This Month in Real Estate Newsletter for U.S. & Canada Real Estate Markets – January 2011
This Month in Real Estate Newsletter for U.S. Market – January 2011
Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across the United State. The aim of the consumer-oriented segments is to help Keller Williams Realty realtors combat the “doom and gloom” messages of the national print and television media with real information on the state of the real estate market.
January 2011 Market Update:
The housing market is recovering. As more home buyers are taking advantage of the improved affordability conditions. With mortgage rates hovering around recent record lows and home prices having generally stabilized, economists are expecting an upward trend to a healthy and sustainable level in 2011.
Encouraging signs are showing up across the economy. Retail sales recently hit their highest level since before the recession. Key measures of small and big businesses’ optimism marched back up to prerecession levels and new claims for jobless benefits are trending lower. Together they bode well for steady job creation and improved consumer confidence which is generally manifested in more spending.
As the economy improves, current stimulus efforts by the government and the Federal Reserve Board are expected to gradually wind down. Meanwhile, serious buyers stand to benefit from historically favorable buying conditions.
Existing home sales resumed on an upward trend since bottoming in July. Sales activity rose to a seasonally adjusted annual rate of 4.68 million in November. This was up 22% from July and 5.6% above the 4.43 million level in October, but remained 27.9% below the 6.49 million tax credit rush a year ago. As steady job creation is expected to continue, industry experts are hopeful for 2011.
Home prices continued to stabilize. Median home prices edged up slightly to $170,600, 0.4% above year-ago levels. Distressed homes have accounted for a fairly stable market share, representing 33% of sales in November. This is on par with the 34% in October and 33% in November 2009. Historically favorable interest rates, coupled with stable home prices, continue to offer advantageous buying opportunities .
The number of homes on the market continued to decline. Total inventory fell to 3.71 million in November from 3.86 million in October. This reflects the increasing response from buyers to improved affordability conditions. As lending standards return to historical norms and consumers become more confident about their financial situation, more people will be able to buy their first home, move up, or invest.
Housing affordability set a new record in November. The relationship between mortgage rates, home prices, and family income is the most favorable on record for buying. The home price-to-income ratio, currently at 13.5%, continues to remain well below the historical standard. Stabilizing home prices and rising interest rates are expected to begin drawing affordability back up toward more normal levels.
Source: National Association of Realtors – October housing data released December 22.
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This Month in Real Estate Newsletter for Canada – January 2011
The housing market has returned to normal and balanced levels. Sales activity is still midway between the recessionary low of December 2008 and recovery high of December 2009. Over the past quarter, affordability improved in every market, making homeownership more attractive to buyers who have waited to enter the market.
Although there have been recent signs that the global economic environment is still fragile, such as the European debt crisis and the mid-year slowdown in the U.S. economy, the outlook in Canada remains positive. Despite sluggish exports, overall economic growth continues. Unemployment unexpectedly improved to 7.6%. The net worth of Canadians has risen to a new high, erasing the losses from the recession. Even though an increase in mortgages gave way to an influx of new debt, the rise in both assets and net worth has pulled debt-to-assets and debt-to-net worth down from the high. This bodes well for consumer confidence.
“Following the chilling lows at the onset of the recent recession and the dizzying heights during the subsequent recovery, the national housing market appears to be returning” to normalcy, says Gregory Klump, chief economist at CREA. Moving forward, he cites rising rates and weak job growth as factors that are responsible for keeping sales activity and price appreciation stable and slower than seen during the recovery. With improved affordability, balanced markets, and record low mortgage rates, there are ample opportunities for both buyers and sellers.
Resale housing activity rose for the fourth consecutive month in November, with home sales increasing 4.8% over the previous month. This monthly rise in activity builds on similar increases during the previous 3 months, pushing home sales 19.5% above the year’s low in July. More than half of provinces and territories posted monthly upward trends, led by Yukon with an 18% increase in sales compared to October.
Average Home Price:
The average home price in November was $344,268, up 2% compared to a year ago and just slightly above the previous month. Prices rose or were stable in more than two-thirds of all markets on a year-over-year basis. Price stability is expected to continue.
Heightened sales activity has resulted in a surprising improvement in the ratio of sales-to-new listings. 60% of local real estate markets are balanced, while 40% are seller’s markets. Experts anticipate a rise in new listings which will draw the remaining seller’s markets back into balance. In November, the number of new listings dropped slightly by 0.7%. Improved home sales continued to shrink the months’ supply of inventory, now at 5.8 months, which bodes well for further stability in home prices.
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