An Analysis of Real Estate Inventory: Why Now Seems Like A Great Time To Sell
I recently analyzed inventory data for single-family homes located in Milwaukee County between November 2010 and October 2012 to determine if demand is keeping up with supply.
For the years that followed the peak in 2006, buyers have since left the market causing a glut of inventory of homes. The few buyers that remained in the market found plentiful options and great bargains during the Buyer's Market of that time.
In 2012, the market shifted again toward a healthier, more balanced market. Today's buyer is still enjoying the benefits of historically-low interest rates and low housing values; but, have much fewer options than those buyers who purchased homes in 2011. Many real estate agents are noticing an increase in the number of bidding wars. Fewer inventory (i.e. competitors) may mean greater opportunities for you to sell your home during a market where demand seems to be keeping up with supply. Buyers are back!
My analysis includes four categories of inventory: (1) Active Listings (in Total), (2) New Listings, (3) Pending Listings (an indicator when offers were being written and accepted), and (4) Sold Listings.
Inventory levels peaked during Q2 2011 and have generally declined since. We typically experience a cycle during the course of the year which indicates that the market slows during the winter months and peaks during the spring/summer months. For this reason, our lowest point occurred during January 2012 and bounced back up in February. However, over time, inventory has declined since July 2011.
NEW LISTINGS:
Low: 520 Listings Entered the Market (December 2011) Peaked: 1,145 Listings Entered the Market (March 2011) Current: 734 Listing Entered the Market (October 2012)
As noted with Active Listings, inventory levels (along with new entrants to the market) tend to decrease during the winter months and increase during the spring/summer months. New entrants to the market dipped during Q4 2011, increased sharply during Q1 2012, and has tapered off since.
During the 24-month period analyzed, the frequency of real estate sales increased to its peak during Q2 2012 and has slightly tapered off since.
OVERALL OBSERVATION
Within a calendar year, there appears to be a cycle - peaking during the Q2 and dipping during Q4. The peak season appears to begin early each year (February 2012) and continues through the summer/fall. Despite the cycle, it is important to note that buyers are still submitting offers (196 offers accepted during October 2012) and deals are still closing during the quieter months (552 closed deals during October 2012).
Demand - as reflected by Pending and Sales - peaked during Q2 2012 and has decreased slightly since.
Supply - as reflected by Active and New - peaked during the first half of 2011 and has decreased since.
Supply of homes peaked approximately one year before demand peaked. For this reason...
"In 2012, the market shifted again toward a healthier, more balanced
market. Today's buyer is still enjoying the benefits of
historically-low interest rates and low housing values; but, have much
fewer options than those buyers who purchased homes in 2011. Many real
estate agents are noticing an increase in the number of bidding wars.
Fewer inventory (i.e. competitors) may mean greater opportunities for
you to sell your home during a market where demand seems to be keeping
up with supply. Buyers are back!"
Message for Home Owners Who Are On The Fence About Selling
This analysis seems to indicate that Buyers are back with limited number of options. It would seem likely that you will experience greater success in selling your home than those who attempted to sell their home since the peak of the housing market. If you are contemplating selling your home, then I suggest you beat the cycle and enter the market shortly after the new year begins.
Please leave a comment or send me an e-mail at dray@shorewest.com and let me know if you have any questions regarding my analysis or the real estate market in Metro Milwaukee. -----
Medicare Surtax in 2013: Impact on Real Estate Transactions
Do you own real estate as an investment? Are you looking to sell any of your investment properties during the next 12 months? You may wish to consider selling them in 2012 as it may be more expensive to do so beginning in 2013.
According to the National Association of REALTORS® (NAR): "Beginning January 1, 2013, a new 3.8 percent tax on some investment income will take effect. Since this new tax will affect some real estate transactions, it is important for [you] to clearly understand the tax...Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals when an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI."
A short video from Putnam explains how the tax works:
The NAR prepared the following PDF to provide additional information regarding the Medicare Surtax as well as case examples under various situations:
Please leave a comment and let me know if you have any additional questions or concerns regarding the Medicate Surtax and its impact on your next real estate transaction.
Based on most recent mortgage rate sheet from Wisconsin Mortgage Corporation
(www.wimort.com).
Disclaimer: Posted rates are subject to adjustments based on Customer Credit
Score and Loan-To-Value. Terms are subject to change without notice. This is
not an advertisement to extend consumer credit per Sec. 226.2 of Regulation Z.
Please leave a comment if you need any additional information.
MKE Real Estate Market: 2011 Analysis. 2012 Outlook. Interested in Milwaukee’s Real Estate Market?http://ht.ly/8f8di
My wife and I believe this is a good time to buy. Looking at a few condos next week. Great post:http://ht.ly/8bcXK
Mortgage rates continue to bounce around 4%. Have you considered refinancing your loan to lock-in at a lower rate? Leave a comment for more information.
