of Downsizing

Lifestyle of Travel – There’s no need for house-sitters when the house itself is so easily manageable.

Forced Organization – When there’s no room for clutter, you’ll be forced to be cleaner.

Fewer Chores – Think of all the time you spend maintaining your home. Imagine getting all that time back!

Cozy Home = Happy Home – Studies show families in smaller homes feel more closely bonded.

Smaller House is Often Cheaper – Tap into the equity on your current home and potentially pay for a new home in all cash!

Smaller Bills – Pay less on property tax, electricity, cleaning, etc.

Frivolous Spending – Extra cash is available to get out of debt, furnish the house, go on a trip, or whatever else!

Downsize the Right Way

Be Realistic – What can’t be sacrificed? Don’t trick yourself into thinking you don’t need something that’s important to you; whether it’s a specific possession or a large dining room.

Where Will the Excess Go? – When you clear out the clutter of life, where will it go? Have a plan to donate, gift, or responsibly trash your excess.

 

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What to Do FIRST When You Move Into a New Home

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So you’ve closed on a new house and you’re holding the keys. It’s all yours! Now what?

To make sure you’ve covered all your bases, here are two definitive checklists to make sure your move goes as smoothly as possible. One is what to do before you actually move in, and the other is what to do when you’ve started unloading boxes. (If you’re looking for what to do building up to the move, check out on Timeline for Moving Infographic.)

 

What to Do FIRST What to Do FIRST When You Move Into a New Home

After Closing on the House

o   Transfer Utilities

Make sure they’re aware of your move date

o   Forward Mail and Change Billing Addresses

Start with credit cards and work your way down to magazine subscriptions.

o   Switch Schools for the Young Ones

Being able to start school right away may sound like torture to them, but it will help them make friends and develop a new routine after the potentially disruptive move

o   Smog Tests, anything else you need to register vehicle

Only if you’re going out of state

o   Pest-proof the new place

Before you move in your nice new furniture, de-bug the entire home as thoroughly as possible. We’re not implying that your new place is already roach infested, but it’s a house that’s likely sat empty for at least a few days. It’s easier to handle this issue yourself now than to hire a professional months down the road when you realize it’s a problem.

o   Paper products in place!

You’re going to want paper towels for cleaning.

You’re going to want toilet paper for… you know…

o   Deep clean the walls/carpet

There will never be an easier time to deep clean your house than before you even move in.

o   Change the locks

We know, you’re super excited about your new keys! But you know who also has that key? The previous owners, their dogsitter, their Realtor, and the list goes on. Give yourself some piece of mind; change the locks before your family moves in.

BONUS: This checklist is full of things to do before the move. But here’s a surprising to-not-do: Paint. Houzz considers painting before the room has any furniture or atmospheres one of the biggest mistakes you can make with your new home right out the gate.

 

After You Begin Moving In

o   Inspect Your Belongings

Are all boxes accounted for? For that matter, do you have all your family members in tow still?

o   Lay Out Essentials for Kids and Pets

Moves are tolling on anyone, but sometimes kids and pets have the hardest time with these big transitions. Put a few comfort items in the kids rooms right away so they can begin feeling ownership over the new space. Lay out dog bowls, litter boxes, and any other pet essentials so that they know they belong in the strange territory.

o   Don’t Just Unpack… Organize!

Maximize your space from the get-go!

o   Cover the Windows

Before placing the major furniture, start with the windows. Get the blinds and drapes up, at least in the rooms where people will be sleeping. This is obviously necessary for privacy, but also helps guide decisions on how to the theme the rooms from here on out.

o   Make the Beds

Whoever’s spending that first night in the house deserves a mattress and some bedding. You can assemble bed frames or make guest beds later. But it’ll never feel like home for your family until they can have a restful night’s sleep in the new place.

o   Meet the Neighbors

If you get all these essentials knocked out and still have some daylight to kill, go introduce yourself to your street. Yes, it’s awkward. But it’ll make you feel more comfortable in your new home, and we’ve got tips on the best ways to do it.

 

We hope this provides some guidance and comfort when you decide what to do first when you move into a new home! If you knock out the essentials as soon as you get your keys, and make the place homey as soon as you start unpacking boxes, you can remove all the stress from the process. Enjoy your new digs!

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Should You Buy an Investment Property?

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A successful investment property has about a 25% return on investment for the landlord. As enticing as that figure may sound, that is, of course, a property being rented out under ideal circumstances. The truth is investment properties (houses that you buy to rent out to others for profit) are just as risky and require just as much effort as any other real estate based investment.

Should you buy an investment property? Here are the questions you need to ask yourself before you move forward. These questions may sound tough, but they’re not meant to discourage you from the opportunity. They are meant to cover your bases so that your next real estate purchase will be lucrative!

investment property Should You Buy an Investment Property?

What does the housing market look like?

A slow housing market is a good time to strike. Low interest rates and stagnant inventory will equal the best deals for you. A weak market also often means more people are looking to rent instead of buy. Your rental property could be just what the neighborhood shoppers need.

Can you pay cash?

Do you have to pay in cash for an investment property? Not at all. But we highly recommend it. Here’s why:

1)      It’s harder to get a loan for an investment property. It’s not like when you got a mortgage for your house; this is a business. The bank is taking a bigger risk on this property, so there will be higher rates and other negatives to a loan.

2)      If you do successfully get a loan, you’re still not setting yourself up for success. If the property sits empty for a few months unexpectedly while you’re still making payments, the money will dwindle fast. If the house is all paid off, every month you have a renter will have minimal expenses.

Do you have a business plan?

It’s pretty easy to calculate your projected income based on how much you’ll charge a tenant for rent. Calculating business expenses can be a little trickier. Here are the key ones to not let slip through the cracks:

  • Projected Vacancy Costs – Usually estimated at about 5-10% by professionals. This is the cost of maintaining the lot while it sits empty.
  • Utilities that are not covered by the tenant.
  • Property Taxes! Yeah, turns out you still owe those even if you’re not living there…
  • Repair Costs – You’re the landlord now. You finally have the power! You also have to fix the perpetually clogged toilet.
  • Property Insurance

It may not quite cover every possible scenario, but we found a very helpful Investment Property Calculator at Good Mortgage.

Have you accounted for the miscellaneous expenses?

If the property isn’t near you (or maybe even if it is), you’ll want to hire a property manager. That will cost extra.

Are you going to let any Joe Blow off the street live in your house, or would you rather conduct background checks? Because those have fees attached, as well. So do the credit checks to ensure the people moving in can actually pay their rent.

You may want to pay for legal counsel to look over your tenant contracts to make sure you’ve covered your assets.

There will be plenty more unpredictable expenses to add to this list. It’s just like your primary residence – there will always be unexpected costs. But if you are able to answer these questions with confidence, it’s a good sign you’re ready to start making that significant ROI from a rental property! 

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