MSNBC: Existing-home sales post surprising 5.1% gain - Sales activity remains slow, but plunging prices draw in first-time buyers
According to the Associated Press (AP), sales of existing homes spiked in February by the largest amount in nearly six years. Who do we have to thank?
The answer is first-time homebuyers. This demographic have plenty of inventory to choose from. Many are taking advantage of homes that are selling for a deep discount (e.g. foreclosed homes, short sales, etc.).
Despite the increase in sales of existing homes, prices will continue to remain affordable.
On April 13 Paul Gores of the Milwaukee Journal Sentinel wrote an article that suggested that home prices in Metro Milwaukee have declined to match 2005 levels. I think many who follow real estate trends knew that housing prices have declined during the past year or two. As with any investment, prices rise and fall due to changing economic conditions. Prices rise and fall based on supply and demand.
According to the Mandel Group of Milwaukee, we currently have a two-year supply of downtown condos. In comparison, a healthy downtown market would have approximately a one-year supply. This means that if all of the prospective sellers were to wait to enter the market, it would still take us approximately two years to sell off our current inventory levels.
Our downtown supply has dried up in recent months because several downtown projects have been canceled. These canceled projects should hold our current housing prices in check. We’re not going to see a huge spike in prices this year due to the amount of bank-owned properties or properties under foreclosure, short sales, and transactions involving relocation companies. All of these transactions will impact the salability and marketability of real estate in any sub-market.
Economists feel that the large number of foreclosed homes will keep housing prices in check. Many of these bank-owned properties are not even on the market.
Those analysts who buy into the “doom-and-gloom” suggest that buyers will remain on the sidelines as the economy continues to show signs of deterioration and the unemployment rate increases.
I agree that the $8,000 income tax credit for first-time homebuyers isn’t enough. I agree that if you are worried about the health of your career, you will not be in the market for a home this year regardless of how much free money is being offered.
Have we hit the bottom? I don’t know. During the past two years, housing prices have declined throughout Metro Milwaukee. I feel that prices will stabilize in 2009 as new construction projects are cancelled. Despite the decline in housing prices, I am witnessing more and more activity within the downtown Milwaukee condo market in recent weeks. I would be much more scared about the health of the real estate market if activity levels remain down. Slow sales generally lead to further price declines.
I anticipate that sales will continue to show signs of improvement through the early weeks of summer. I also anticipate that existing home sales will increase at a faster pace as we approach August, September, and October. During this three-month period, we will witness all of the procrastinators who will jump into the real estate market shortly before the $8,000 tax credit expires.
For your information, the $8,000 tax credit applies for those transactions that close no later than December 1, 2009. Therefore, I am and will be encouraging all of my buyers to write their offers and have them accepted no later than the end of October. Most deals close within 25-30 days from the date of acceptance.
The AP and MSNBC provide more details regarding the health of the current housing market and the impact bank-owned properties have on the market. Click here to read more about the current housing market>>>
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Labels: Economy
posted by David Ray @ 9:20 PM
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