THE BLOOD BATH IS ABOUT OVER

I wanted to take a moment to highlight an important market indicator that has shown significant promise in the past few weeks.  The national home supply has fallen down to its lowest levels since December 2008.  In June, there was 9.4 months of supply on the market, down from a year-ago level of 11.0 months. 

It’s one more sign that the housing market may be mending itself.  Housing supply is an important metric because home values across every U.S. market are rooted in supply and demand. When the supply of available homes outpaces buyer demand, home values tend to fall. And, by contrast, when homes are relatively scarce, values tend to rise.

We’re still a long way from historical averages, but dwindling home inventory may be one reason why the national median sale price rose by $7,000 last month.

It is important to remember that home sales of late have been spurred several key factors including low mortgage rates and the First-Time Home Buyer Tax Credit.  A NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May, and that the number of buyers looking at homes is up nearly 12 percentage points from June 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are very good opportunities. “Despite some of the challenges, the housing market continues to demonstrate signs of recovery,” said McMillan. “The temporary first-time buyer tax credit is clearly helping people make a decision and is contributing to the overall stimulus impact, but since it’s taking longer to close transactions, many would-be beneficiaries may not be able to take advantage of the credit before the December 1 expiration date.”

The S&P/Case-Shiller index for home prices in 20 major cities in the three months ended June 30 was up 1.4% from its level in the three months ended May 31. It was the first time the index rose two months in a row since mid-2006. Prices gained in 18 of 20 markets, but were still down 31% from their July 2006 peak. 

These numbers mark a definitive slowing in the downward spiral since 2006.  "Momentum matters," said Robert Shiller, the Yale University economist who helped create the index. "This is a sudden break in momentum."

We are now hearing almost daily reports of “good news” in the real estate sector.  This good news compounds upon itself and begins to move the market in a more definite direction of growth.  One component of the Case-Shiller index, consumer expectations of where the economy will be in six months, rose to 75.8, its highest since the recession began in December 2007. Consumers' assessment of present conditions also improved, along with stepped-up plans for buying homes, autos and several major appliances.

At a macro level economists and real-estate professionals warn that a recovery in housing is likely to be bumpy: Home prices could drop again as job losses drive foreclosures higher.  However, there are various markets that have suffered so greatly, that they will begin to surge in the coming months regardless of a few bumps on the national scene.  We are working diligently to identify these markets, so that your clients will enjoy a maximum benefit of the economic recovery.

Taken from MasonHill.com/blog