What causes home prices to fluctuate?
Over time, the worth of a house will go up and down. Over a long enough period of time, house values normally appreciate. But, in real estate there is always a certain amount of risk.
When your home appreciates you have a larger asset to borrow against, and you get a larger profit when you sell. There are various reasons why property values in Longmont change. So, how will you be sure what you’re investing in this year will appreciate over time? The most important part is that you pick a real estate agent in Longmont who can identify the factors that drive local prices.
A lot of people think that the economy is the top factor affecting real estate appreciation. Naturally, mortgage rates, employment, job growth, government programs and numerous other national factors have a noticeable effect on your home’s worth. But the most significant issues that determine your home’s value depend on the local Longmont economy and residential market.
Access to services – Being close to schools, employment and amenities like shopping, restaurants and entertainment is a big deal to many buyers and will greatly influence home values. So when it comes to keeping their value, these regions generally appreciate the best.
Recent home sales – You should receive facts and figures on the recent real estate sales in the neighborhoods that you’d like to live in from your REALTOR®. You’ll want to know figures like how long a house stays on the market and seller discounts.
History of appreciation – In the past 5-10 years, have house prices gone up or down? Does location or affordability affect how desirable the neighborhood is thought to be?
Economic factors – Have businesses moved into or away from an area? Are local businesses hiring? Is there a nice combination of job types in an area, or does it rely on just one industry? All these play a part.
Existing-home sales rose 4.3 percent in January to a seasonally adjusted annual rate of 4.57 million, marking the third gain for home sales in the last four months, the National Association of REALTORS® reports.
“The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” NAR’s Chief Economist Lawrence Yun says.
While sales ticked up, inventories of for-sale homes also continued to show improvement, NAR reported. At the end of January, total housing inventory fell 0.4 percent to 2.31 million existing homes for sale, which represents a 6.1-month supply at the current sales pace.
Unsold listed inventory has steadily dropped since reaching a peak of 4.04 million in July 2007. It now is 20.6 percent below where it was a year ago, NAR reports.
Housing Affordability Improves
As home prices have fallen and mortgage rates at all-time record lows, housing affordability is at some of its highest levels on record.
“Word has been spreading about the record high housing affordability conditions and our members are reporting an increase in foot traffic compared with a year ago,” says NAR President Moe Veissi. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”
The national median existing-home price for all housing types in January was $154,700, which is down 2 percent year-over-year.
Distressed sales, which tend to sell at steep discounts, continue to hamper home prices nationwide. Foreclosures and short sales accounted for 35 percent of all January home sales, which is up slightly from 32 percent in December.
Still, “home buyers over the past three years have had some of the lowest default rates in history,” Yun said. “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”
Contract Delays, Cancellations Remain High
Twenty-one percent of NAR members in January reported delays in contracts, and 33 percent said contracts fell through, according to NAR. The number of contract cancellations remains mostly unchanged from December.
The increase in the past year of contract cancellations or delays has been blamed on more lenders declining mortgage applications from stricter underwriting standards and low appraisals coming in under the agreed upon contract price.
Source: National Association of REALTORS®
With so many predictions out there, it’s hard to decipher the real from the hype, but take a look at what US News Weekly has to say – pretty interesting article.
I personally have experienced extremely low inventory levels in the past few weeks. What’s that mean? It means there are NOT ENOUGH homes for sale. I know, it may sound like the opposite of what your used to hearing, but that’s why it’s so important to stay on top of the absolutely latest information.
This article ran in US News Weekly.
What’s in Store for the Housing Market in 2012?
Tanking home prices are likely to level off
By MEG HANDLEY
Is 2012 the year the housing market turns around? Of course, no one can say for sure, but plenty of economists say signals are pointing in the right direction.
“It has become increasingly apparent that the pieces for a housing rebound next year are beginning to fall into place,” wrote Barclays Capital analyst Stephen Kim in a recent report.
[Still, obstacles remain for the housing market. Here’s look at what to expect in 2012:
Home prices bottom out. Nationally, home prices have plummeted almost 24 percent off of their peak, and most economists expect prices to continue to decline as much as 4 or 5 percent before leveling out in late 2012.
While experts don’t expect a rapid conclusion to the saga of ever-declining home prices, “the trend of eroding expectations for the housing market recovery has come to a halt,” said Terry Loebs, founder of Pulsenomics, in a release.
Nationally, prices could start seeing a modest bump in 2013, but some markets are already recovering. “[T]hese national indexes mask the sizable variation in local house-price performance,” Frank Nothaft, chief economist at Freddie Mac, wrote in a recent report. “Some markets have appreciated over the past year and are likely to gain further in 2012, while those markets with higher vacancy rates and relatively large distressed sales will continue to see downward price pressure over the next year.”
Low mortgage rates. Rock-bottom low mortgage rates are likely here to stay, at least through the first half of 2012, in large part due to the Fed’s commitment to keep interest rates low to spur borrowing.
All bets are off, though, if politicians come to a decision on the qualified residential mortgage measure included in the Dodd-Frank financial reform act. “One of the most substantial things that will impact the market will be the definition of the qualified residential mortgage,” says Cameron Findlay, chief economist at LendingTree. “That has the potential of entirely changing the way mortgage rates are offered to consumers and it has the risk of raising rates by about 1.25 percent.”
Rising rents. The foreclosure crisis has converted millions of previous homeowners to renters and many would-be homebuyers have continued to stay on the sidelines and rent, waiting for prices to “hit bottom” before jumping into the housing market fray.
With more demand comes rising rents, a trend already being seen in many metro areas across the nation. Ultimately that can be a good thing for the housing market, since it generally tips more people into buying homes.
[“Rising rents have traditionally been a good factor for home sales,” says Lawrence Yun, chief economist at the National Association of Realtors.
Also, with rental demand heightened, real estate investors’ ears have perked up. With prices in many metro areas at historic lows, investors are taking advantage and scooping up properties to convert into rentals, Yun says.
Home sales pick up. The end sum of all these factors is an expected uptick in existing and new home sales next year. “There are so many improving factors that support home sales that we are calling for about a 5 percent increase in [existing] home sales in 2012 over 2011,” Yun says.
New home sales should also see an even bigger bump between 10 and 15 percent, Yun says, because the inventory of new constructions is so low. “The builders will be ramping up production,” he says.