Existing Home Sales for the nation rose substantially for 2013 giving us the highest numbers that we’ve seen for 7 years. This is encouraging to say the least, however, many factors still plague our country and the health of our economic recovery. The United States needs to see more than the 70,000-200,000 private jobs created each month for us to have a strong economic recovery. It is understood that the national unemployment rate dipped below 7%, but let’s be honest here. Many people have left the workforce causing this number to look more attractive than it really is. Many more people need to get back to work and be able to make attractive wages before our economy is not struggling on life support.
Regardless of how our overall economy is, people still need to find homes to live in. We have witnessed the largest economic correction that the US has had in decades and people still find ways to buy their own home. This is the resilience and creativity of the American people, which is what should be celebrated. People are doing what they can to scratch and crawl their way to lending approval because they know the importance of owning their own home. Taking advantage of the amazingly low interest rates is a strong motivator as well. Allowing interest rates to rise before locking in that rate will cost a home buyer thousands of dollars over the term of their loan or the time they own the home. As interest rates continue to rise through 2014, the buyers who are able to purchase now will be the ones creating more of their own wealth over time. http://data.bls.gov/timeseries/LNS14000000
Although the number of home sales keeps increasing each month. The average home sales price continues to decrease month to month. The average sales price in January 2012 was $187,000. February shows the average stepping down to $181,000. Although there are positive signs in our economy, our housing market continues to slide. We do believe that we could very easily be on the cusp of a different direction, the fact of the matter is that there are just too many factors that are unknown that could sway the future of our market. We do believe most of the damage has been done, however; our economy is not based solely on the United States. We are in a world economy, so the events happening across the globe will affect our housing industry. Unfortunately these are items that we can not control. One event that we do have a little control over is our election results. Being an election year, it will be interesting to see how the voters respond to the candidates. The current administration will no doubtedly be inflating the positive results of the economy to influence voters. One fact is that there is a lot of cash sitting on the sidelines waiting to be injected into this economy once corporations and investors feel confident in our leadership. This confidence can change each day as we inch closer and closer to November.
Mortgage rates continue to conquer new territory with a new all time low for a 30 year fixed mortgage! What an amazing time to purchase or refinance. I know there are many people who would love to take advantage of these rates, but they are not in the position to make any moves. What good is the lowest interest rates on record when the financing rules are too tight? Rates could bottom out at 1%, but if people can’t qualify, then it is all in vain.
Fortunately FHA buyers are able to take advantage of these historically low rates. However, in our Salem Oregon market, those buyers only make up 20% of the purchasing power. It is the more qualified purchaser that is having difficulty with financing and therefore is less of a driving force in getting us out of the housing crash. FHA buyers have helped stabilize the market below $150,000 in our Salem Oregon area. Homes priced above that price point continue to see values erode away quickly. Unfortunately there is too much inventory in the higher price point.
It is so overwhelming to think about how our economic system is all tied together with different facets of the economy. What is going to break it open? Housing has historically lead the road to recovery in the past recessions, but how is housing going to recover when jobs are not created? How is housing going to recover when we have so many homeowners underwater on their mortgages and banks are not modifying? How is housing going to recover when we have such a mess with MERS and the overwhelming presence of Shadow Inventory?
There is no one answer to get us out of this mess. Declining mortgage rates are not going to make a bit of difference at the moment. We need solid fiscally conservative leadership on a wide and consistent basis to have a chance. The question is, have we dug our hole way too deep to recover well in the next decade? Judging by the way things are going, the answer seems grim, however; if you can take advantage of the all time low mortgage rates, then by all means; CAPITALIZE!
Well, things seem to be heating up once again with first time home buyers as well as move up buyers in our area. People are trying their hardest to get contracts signed around by April 30th to receive the tax credit. The homes that are selling are around $225,000 and below. The good ones are selling rather quickly, which is a great sign for move up buyers that have prepared well. If they can take advantage of this little “sellers market” in their market segment and then take advantage of the “buyer’s market” in their move up market segment, then I see that as a huge success. Values have held steady for those properties that have been a target of the first time home buyers. Prices have not increased, however; they have mainly held firm. It will be interesting to see what the market will do once May rolls around. Once again, if the government doesn’t concentrate on creating opportunities for private sector jobs, then we are in for a long haul. Of course, it will still take a long time for the economy to work through the 8 Million jobs lost over the last two years. The government is sure not to extend this tax credit, but they may just have to come up with more opportunities out there if our economy does not start to show healthy & sustainable signs of recovery soon.