Below is a good article written by our (Intracoastal Realty) VP of Sales. It was written for the Lumina News.
Supply and Demand
by Chris Livengood
Thursday, December 31, 2009
The real estate market like other markets is driven by the economic principle of supply and demand. The data shared weekly in this section of Lumina News provides a simple measure of this economic principle in action with absorption rates. Simply put, the absorption rate is the measure of today’s housing, or demand, versus how many months will it take to absorb the current supply of inventory.The formula uses the past 12 months of unit sales to establish how many houses are selling each month on average, divided into the existing inventory to calculate the months of supply available.
In real estate it is generally thought to be a balanced market when there are 5-6 months of inventory on the market. A key point to keep in mind: fewer months of supply result in a seller’s market and puts pressure on prices to increase. Higher months of supply result in a buyer’s market and puts pressure on prices to fall.
A seller’s market was evident locally, in the period of 2000-2006 as demand was high and supply was low. During this period of time the New Hanover County market was operating as a seller’s market with 1-2 months of supply at its peak which occurred in the first quarter 2006. By late 2006-2007, inventories rose to seven months of supply, or a balanced market; and since 2008 the market has become a buyer’s market with current inventories running around a 16 month supply.
Within New Hanover County the absorption rate varies by location. In the Ogden/Porters Neck, Castle Hayne and Myrtle Grove/Monkey Junction areas housing inventory is turning more quickly based in part on the lower average price points and the positive effect that the first time home buyers tax credits had in 2008. Other areas like Wrightsville Beach, Pleasure Island and parts of downtown Wilmington show a higher inventory based in part on the higher average price points of those locations which at present are turning slower. The positive effect of the tax credits continues into 2010. The first time home buyers will benefit from the $8,000 tax credit on their purchases that most affect the $280,000 and lower purchase price points. Additionally in 2010 existing homeowners can benefit for tax credits up to $6,500 on purchases at price points of $800,000 or less. (Contact your Realtor to understand how these benefits may affect your purchase decisions.) Buyers are coming back to the market attracted by an abundant selection, value and historically low interest rates. With current levels of inventory, selection has never been better. Values are wonderful. Value is determined by condition, price and location of product. As always, the properties that sell the quickest are those that are the best value to buyers. Interest rates are at historical lows and yes, banks and mortgage companies are lending money. Generally today’s lending market requires that you put some money down and qualifying has been tightened to eliminate the aggressive hybrid sub prime lending of the past few years which included an abundance of 100 percent loans and low documentation requirements. Today’s interest rates are being artificially held low by the current policies of the federal government. It is generally believed that these rates can not last long term and there is much more pressure for rates to increase than stay at these low levels. The effect of interest rates has a bigger effect on a buyer’s purchase decision than purchase price. A quarter of a percent increase in interest rates can eat up quickly a reduction in purchase price.
Based on all these factors, now is an excellent time to buy. I think we have all had an experience personally or had someone close to us experience a situation in which the memory is, "I could have purchased that property in _____ for only $_____." Some will be talking about 2010 in that way 10 years from now. Today’s sellers are divided into two groups:Group one is those individuals that want or need to move and will price their homes aggressively to sell while taking advantage of this same buyer’s market to purchase their next home. As long as you are staying in the market, there is very little reason to not be in the home you want or need.
The second group of sellers will be those that stay in a location and wait for the market to return to the peaks of 2005-2006. Increasingly financial resources are calling for a slow but steady recovery. The forecasted recovery for North Carolina ranges in time from 2014-2017. Several national sources expect the recovery to take twice the length of time as the decline. If we bottom out in mid 2010 then the projected recovery fits the range cited above.
Just as so many other financial decisions, too many purchasers miss an opportunity by trying to time the absolute bottom of the market. Real estate is best considered as a long term investment and on the North Carolina coast the future looks bright. Last year, Senator Richard Burr shared with local Wilmington business leaders that as the federal government looked at the long term need of infrastructure by state, that population growth predictions called for a 50-plus percent growth in the population of North Carolina by the early 2020s.
The growth in North Carolina comes from the recognized superior quality of life factors that North Carolina offers such as climate and cost of living.
Another significant factor for North Carolina growth comes from the strength of secondary education in North Carolina’s universities, colleges and community college system. North Carolina is second only to California in the number of graduates each year. The students that come to the state often don’t want to leave, creating an intellectual capital that attracts business and industry.
All said and done, the recent events in the real estate market seem to be short term in nature, while the long term future looks bright.
Friday, January 8, 2010
Tuesday, January 5, 2010
When Is The Best Time To Sell Your Home?
Below is an article I found on Forbes.com by Francesca Levy regarding when is the best time to put your house on the market. It's a good read!
Putting a home on the market in this grim real-estate climate might seem like lunacy considering how heavily the market favors buyers. Home prices are down 28% from their national peak in the second quarter of 2006, according to the S&P/Case-Shiller home price index, which tracks sales in 20 major housing markets. Still, listing a home during certain months can improve a seller's odds. Late spring and summer are usually thought of as the best times to put a home on the market because buyer demand builds steadily through spring. Sales then peak during the warmest months, when it's easiest for families to move without uprooting their children from school. But this year, experts predict that the selling boom, which normally starts in spring, will hit at a different time than it has in the past. Sellers with flexibility should market their homes earlier in the year. According to data from Zillow.com, an online real-estate database, the volume of home sales was highest in June, July or August every year since 2000. This year, however, an $8,000 credit for those buying their first home--that expires on June 30, 2010 and requires buyers to have closed on a home by April 30, 2010--will force buyers to speed up their decisions. Historically low interest rates also suggest that sellers will face a busier market as early as February.
