18 DECEMBER 2013

The housing outlook for 2014?  Along with California-based real estate consultant John Burns and others, I’m holding my breath.

Last spring pent-up demand coupled with a resurgence of bidding wars drove home prices up the most in seven years, leading some, myself included, to fear that the market was becoming unhealthily overheated.  However, that concern has evaporated in response to a noticeable slowdown in real estate activity in the third and fourth quarters.  Now the question is whether that slowdown is normal—part of a recurring seasonal pattern—or a harbinger of things to come.

Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., called the top and bottom of the housing market.  From her Olympian perch she advises we not take the present real estate market’s tepidness too seriously—yet—as it may be due less to lack of demand than to lack of inventory.  As I’ve mentioned before, lack of inventory is a big problem these days.

Locally (my figures are for Montgomery County), TREND reports that despite recent weakness in the market, we already have the highest sales total—not counting December!—since 2007.  Despite considerable uncertainty in the general economy as well as in certain housing-related financial arrangements, therefore, TREND’s spokesperson is cautiously optimistic the real estate recovery will continue in 2014.  Amen to that!

2 OCTOBER 2013

Every homeowner wants to know how much appreciation our region has enjoyed lately, so here it is from TREND’s Market Update for August 2013:

Median home prices locally have increased 4-5% year over year—call it 4.5%.

By contrast you may have read that the Case-Shiller Index reported 12-13% year over year for the major metropolitan areas it covers, of which Philadelphia is not one. (In fact, Robert Shiller has just reported that in the sixteen months that ended in July, home prices were up 18.4% in real, inflation-adjusted terms.) That’s staggering, but resist the urge to relocate: double-digit price increases are never sustainable, as the country’s housing industry proved in 2005-2007. Fueled by pent-up demand created during the five-year post-Bubble Recession, our region’s moderate yet stable growth in prices is healthy and will probably continue for the foreseeable future. We are on track to have 64,000-65,000 sales in the area by year’s end, which will be the highest volume of activity since 2007.
Some of you may enjoy reading the attached Prudential Fox & Roach Realtors’s “Chairman’s Report” for further enlightenment on local market conditions.


As things stand at the moment, we have much to be happy about, real estate-wise.  According to The Wall Street Journal (9/19/13), today’s volume of home sales is approximately what it was in 1999 (before all the madness began).   Additionally, inflation-adjusted prices are now at 2000-2001 levels.  New construction starts are running about 600,000 per year, up dramatically from the post-Bubble nadir of 337,000 in January 2009 albeit nowhere near the 1.6 million required by the country simply to keep up with the steady increase in population via new family formation and immigration.  With today’s 30 year fixed rates still much cheaper than in 40 of the past 42 years, mortgage money remains a terrific bargain.  

All these factors make for a reasonably healthy real estate market.  The one major imbalance we have currently mucking up the works is our severe lack of inventory:  demand exceeds supply—and, worse, according to Brian Buffini of the preeminent real estate coaching company Buffini and Company, it will continue to do so for up to five more years.  That said, analysts (and this Realtor) agree that the past spring’s frenzy of bidding wars and double-digit price gains for Sellers eased over the summer.  It is still the most favorable time in recent memory for a homeowner to sell, but it won’t be wise to price as if we were still in a mini-Bubble.  Put a strategic price tag on your property—I can help you with that—and then let the Buyers have at it!    

15 MAY 2013

Owing to the unprecedentedly severe shortage of inventory I reported in recent Market Watches, a Bubble-like atmosphere now pervades the Main Line marketplace as we reach the height of the spring selling season. Good product is being snapped up in three-way, six-way, eight-way bidding wars that inevitably, for the lucky Sellers involved, result in driving sales prices skyward. 

Because in the past quarter-century home values have never just “taken off” from a standstill position—even the Bubble was preceded with gentle rises in prices over a period of several years before the market finally exploded in 2004-2006—we face a singular problem this spring: getting houses to appraise for the robust prices they are commanding in the current super-charged atmosphere. Since listing agents can no longer confidently expect their listings to appraise for the sums they’re getting for them, offers with no mortgage contingency easily trounce those that have one. In cases of dueling mortgage contingencies, those that don’t require the property to appraise in order for the Buyer to secure his desired financing easily trounce those that do. It is a tough dynamic for Buyers.

Virtually no one predicted the current real estate frenzy, which nationally has elevated both the sales rate for resale homes (up 10.3 % March over March) and sales prices generally (up 9.3% February over February). 

