Talking Points about the Real Estate Market
What are real estate professionals saying to homebuyers and sellers about current market conditions? The successful brokers and sales associates are talking about the strengths that exist in the market. Below are positive angles that appeared recently in the media and underscore why it is a good time to buy real estate.
Survey: Americans Have a Visceral Desire to Own Their Own Home
A bipartisan national poll of 2,000 likely voters by the National Association of Home Builders makes clear the unique position that homeownership holds in Americans’ minds and the delicacy required in dealing with the issue.
75% of voters believe ¨Dthat owning a home is the best long-term investment they can make and is worth the risk of ups and downs in the housing market.¡¬ Interestingly, a high percentage of people in different financial situations felt this way, including 81% of those who own their homes outright, 76% with mortgages, 67% who are renters, and 65% with underwater mortgages.
80% of respondents they would recommend buying a house to a close friend or family member just starting out, including 78% who had underwater mortgages.
73% of the respondents who do not own a home said that their goal is to eventually buy one. Clearly, the decline in home values and economic turmoil has not diluted their dream of homeownership and the aspirational element that makes the notion a core value.
Told that ¨Dsince the federal income tax was introduced in 1913, the federal government has used the tax code to encourage homeownership, respondents were then asked: ¨DIn general, do you think it is appropriate and reasonable for the federal government to provide tax incentives to promote homeownership, or do you think it is not a good idea?
73% of all voters thought those incentives should be provided, including 71% of Republicans, 68% of independents, 79% of Democrats, and even 68% of those who support the tea party movement.
Given this kind of visceral connection to homeownership, it’s not surprising that 71% of respondents oppose eliminating the mortgage-interest deduction and 63% oppose lowering it. Moreover, 58% oppose eliminating the deduction for home-equity loans or limiting the deduction for those who earn more than $250,000 a year.
These numbers are pretty much across the board: 63% of Republicans, 56% of independents, 55% of Democrats, 61% of tea party supporters, and 58% of those voters in congressional districts held by freshman Republicans would be less likely to support a candidate who favored killing the deduction.
The clear message is that owning a home is among the values that Americans most cherish – an important part of the American Dream.
-- "The Cook Report: The Home Front," by Charlie Cook, National Review, June 3, 2011.
SmartMoney: Why it’s A Good Time to Buy
There are growing indications that it is a good time to buy.
Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows.
Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average.
A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate Consulting Inc. – some 3.1 million more than normal.
Such conditions might not last long.
Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then.
Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse.
Demographic indicators such as "household formation" – the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.
The upshot: ¨DWhile we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound,¡¬ says Anthony Sanders, a real-estate finance professor at George Mason University.
-- "Is Now the Time to Buy a Home," by Ruth Simon and Jessica Silver-Greenburg, SmartMoney, June 6, 2011.
Barron’s: Home Prices Should Stabilize by the Second Half of 2011
Another shock last week was the first-quarter decline in the Standard & Poor's/Case-Schiller National Index of home prices, following increases in 2009 and early 2010, to levels not seen since 2002. But to begin with, the up-and-down price pattern, which inspired the dreaded term ¨Ddouble dip,¡¬ was due to the on-again, off-again tax credits to homebuyers, which temporarily boosted sales and prices.
More to the point, home prices should begin to stabilize by the second half. Based on its modeling of the factors that determine the National Association of Realtor's median price on existing homes (a series with far more history than Case-Shiller), Benderly Economics finds the price will probably run about flat on a year-over-year basis, and start trending up by 2012.
-- "Facing the Music, and It Ain't All Blues," by Gene Epstein, Barron’s (subscription required), June 4, 2011.
Analyst: Don't Believe the Doom on U.S. Housing
Data from the U.S. housing market has not made for nice reading in recent months but one analyst believes the worst could well be over and that if you take a closer look at the data prices are stabilizing. ¨DThe decline is mainly because the mix of homes sold has changed in favor of distressed sales, which typically sell with a 'foreclosure discount.' Non-distressed properties (sold by voluntary sellers) have already started to stabilize,¡¬ said Ajay Rajadhyaksha, the co-head of U.S. fixed income strategy at Barclays Capital said in a research note on Friday.
¨DAs voluntary sales pick up in the summer, the mix of homes should change again in the next few months, in favor of non-distressed sales. As a result, the aggregate index of home prices should stop declining and could even go up,¡¬ he added.
-- "Don't Believe the Doom on US Housing," by Patrick Allen, CNBC, June 3, 2011.
Mortgage Rates for 30-Year Loans Fall for Seventh Week
Mortgage rates in the U.S. fell for a seventh week, the longest decline since September. The average rate for a 30-year loan slipped to 4.55% in the week ended June 2, from 4.60%, according to Freddie Mac. That is the lowest since the week ended Dec. 2. The 15-year rate fell to 3.74% from 3.78% a week ago, the McLean, Virginia-based mortgage-finance company said.
-- "Mortgage Rates for 30-Year Loans Fall for Seventh Week," by Prashant Gopal, Bloomberg, June 2, 2011.