Bicycling magazine’s Top 50 bike-friendly cities includes Madison #7, Milwaukee #25 |http://ht.ly/7qB2B
Kiplinger: 2012 Predictions - Home prices stabilize, rates remain low, sales increases, foreclosures remain an issue.http://ht.ly/8cD5y
Most affordable 2 BR condos in/around Downtown MKE (w/ Parking) | Indoor parking, #2 is a deal|http://ht.ly/8ksr1
Most to least expensive metro areas for homeownership - Q3 '11: #46 Madison, #90 MKE, #130 Green Bay, #170 Appleton.http://ht.ly/82zCa
Homeowners facing default on their mtg likely to become renters. Expand your portfolio of income-generating properties.http://ht.ly/7iZP7
Leave a comment if you need assistance w/ a real estate need. I can put you in touch with a quality agent...almost anywhere.http://ht.ly/7qBg4
Please share a comment if you have any questions regarding the real estate market.
Downtown Milwaukee Condo Market: Looking Back on 2011
The real estate market continues to keep me on my toes. The word I would use to describe the real estate market in 2011: Encouraging.
In this year-in-review analysis, I will explore fair market values, inventory levels, sales activity, and mortgage rates. I will also share my thoughts on the real estate market for 2012.
To begin, I will analyze fair market values (FMV) in the Downtown Milwaukee condominium market. Although this analysis pertains to one specific segment in Milwaukee Metro, this analysis can be used to review other segments.
Downtown Milwaukee is comprised of several neighborhood markets: Bay View, Brewers Hill, East Town, Halyard Park, Lower East Side, Riverwest, Third Ward, Upper East Side, Walker's Point, and Westown.
Since January 2008, Average Fair Market Value or AFMV (on a price-per-square-foot basis) declined during two distinct periods throughout Downtown Milwaukee: March 2009 - March 2010 and January 2011 - December 2011. The real estate market experienced a short-term spike between March 2010 and June 2010. If you recall, the final deadline for the First-Time Home Buyer Tax Credit expired in April 2010 (closed no later than June 30, 2010) which accelerated sales transactions in 2010.
Location, Location, Location: Not surprisingly, the affordability index increases the further away you move from the center of Downtown Milwaukee. The AFMV is highest in Milwaukee's East Town, Lower East Side, Third Ward, and Walker's Point neighborhoods. The AFMV is lowest in Milwaukee's Bay View, Brewer's Hill, Halyard Park, Riverwest, Upper East Side, and Westown neighborhoods. The Third Ward remains one of the most desirable neighborhoods in Downtown Milwaukee (hence, the highest AFMV).
During 2011, AFMV declined slightly for all neighborhoods in Downtown Milwaukee. This slight decline suggests that AFMV is beginning to level off. Why are fair market values leveling off?
One factor that influences FMV is supply. In real estate, supply includes "Active Listings". In this analysis, I researched the condominium market in the 53202 zip code (includes East Town, Lower East Side, and Third Ward neighborhoods). Between January 2010 and September 2010, Active Listings was holding steady around 500 per month. Since September 2010, inventory of condominium units in 53202 has been steadily declining. Since June 2011, fewer sellers entered the market which is limiting our available inventory.
Another factor affecting supply is sales activity. Since January 2010, condominium units have been selling at a constant rate each month (between 15-25 units per month). Flat sales activity during this analysis (January 2010 - December 2011) suggests that buyers are purchasing condominium units regardless of mortgage rates, first-time home buyer credits, etc. Notice that "Sold Listings" matched "New Listings" in December 2011. This suggests that the pendulum is moving closer to a balanced market.
Sales activity remains constant. New listings are decreasing. Based on these two factors, overall supply is decreasing which is causing FMV to level off. Why are listings decreasing? Based on my knowledge of this market segment, prospective sellers are either staying in their condominium units and waiting for prices to improve or are choosing to rent their condominium units and waiting for prices to improve. Either way, today's prospective seller is choosing to wait for the market to improve.
At one point in time, inventory levels for condominium units in 53202 peaked at 58 months worth of inventory (November 2010). This is a highly-skewed Buyer's Market. In other words, it would take the market 58 months to sell off the inventory levels reported at that point in time. The market experienced a dip in FMV during this period as supply significantly outweighed demand. Since December 2010, inventory levels have declined between 14 and 30 months of inventory. This is still a Buyer's Market; but much more balanced than 2010 levels.
Suggestions for Buyers: Keep an eye on mortgage rates. With FMV leveling off, buyers should focus on the stock market, bond market, and mortgage rates. Mortgage rates were fairly flat between January 2009 and March 2010; declined between April 2010 and November 2010; increased quickly in December 2010; remained flat between December 2010 and April 2011; and decreased steadily since May 2011 to our lowest level reported in December 2011.
