This Month in Real Estate Newsletter for U.S. & Canada Real Estate Markets – February 2011
Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across the United States. The aim of the consumer-oriented segments is to help Keller Williams Realty real estate agentscombat the “doom and gloom” messages of the national print and television media with real information on the state of the real estate market.
February 2011 U.S. Market Update
Gradual improvement in the housing market continues at a steady pace without government support. Six months after two consecutive years of tax incentives for buyers; starting in July 2008 with a $7,500 repayable first-time buyer tax credit, extending to a $8,000 nonrepayable first-time buyer tax credit in January 2009, and ending in June 2010 with the expanded credit to repeat buyers; the market has shown remarkable improvement from the initial drop this past July. With mortgage rates remaining near historic lows and home prices having generally stabilized, economists are expecting further strength in 2011.
Consumers are showing some signs that they’re feeling better: a significant boost in the food and services industry implies they are eating out more, vacations are back on the rise as spending on travel and tourism increased 8% in the third quarter, and household net worth has risen notably thanks to a strong stock market even as they continue to shrink their debt.
As the economy improves, current stimulus efforts by the government and the Federal Reserve Board are expected to gradually wind down, which typically means rising interest rates. Meanwhile, buyers continue to benefit from historically favorable buying conditions and sellers enjoy increased stability in the market.
Home Sales(in millions):
The uptrend in existing home sales activity continued through December, increasing by a substantial 12.3% from a month ago. This marks the fifth monthly increase in the past six months and indicates a recovery that’s gaining a firmer footing. While home sales remained 2.9% below the level seen last year, the market’s upward momentum, despite the absence of the tax credit, is a welcoming sign.
Home Price(in thousands):
Home prices softened in December: median home prices edged down slightly to $168,800, 1% below the year-ago level. Contributing to this is a larger share of distressed homes sales which accounted for 36% of sales in December. This is compared to 33% in November 2010 and 32% in December 2009. Prices continue to hold steady and mortgage rates remain historically low, offering favorable buying opportunities.
Inventory- Month’s Supply(in months):
The surge in home sales and a shrinking inventory pared down the month’s supply to 8.1 months. This is down 1.4 months from November but remains 0.9 months above last year at this time. While still at a relatively high level historically, months of inventory has declined steadily from its peak of 12.5 months in July and is now back to pre-tax credit expiration levels.
Source: National Association of Realtors – December housing data released Janurary 20.
February 2011 Canada Market Update
The housing market continues on a stable and balanced track. Sales activity is still midway between the recessionary low of December 2008 and the recovery high of December 2009. Both home sales and prices remain on par with the previous month.
Although there have been recent signs that the global economy is still fragile, recovery continues to gain traction with an improved economic outlook and anticipated strengthening of consumer confidence. The Canadian Real Estate Association (CREA) has upwardly revised its forecast for the coming year, meaning the housing market is expected to be better than initially thought. Additional tightening in mortgage regulations is expected to encourage buyers to purchase before the changes take effect in March. This will likely mean slightly stronger sales in the first part of the year, as was the case in 2010 with the introduction of the Harmonized Sales Tax in British Columbia and Ontario and tighter mortgage rules across the country that raise the minimum down payment.
Moving forward, rising interest rates and weak job growth are factors that are responsible for keeping sales activity and price appreciation stable and slower than seen during the recovery. Due to improved affordability, balanced markets, and record-low mortgage rates, there are ample opportunities for both buyers and sellers.
Home Sales(in thousands):
Resale housing activity remained stable in December, having edged down by less than 1% from November. Home sales improved steadily during the second half of 2010, gaining 18.3% from the low in July. Historically low interest rates will continue to support the market.
Average Home Price(in thousands):
The average home price in December was $344,551, which was up 2% from a year ago and which held steady compared to October and November. Prices rose or were stable in more than two-thirds of all markets on a year-over-year basis. Price stability is likely to continue as new listings pick up and interest rates are expected to increase.
The national housing market remained in balanced territory in December. More than half of Canadian local markets were balanced and three-quarters of the remaining local markets were seller’s markets. In December, the number of new listings rose by less than 1%, but remained 14.2% below the peak in April. An expected increase in new listings in the spring and rising interest rates are likely to return many of these seller’s markets into balanced territory and further stabilize home prices.
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