“This year, we're anticipating sales will peak earlier,” says Nicole Hall, editor in chief of Lendingtree.com, an online mortgage comparison service. “The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition.”The Economy Upsets Seasonal Trends House hunting may have traditionally sped up after March, but nothing about the last few years in real estate has been traditional. In 2008, sales failed to pick up with their usual gusto in late winter because the financial crisis cast a shadow of fear over buyers, and lending seized up.
“Between the fall of 2008 and March of 2009, there was a long dead period in real estate,” says Ken Shuman, spokesman for the real estate Web site Trulia.com. “You don't want to buy a house if you don't have job security, and a lot of people had jobs but didn't feel too secure about them.”2009 didn't follow typical trends, either. Fall, when sales usually plummet, saw more sales activity than usual this year because of the introduction of the government's tax credit, which was initially set to expire on Nov. 30, 2009.Improving the Odds Granted, some sellers have no choice but to sell at a slow time of year. Job relocation and the need to free up assets are facts of life that can deprive families of the luxury of waiting until the peonies bloom to put their homes on the market. But Hall says that there are ways to improve your chances of a sale if you have to list your home late in the year, like playing up holiday decorations and shoveling walkways to maximize curb appeal. She adds that selling at this point in the cycle isn't always the worst fate.“Look at how you can turn it to your advantage. Maybe because you're forced to sell at a different time, there will be less competition,” she says. “Also, be realistic about your price. If you know you're selling at a tough time, it can be a tough call, but you might have to drop that price a little.”Shuman and Hall agree that the season shouldn't be the only factor homeowners consider when getting ready to sell. Paying attention to the vagaries of the local real-estate market, where inventory and prices can fluctuate week to week, will offer more guidance to sellers than simple seasonal trends. “Check out your local inventory,” says Hall.
“Read the housing-market blogs, follow the local market really carefully, and look at the unemployment rate. That will make a big difference.”For smart sellers, Shuman and Hall agree, taking a chance and starting the sale process earlier will reap distinct benefits in 2010. “The beginning of the year is going to be make-it-or-break-it,” says Shuman. “If you're a seller, get your property listed as early in the year as you can.”
Putting a home on the market in this grim real-estate climate might seem like lunacy considering how heavily the market favors buyers. Home prices are down 28% from their national peak in the second quarter of 2006, according to the S&P/Case-Shiller home price index, which tracks sales in 20 major housing markets. Still, listing a home during certain months can improve a seller's odds. Late spring and summer are usually thought of as the best times to put a home on the market because buyer demand builds steadily through spring. Sales then peak during the warmest months, when it's easiest for families to move without uprooting their children from school. But this year, experts predict that the selling boom, which normally starts in spring, will hit at a different time than it has in the past. Sellers with flexibility should market their homes earlier in the year. According to data from Zillow.com, an online real-estate database, the volume of home sales was highest in June, July or August every year since 2000. This year, however, an $8,000 credit for those buying their first home--that expires on June 30, 2010 and requires buyers to have closed on a home by April 30, 2010--will force buyers to speed up their decisions. Historically low interest rates also suggest that sellers will face a busier market as early as February.
“This year, we're anticipating sales will peak earlier,” says Nicole Hall, editor in chief of Lendingtree.com, an online mortgage comparison service. “The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition.”The Economy Upsets Seasonal Trends House hunting may have traditionally sped up after March, but nothing about the last few years in real estate has been traditional. In 2008, sales failed to pick up with their usual gusto in late winter because the financial crisis cast a shadow of fear over buyers, and lending seized up.
“Between the fall of 2008 and March of 2009, there was a long dead period in real estate,” says Ken Shuman, spokesman for the real estate Web site Trulia.com. “You don't want to buy a house if you don't have job security, and a lot of people had jobs but didn't feel too secure about them.”2009 didn't follow typical trends, either. Fall, when sales usually plummet, saw more sales activity than usual this year because of the introduction of the government's tax credit, which was initially set to expire on Nov. 30, 2009.Improving the Odds Granted, some sellers have no choice but to sell at a slow time of year. Job relocation and the need to free up assets are facts of life that can deprive families of the luxury of waiting until the peonies bloom to put their homes on the market. But Hall says that there are ways to improve your chances of a sale if you have to list your home late in the year, like playing up holiday decorations and shoveling walkways to maximize curb appeal. She adds that selling at this point in the cycle isn't always the worst fate.“Look at how you can turn it to your advantage. Maybe because you're forced to sell at a different time, there will be less competition,” she says. “Also, be realistic about your price. If you know you're selling at a tough time, it can be a tough call, but you might have to drop that price a little.”Shuman and Hall agree that the season shouldn't be the only factor homeowners consider when getting ready to sell. Paying attention to the vagaries of the local real-estate market, where inventory and prices can fluctuate week to week, will offer more guidance to sellers than simple seasonal trends. “Check out your local inventory,” says Hall.
“Read the housing-market blogs, follow the local market really carefully, and look at the unemployment rate. That will make a big difference.”For smart sellers, Shuman and Hall agree, taking a chance and starting the sale process earlier will reap distinct benefits in 2010. “The beginning of the year is going to be make-it-or-break-it,” says Shuman. “If you're a seller, get your property listed as early in the year as you can.”
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