A Promising Spring Market
We are well into a solid spring market, with potential buyers in search of “For Sale” and “Open House” signs. With so many people ready to move forward, there’s one thing holding the market back: more houses are needed to meet this growing demand. If you’ve been thinking about selling your home, this could be the perfect time to spring into the market!
Go to the Source
When I want first-hand knowledge of market activity, I go right to the source — our BHHS Fox & Roach sales associates. We surveyed real estate agents throughout our company and here is their response:
85% describe the market so far this year as moderate-to- strong
85% believe that lack of inventory is holding the market back. Just 3% think difficulty in obtaining a mortgage is negatively affecting sales
When asked how they think 2016 will compare to last year:
80% believe that the total number of sales this year will equal or exceed those in 2015
85% believe that average sales price will be the same or higher
Most believe that, like last year, high-end inventory is plentiful, but there is limited demand for those properties
Our sales associates’ experiences are supported by data. In the first quarter of 2016, the number of pended sales increased 11% over the same period of 2015, while houses on the market increased only 5%. This is a continuation of a trend: over the last five years, total first quarter pended sales increased 58%, while houses on the market decreased 28%. Current home sales are outpacing homes coming onto the market, so the supply of homes for sale is not meeting demand. With the exception of high-end properties, we are in a seller’s market.
In basic economics, when demand exceeds supply, prices rise. In our market area, we have been experiencing steady but modest growth. Average median sales price reached its post-recession low of $230,000 in 2012. Now, median sales price is $244,000. While home prices in some areas of our market remain below the artificial peak seen at the height of the real estate bubble, overall, our area has experienced slow, but steady and sustainable, growth. All real estate is local, so it is important to remember that price appreciation varies even throughout our own market area. Consult with your BHHS Fox & Roach sales associate to obtain the specific information for your micro-market.
If you want to sell your house
This is a great time to sell a house! That said, buyers are not looking for a house at any price: they are looking for excellent value. They are not letting emotions drive them into paying more for a property than what they perceive to be fair market value, even if they really like the house. Buyers are also demanding homes that are in move-in condition, and they are unwilling to take on what they consider to be significant home improvements.
The exception to this is the high-end market, where there is ample inventory and a limited number of buyers. There is much less aspirational purchasing of homes today than ten years ago. And high-end buyers are looking at options other than purchasing one large home, such as investing in a second home.
If you want to buy a house
With the exception of the higher-end, we are in a seller’s market. Buyers must be prepared to act fast if they see a home that they really want, because properties in good condition and priced right often receive multiple offers. Increase your chances of success by making an offer that appeals to the seller, including meeting their desired settlement date, with as few contingencies as possible. Offers that are accompanied by mortgage pre-approvals are stronger, so gain an advantage by contacting your Trident mortgage consultant to get the process going before you find the home you want to buy.
A Presidential Year
I’m often asked if presidential elections affect the real estate market. Historically, the real estate market has performed very well during those years. In the past six cycles, starting in 1992, four of the six of were accompanied by exceptional real estate markets. The two exceptions were 2000, when the dot.com bubble occurred, and 2008, when the economy collapsed. Federal Reserve economic data shows that the average sales increase of these presidential years was 6.9%. If we exclude 2008, the average is 8.9%. The average increase for non-presidential election years is 1.8%. If we exclude the housing bubble years (2006–2008), the increase rises to 2.7%. I’m not sure why this is the case, but I’ll take it as a good sign for real estate in 2016!
At this year’s Berkshire Hathaway shareholders meeting, Warren Buffet noted that the country is headed in the right direction and “no presidential candidate or president is going to end it.” I don’t know of anyone with a track record like Warren Buffett, so I’m happy to take him at his word!
What should we expect for the rest of the year?
Jobs, income and demographics are the primary economic drivers that make me positive about how our local economy and real estate market will perform for the duration of the year.
We are very close to reaching full employment in our region
Income growth is occurring
The largest number of baby boomers are in their peak earning years. They will be looking to downsize and/or buy a second home.
The largest number of millennials are in their mid-20’s. They are starting to enter the real estate market, and will continue to do so for quite a while.
Interest rates are at a three year low and any increases will be modest
Consumer confidence is good
There is plenty of mortgage money available
Stock market and oil prices are stabilizing
With the economy on the upswing, I expect interest rates and prices to rise in the not-so-distant future. It’s a great time to buy a home. If you are ready to realize your dream of a new home this spring, take the next step and contact your BHHS Fox & Roach sales associate today!
Lawrence F. Flick, IV
Chairman and Chief Executive Officer
Berkshire Hathaway HomeServices Fox & Roach, Realtors® and The Trident Group
Independent View from Joel Naroff
The economy began the year with a whimper, not a bang. Economic growth in the first quarter was minimal, and that came after a mediocre performance at the end of 2015. Yet that doesn’t mean the economy is heading into a tailspin. Indeed, there are many reasons to believe the slowdown was the pause the refreshes, rather than the one that depresses.
While recent economic growth was nothing to write home about, recent income gains were – and that creates hopes the housing market will continue to improve. Job gains in April were not great and some view that as a looming problem. I believe the slowdown was due to a lack of workers rather than a lack of demand. We can see that by examining the wage data. Earnings rose sharply as did hours worked. People who already have a job are finally seeing their incomes increase.
When it comes to the housing market, nothing helps more than a good household balance sheet and the rising take home pay should help more people feel comfortable taking on loans as well as qualifying for mortgages. With rates generally at or below 4%, homes remain affordable, especially with prices rising modestly in the region. And rates are not expected to increase significantly over the next six months.
Almost all the economies in the BH HomeServices Fox & Roach, Realtors, continue to improve. The outlier remains the Atlantic City region, as New Jersey’s politicians continue to fiddle as the city burns.Steady improvement in growth is expected this year, as the region follows the national upturn. All these factors point to a solid housing market.