Since August 2011, rates have been bouncing around 4.000% - showing greater instability. Fluctuations in mortgage rates are due to economic conditions - here and abroad. Keep an eye on economic situations in Europe. Is consumer confidence showing strength here in the U.S.? Are investors moving money from bonds to safer investments like stocks? If investors choose to move money into stocks, look out for mortgage rates to increase.
Supply: I expect inventory levels will increase during our traditional "busy season". I expect banks will add more foreclosures to our inventory levels. I expect more Short Sales will appear on our books as well.
Demand: I expect that sales activity will remain constant throughout 2012.
Fair Market Values: I expect FMV will decline slightly in 2012 - continuing to show signs of leveling off. Distressed properties (i.e. foreclosures, Short Sales) will continue to keep FMV flat during 2012.
Wildcard: Mortgage rates. Buyers who are in the market to purchase real estate should be cognizant of mortgage rates. Historically, mortgage rates spike high and fast once consumer confidence returns. For those who are timing the market, I expect mortgage rates will remain fairly flat during the first half of 2012.
Do you have any questions regarding the real estate market? Feel free to leave a comment? May you and your family enjoy a prosperous 2012!
First-Time Home Buyer's Tax Credit Deadline Is Approaching!
Do you qualify for the First-Time Home Buyer’s Tax Credit?The answer might surprise you!It’s not just for first-time home buyers.Please contact me if you have any specific questions about the qualifications of this tax credit because it is on a case-by-case basis. Please e-mail me at dray@shorewest.com or call me at (414) 412-7980.
The purpose of this blog post is to offer those who qualify a suggested course of action as the deadline is quickly approaching.
To qualify, your transaction must close before December 1, 2009 (or on or before November 30, 2009).
Many mortgage providers and title companies are expecting a large spike in activity during the final months leading up to this key deadline.
Therefore, here is a suggested time line for those who still want to take advantage of the free money:
Closing Date: Before December 1 (On Or Before November 30)
However, title companies will be swamped on this date.Closing attorneys and conference rooms will be difficult to find. November 30 is a Monday.Other notable dates: Thursday, November 26 is Thanksgiving. Friday, November 27 and Monday, November 30 will be very busy dates as well for closings. Most companies are closed the Friday following Thanksgiving (this might be the case for title companies as well).
For cushion, I suggest that you plan accordingly and make sure your transaction closes before Thanksgiving.
Most buyers like to close on Fridays to allow moving to take place over the weekend.Therefore, I suggest closing on or before Friday, November 20.
Acceptance of Offer:
It used to be a safe bet to figure 30 days from contract to closing.If you are feeling lucky, then I suggest having an offer accepted no later than October 21.This is not the date that you should begin the negotiations!
Most mortgage providers and title companies are expecting huge delays throughout every step of the transaction (most of which is even beyond my control).These professionals are suggesting that the 30-day rule should not apply during this period.A few are suggesting 45-days (at the very earliest from contract to closing).Most believe that the 30-day rule should be increased to 60 days during this period. I also recommend giving you 60 days from contract to closing to ensure that your closing occurs within the set time frame.
Therefore, I recommend that your Offer is not accepted no later than September 21 to ensure that your closing occurs prior to December 1.Again, this is not the date you should begin negotiations.
Begin Search:
This depends on how much time you would like to give yourself to search for your next home.September 21 is five (5) weeks from tomorrow, August 17, 2009 (five open house dates).
Please e-mail me at dray@shorewest.com or call me at (414) 412-7980 and let me know if you have any specific questions regarding the First-Time Home Buyer's Tax Credit.
JSOnline.com: Tighter standards make getting condo loans more difficult
Many of my condominium purchasers are finding it more challenging finding a mortgage lender that is willing to work with them. It has become an even greater challenge for financing new condominium developments. It’s not because the banks don’t want to lend. It’s because Fannie May and Freddie Mac, government-backed mortgage finance companies, have tightened their policies for purchasing loans from banks that are used to purchase condominium units. Banks typically pass these additional costs on to the purchaser by requiring larger down payments and charging higher interest rates.
It’s not enough to have a good credit score, a well-paying job, and a savings account with a balance large enough to cover 20% of the purchase price for a down payment.
My Thoughts
There is good news for many condominium purchasers in today’s market. All is not lost. There are two local banks that are still funding condominium units especially new condominium developments. AnchorBank and Johnson Bank are assisting buyers in today’s market to purchase even brand-new condominium developments (e.g. Cityside Plaza, The Point, The Edge, Landmark On The Lake, etc.). Johnson Bank is holding their loans versus selling them to Fannie Mae and Freddie Mac. By choosing to hold their loans, Johnson Bank doesn’t need to meet the strict lending requirements of Fannie Mae and Freddie Mac.
