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State of the real estate industry- showing signs of stability [REPORT]

Signs of stability

interior designThis month brings mostly good news with leading real estate indicators showing improvement and promise of recovery while there is still cause for concern, especially as the real estate tax credits come to an end.

While overall buyer and seller sentiment is trending positively, buyers fear financial instability in their home, citing it as the most common prohibitive factor in their home purchase.

First time buyers

Americans may not see homeownership as the American dream anymore, they still believe that homeownership is critical to the economy and in response, first time home buyer activity is on the rise.

New home sales

New construction is performing dramatically different than just 30 days before, experiencing a rebound. Last month, the U.S. Census Bureau reported that sales of new single-family homes were up 7.0% from February but down an alarming 13.0% from February 2009, making it look like tough times were ahead for builders.

This week, the Census Bureau reports that in March 2010, sales of new single-family homes is at 26.9% above February and a very impressive 23.8% above March 2009, leaving only a 6.7 month supply, despite February ending with a dismal 9.2 month supply.

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While sales of new homes are skyrocketing, the prices of the homes sold is dipping a bit. The median sales price of new homes in February was $220,500 but only $214,000 in March, representing a 3.0% drop.

Existing home sales

Like new home sales, existing home sales were down last month but experiencing a rebound as well, according to recent data released by the National Association of Realtors. February existing home sales had slipped 0.6% but risen 7.0% from February 2009, and March home sales rose 6.8% from February and (like new home sales), a large rise from March 2009 with a 16.1% jump.

The NAR survey shows first time buyers account for 44% of purchases and 19% were investors. The national median existing home price was $170,700 in March, up from $165,100 dropping a bit along with new home sales.

Bargains across America

More signs of stabilization come with Trulia.com’s report that the number of homes listed on their site having experienced at least one price reduction is down 26% annually.

“With such a dramatic drop in home price reductions over the past year, we’re beginning to see early signs of stabilization in the housing market on a national level, as well as locally in certain markets,” said Pete Flint, Trulia co-founder and CEO.

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ZipRealty reports that luxury housing markets experienced the largest price reductions, creating the biggest bargains for buyers in the first quarter of 2010.

Hope for the USDA program and rural buyers

For rural buyers, hope came this week in the form of HR 5017 passing, making USDA loans self funded through fees rather than the current method of using federal funding to backstop the guarantee.

The news couldn’t have come sooner, as supporters claim the funding will dry up literally over the next few days. HR 5017 next goes to vote and is expected to be approved.

Distressed homeowners

According to NAR, in both February and March, distressed sales accounted for one in three existing home sales. Last fall, NAR began recognizing the Certified Distressed Property Expert designation in response to what has continued to be a rise in distressed sales.

The takeaway

First time buyer activity is on the rise along with existing home sales and the new home sector has improved greatly and lowered supply to a healthier number. The luxury home market is experiencing the greatest price reductions and overall, the number of price reductions are down from 2009. HR 5017 passed this week bringing hope that the USDA program won’t die. The downside is that distressed homes are still at elevated rates, so while the residential real estate sector is showing signs of stability, the weak point in the system is the distressed homeowner.

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If programs like HAMP were to actually work, this sector would be stronger, but red tape and poor politics keep distressed homeowners in distress. We suspect that this summer, we’ll see a new program or a shift in how the government treats short sales and foreclosures. Benn and I were talking this week about the old $100 down HUD program moving inventory- maybe there will be a revitalization of the old system or emergence of a new form of helping distressed owners or shuffling foreclosed inventory.

CC Licensed image courtesy of annahape via Flickr.com.

Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

21 Comments

21 Comments

  1. Patrick

    April 25, 2010 at 8:25 pm

    Great Post Lani-I love good news. I just hope and pray that all the new construction going on up here in ^Seattle and the Puget Sound Area doesn’t turn into more existing inventory in 6 months when their completed! Nice to see things happening none the less!

  2. Ashlee in Dallas

    April 25, 2010 at 10:23 pm

    Great news that the market is turning around! Hopefully it stays that way and we have this high for a good time to come!

  3. Jim Hodson

    April 25, 2010 at 11:57 pm

    At countdowntobuy.com we have recently priced homes starting at 10% above fair market value (FMV) and reduced prices 1% per day. In the last month we have seen 98% of FMV with an average of 14 days on market. (some homes we held at 10% above for a short period before the reductions started).

    Some degree of stabilization would certainly be a welcome sign and help buyers and sellers alike because the ups and down can really keep people from making a commitment on a home.

  4. Daniel Bates

    April 26, 2010 at 8:21 am

    Once this artificial spur of first-time home buyers is gone aren’t the numbers going to take a big dip, just like the automobile and appliance industries saw after those incentive programs? We need to quit tinkering and let the market make the natural corrections that it needs to reach. I see signs of improvement in my area, but I’m not going to call it stabilization until the realistic inventory (counting actual homes on the market and those “taking a rest”) reaches normal levels and home values can be accurately determined.

  5. Susie Blackmon

    April 26, 2010 at 9:02 am

    I don’t see stabilization, per se, yet, at least not where I am (thank goodness I’m moving to horse country). We have realtors here running around bragging about new (overpriced) listings, when we have a 4-year absorption rate. Doh. Until there is a strong, solid job market, not spiked by census jobs, none of the government loan blips IMHO are sustainable or desirable. Prices still have a way to go downward here and I suspect many other places. Let the bloodletting run its course. Or go work for the SEC and have some fun!

  6. Erica Ramus

    April 27, 2010 at 6:39 pm

    Nice summary, Lani. We have had an up and down start to 2010 for sure.

  7. Justin Boland

    April 28, 2010 at 9:15 am

    This was excellent. Concise, clear and you covered everything that mattered.

    The numbers this summer will force gov to do something…hopefully something rational this time. Like passing the buck to the “free market” and opening up the short sale floodgates, at long last.

  8. Peter

    August 8, 2011 at 1:42 am

    We need to get back to about 4 years ago when it was raining home sales

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