“Existing home sales collapse in January despite low mortgage rates’
HW Breaking News Update, February 23, 2015
If you recently read news similar to this, it doesn’t reflect what is actually happening in the real estate market today and here’s why.
According to the National Association of Realtors (NAR), from October 2013 through January 2014 home sales dropped to 4.62M. From October 2014 through January 2015, home sales dropped to 4.82M. So yes, home sales did go down from December to January in each of the four month periods, but there were 200,000 more sales in December 2014 than there were in December 2013 and the same in January 2015 over January 2014.
Nationally, sales in the last quarter of 2014 and January 2015 were up from the previous year’s sales. How did the local market fare?
Let’s look at home sales recorded in the Wilmington Regional Association of Realtors (WRAR) multiple listing services (MLS). As you can see from the chart below, for the same time period, sales increased this year over last year while showing a drop in sales from December to January. We followed the national trend of increased sales over last year.
Looking at pending sales during the same time period, the number of houses going under contract, it’s even more promising. The last four months of 2014 and the first month of this year, pending home sales remained very strong nationally, as well as locally. So we’re in a much better place as far as homes selling than we were the same exact time last year. Don’t listen to the headlines. The real estate market is in a good place right now and it looks like that wave is continuing to build.
In January the sales of newly constructed homes was up 5.3% over last year nationally and 6% locally. So is the real estate world collapsing? Existing home sales increased over last year, pending home sales increased over last year, and new construction sales increased over last year. We’re in fine shape.
Foot traffic is the number of people out there actually looking for a house right now.
Nationally, buyer activity based on foot traffic this January is actually three times greater than it was last January. According to Steve Harney, a leading residential real estate expert from the greater New York City area, there are triple the number of buyers out there looking for a house right now than there were just twelve months ago.
By looking at how many people are Googling buying a home – anything that has to do with them actually looking to purchase a home in the future – what we see is
According to Google, the January number for 2015 was higher than the January number in 2014 and the January number in 2013. That’s not the number of people. Google trends is better at gauging a “mineshare” rather than a total number of searches for each item. The higher the number, the larger share of searches that topic had at that time compared to every other topic for which people searched. So what they’re saying is that there are more people interested in buying a home than there were in the last two years, for the month of January. Every indication, the number of houses closing, the number of houses going under contract, the number of houses being looked at, the number of houses being searched, is up over last year.
We have looked at the demand side of the equation – the buyer side. Now we’ll look at the supply side – the seller side. A normal real estate market is when there is a six month inventory of homes – given the current number of homes for sale, it would take six months at the current rate of sales to sell them all. In a normal or neutral market, prices usually only increase with inflation. When there is more than six months inventory, it’s a buyer’s market – prices tend to go down because there are so many homes available. When there is less than six months inventory , it’s a seller’s market – prices tend to increase because there aren’t as many homes for a buyer to consider. As with other markets price is determined by supply and demand.
Let’s look at home prices. According to the Federal Housing Finance Agency (FHFA), the US average increase in home prices from 2013 to 2014 was 4.91%. In the south Atlantic states, it was 5.07%. In NC, prices increased by 2.5%. Home prices in the greater Wilmington area increased 4% from 2013 to 2014.
While we aren’t near the peak average price, our average sales price has been increasing every quarter. With a current ten month inventory of homes for sale, prices in our area may not increase as quickly as in other areas of the state and country going forward.
Where do we go from here? Every quarter, a nationwide panel of over 100 economists, real estate experts, and investment and market strategists develop a report of the home price expectation. This report is an average of all their answers.
They projected the mean percentage appreciation will increase by 4.4% in 2015, 3.8% in 2016, 3.5% in 2017, 3.3% in 2018, and 3.1% in 2019.
The bull is the most optimistic quarter of those surveyed. They are very bullish on the housing market and think prices could be up as much as 27.5% by 2019. The bears, the most negative quarter of those surveyed, think that by 2019 house prices will still be up 11.7%. Keep in mind this is a national survey and it will be different based on states, regions, neighborhoods, but it gives an overall feel of what the housing market will be over the next few years.
Standard & Poor’s put out the Case-Shiller Report in February 2015 that shows the national appreciation of home prices for homes sold in 2014. The level of appreciation (not the sales price) decreased every month until December when it increased slightly. However, if prices go up because of lower inventories of homes and interest rates go up, that could discourage some buyers from purchasing and that will affect the appreciation rate.
Bottom line for those looking to purchase a home in the greater Wilmington area, now is the time to buy – while there is still a strong inventory of homes (keeping prices from rising too quickly) and before interest rates start increasing during the second half of 2015 as predicted by financial experts.
If you are in the market to buy a home or just considering your options, it costs nothing to learn more. Call or email Linda for a free, no-obligation, no pressure consultation – 910.409.3519, Linda@LindaMehner.com.