I have recently joined the sales staff at Cityside Plaza where we have an established relationship with Johnson Bank. During the past week the developer of Cityside Plaza, Magnet Group of Chicago, closed on the sale of two brand-new condominium units. In addition, during the past two weeks, we have secured purchase contracts for four brand-new condominium units. According to Johnson Bank, condominium purchasers are able to secure a loan for as little as 10% down for Cityside Plaza. Therefore, if you need a second or third opinion, I would recommend that you contact Johnson Bank and AnchorBank.
The Business Journal of Milwaukee: Milwaukee area housing recovery? Sales increase in June, but it may be just a blip
I continue to see signs of a slow recovery in the housing market.In June, housing sales in the Milwaukee Metro increased over the same month period the year before.Many real estate professionals contribute this increase to the first-time home buyer tax credit.
I’m a real estate professional so naturally many consumers ask me about the state of the housing market.I immediately respond to inquiries by asking a question:What sub-market are you referring to?Bay View?North Shore?Wauwatosa?Elm Grove?Lake Country?Most consumers appreciate that real estate is very local and the market can be as different as the community.Are you asking about single-family homes?Condominiums?Investment properties?The type of ownership varies greatly within a single community.
Despite the overall increase in sales activity, not all sub-markets are seeing the same results.In another recent blog post titled “JSOnline.com:Tighter standards make getting condo loans more difficult”, I discuss how mortgage providers are making it more difficult for buyers to purchase condominium units.Mortgage providers are also making it more difficult to purchase non-owner-occupied investment properties (e.g. two-family, multi-family dwellings).Fannie Mae and Freddie Mac have implemented stricter lending guidelines for investment properties and condominium units.These stricter guidelines generally mean buyers need to provide a larger down payment and be willing to borrow at higher interest rates.
Molly Newman, writer for The Business Journal of Milwaukee, provides additional statistics regarding the housing market and includes the opinions of other real estate professionals regarding the current housing market.Click here to read more about the state of the current housing market>>>
BizTimes.com: Appraisal problems are holding back housing recovery
The National Association of Realtors (NAR) reported that existing home sales rose 2.4% to a seasonally-adjusted annual rate of 4.77 million.Although it is positive to report such an increase in sales activity, the increase in sales is less than expected.One of the main reasons why sales didn’t meet expectations is due to poor appraisals which are delaying transactions.
Fannie Mae and Freddie Mac require lenders to hire independent, qualified appraisers to appraise properties for their loans.It used to be regular business practice for lenders to hire appraisers based on prior work history and based on familiarity of the real estate market.Now, Fannie Mae and Freddie Mac will no longer purchase loans unless the appraisers are not ordered by the lender.Lawrence Yun, NAR chief economist, said, “Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales.”Yun is concerned that the housing market is at risk if appraisals continue to cause delays with real estate transactions or to cause deals from closing.These issues could increase the number of foreclosures which would only hurt housing values.
My Thoughts
Yun’s concerns regarding the new appraisal procedures are valid.Personally, I have not experienced the issues he describes.However, I have read a number of cases in publications and have heard a number of stories from colleagues which seem to indicate that the new appraisal policies are having an adverse affect on real estate transactions.
I am still optimistic that the housing market will continue to show signs of improvement during the next 2-3 months.Interest rates continue to remain at historically-low levels.Housing prices continue to remain affordable.First-time homebuyers are also encouraged to enter the housing market with incentives like the $8,000 tax credit.
If you are a first-time homebuyer, then I encourage you to consider entering the real estate market soon.In order to take advantage of the refundable tax credit, your real estate transaction must close no later than December 1.On average, most transactions close within 30-40 days of acceptance.Therefore, I recommend that you need to have an acceptable offer in writing no later than mid-October.
Let me repeat this.First-time homebuyers will need to have an offer accepted no later than mid-October to ensure that their deal closes by December 1.If you’re offer closes on December 2nd or later, you will miss out on the tax credit.
Blog dedicated to news and information about Milwaukee's growing condo market. Information maintained by David Ray of Shorewest Realtors, specializing in condos in Milwaukee's downtown, East Side, Third Ward, Brewer's Hill, and Walker's Point. For more information about buying or selling real estate in Milwaukee, please contact David Ray at 414.961.8314 X148, dray@shorewest.com, or DavidKnowsDowntown.com.
Real Estate Broker Associate / Realtor® / CSRS / CPA ***** I am a lifetime resident of metro Milwaukee Area. I enjoy the restaurants, activities, events, and nightlife in Milwaukee's downtown and surrounding areas including the East Side, Third Ward, and Walker's Point. I am a Real Estate Broker Associate, Realtor®, and Certified Shorewest Relocation Specialist specializing in the downtown Milwaukee condominium market, although I represent buyers and sellers through the greater Milwaukee area. When not listing, showing, or selling real estate, I enjoy walking my two Shiba Inus (a Japanese breed) and relaxing with family and friends.
