Spring Is In The Air!
Spring has arrived, bringing about the real estate spring "buying season". Real estate is cyclical - in both long term and short term trends. As a standard, annual trends follow the same pattern year after year. Demand grows in February, continues to climb to the peak in May then remains at this peak thru July (despite our heat), and falling again as it approaches the end of the year.
As pricing and the overall health of the market depend entirely on supply and demand, we focus our lens on two factors.
Supply: In 2014 sellers were placing their homes on the market at very low levels. 2015 has continued that same trend. In fact, supply is weaker than this time last year. The supply of short sales moved down 38% and continues to fall. Foreclosed properties are down 49.6%. Should the supply of active listings continue to remain at low levels, this is good for Sellers, and will result in some upward price movement in the second half of the year. While we can speculate as to why Sellers are not coming to market in great numbers (i.e. distress properties are diminishing, Sellers who survived the distress market still lack sufficient equity, etc.), the fact is they simply are not. Given the recent increase in FHA refinances due to changes in the mortgage insurance premiums (the Mortgage Bankers Association reports a rise of 76.5% of FHA refinances at the end of January), if we were looking for proof that Sellers are staying put, the level of refinancing seems to prove that. Supply can be described as "constrained".
Demand: The good news is that demand is far more robust than supply. While demand appeared to be in a freeze in January and the early part of February, the latter part of February tells a very different story. As Michael Orr of the Cromford Report states:
"Since the Super Bowl ended we have seen the liveliest two weeks for demand for a long time and we can see several areas with very strong numbers of listings under contract compared with this time last year. The most popular ranges are $150,000 to $600,000, which is good news for developers and for sellers of existing homes. Here we see a very sudden upswing in buyer interest that wasn't there in January…
In 2014, pending listings grew from 5,420 to 6,395, between January 15 and February 15, a jump of 18%
In 2015, pending listings grew from 5,047 to 6,689 between January 15 and February 15, a jump of 33%
We have not seen such a large percentage increase between January 15 and February 15 since 2009 when investors started to snap up the low hanging REO fruit.
As usual the recovery is not spread evenly. Our first observation is that the price ranges
• $175,000 to $200,000
• $200,000 to $250,000
• $300,000 to $400,000
are the ones that are very hot and are seeing a large spike in listings going under contract. There were more normal listings under contract on February 14 than there were at any time during 2015 for these three price ranges."
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