Please note: it is still advisable for homeowners to fix red flags and have their houses staged prior to marketing. It is also still advisable for listings to be priced realistically because demand from multiple quarters will do more to drive up the eventual sales price than pricing too aggressively and hoping some Buyer will bite at that high-water mark.

21 MARCH 2013 
I’ve a fascinating (shocking?) new real estate trend to report as we head into the prime months of the year for selling and buying residential property on the Main Line.

For six years now, both locally and nationally, prices have tapered down from Bubble peaks to Recession lows, with home values only turning the corner—at last—in 2012. What should by rights be a balanced housing recovery in 2013 could, however, prove perhaps to be something else: a mini-reprise of the Bubble years!

Nationally sales prices rose 7.3% during 2012 according to the S&P’s Case-Shiller Index. Given the current severe shortage of inventory owing both to continued homeowner resistance to selling in perceived suboptimal market conditions and to builder reluctance to build new homes over the past half-decade, what they will rise this year is unknown.

What IS known is that both nationally and here on the Main Line good product, priced realistically, is selling instantly (one day to one week), selling with one to eight offers, and selling for numbers reflecting Bubble-like price jumps. As the chief executive of Johns Burns Real Estate Consulting was quoted in The New York Times as saying, “The recovery is real, but the pace of the recovery has an artificial component to it.” Although the housing upturn, apparently here to stay, is obviously a most welcome development, the present intensely competitive, Bubble-like appreciation-generating dynamic may prove a mixed blessing.

In light of recent developments I counsel Main Line buyers to be prepared to move fast on attractive listings and Main Line sellers to price their homes strategically, letting competing bidders drive up the sales price from there.

27 FEBRUARY 2013

According to statistics recently released by the National Association of Realtors, the country's listing inventory has not been so low in eight years--that is, since early 2005--making 2013 the most propitious time in a long while for homeowners to consider selling. Because demand for product is steadily increasing as we edge into the spring market, traditionally the strongest sales season of the year, prices may rise "faster than normal," says NAR's chief economist, Lawrence Yun, unless the expected seasonal increase in inventory is really substantial. More likely, a surfeit of buyers will compete for an insufficient number of available properties, driving prices up after six straight years of decline. Buyer traffic is 40% above a year ago, reports Yun. "We've transitioned into a seller's market in much of the country."

To learn how the considerable shortage of inventory locally is starting to impact sales in your own neighborhood, please contact Joey. Very interesting developments are afoot!


Although the nation's housing inventory is at its lowest level since 2005, and although Mark Zandi, chief economist for Moody's Analytics, is projecting home value increases of 5 to 10% by 2014-2015, a more sobering assessment of where we've been and where we're headed was offered on 26 January by Bob Schiller, co-founder of the S&P Case/Schiller Composite Index.

According to Mr. Schiller, Americans have experienced only two major real estate bubbles in the past century:  the one we are still recovering from (1977-2006) that shot home values skyward 86% in real terms and the one we experienced during and after World War II (1942-1953), when real prices rose 68%.  It is thus doubtful another major bubble will materialize any time soon.

The value increases of the recent upswing, Mr. Schiller notes, were "almost completely reversed by 2012."  Along with most experts, he is not predicting any big change in home prices in the near term.  Increases for the next half-decade will be modest, "implying inflation-adjusted price growth of 1 to 2 percent a year."
Owing to improving industry fundamentals, about which I wrote in my last Market Watch, our long-standing buyers' marketplace is beginning once again to favor sellers.  Even without significant increases in home prices expected anytime soon, this is something for which all home owners can be grateful.


1 JANUARY 2013

I bring glad tidings: the real estate industry's fundamentals appear sufficeitnly sound (at last!) to augur continued recovery in 2013. Let's recap the marvelous developments the country witnessed in 2012:

  1. Revised, sustained demand for product from traditional buyers (as opposed to investors);
  2. Sharp declines in the number of resale homes available for purchase;
  3. Continued under-production of new construction homes relative to natural increases in population (household formation and immigration);
  4. The lowest annual mortgage rate average (3.66%) in more than sixty-five years (WSJ, 12/28);
  5. Modestly rising sales prices;
  6. Rising rents.

We have waited for some years for such a happy confluence of circumstances to arise. Already in 2012 buyers, beginning to feel a sense of urgency to purchase, were frustrated by the dearth of attractive resale inventory. In 2013 we should see significantly improved results for sellers offering good product priced right for today's market.

In light of the aforementioned developments, I am very excited about the prospects for sellers in the coming year. I encourage any homeowner thinking about selling to contact me for a meeting to discuss how we can capitalize on current market conditions if he or she were to decide to sell in 2013.