Signs of a Housing Market Recovery
At least 42 percent of major housing markets are in decline, with some projected to fall by double digits over the next five years.
One alarming sign: Money Magazine reports that The National Association of Realtors has reversed its usually upbeat outlook and is now predicting a 1 percent drop nationwide in existing home prices in 2007, the first such prediction in the four decades since NAR started tracking prices.
Of course, no bear market lasts forever. And NAR, quickly recovering from its unusual flash of pessimism, is forecasting that prices will bottom out this quarter.
But how will you know?
Because housing markets are local, it won’t do much good to check national figures. How will that affect those specifically seeking a Georgia mortgage, for example? Instead, stay alert to leading indicators of recovery in your local market, such as:
Inventory is declining
A local home mortgage broker should be able to tell you the months’ worth of inventory - that is, the estimated amount of time, given the current pace of sales, that it would take to sell all the homes currently up for sale.
In markets with fewer than 6.5 months of inventory, homes tend to be appreciating faster than inflation, says Mark Dotzour, chief economist at the Real Estate Center at Texas A&M; above 6.5, prices are lagging inflation. Above nine or 10 months, home prices start to drop, creating an ice-cold market for sellers.
Houses are selling faster than they used to
While you’re asking your broker about inventory, ask how long the average house that sells has sat on the market and how that compares with figures from last quarter or six months ago.
Generally, if the average house is selling in less than a month, it’s a seller’s market. By 90 days, the buyers are generally in control.
Realtors are feeling better
The agents have an agenda - they pay for the privilege of posting - but their collective wisdom and specific entries can help you determine the mood.
“Buyer activity is moving cautiously upward yet not returning to the high levels seen in 2004 and 2005,” writes one realtor in the Minneapolis housing market.
Sellers are acting less desperate
Either by reading the classifieds or by scanning FOR SALE signs on your way to work, pick a handful of homes comparable to yours or one you might buy (think similar size and school district) and check on them weekly.
Does the asking price get reduced? Are the owners constantly holding open houses? Are they throwing in incentives to home loan applicants? Does the ad gain more exclamation points?
All this should give you a hint, says Sacramento housing market broker Elizabeth Weintraub. “If you’re seeing no decrease in FOR SALE signs, balloons and banners and OPEN HOUSE signs, and the SOLD signs aren’t popping up right away, that’s pretty much telling you it’s still a buyer’s market.”