I am continually inundated with articles and newsletters providing updates to the goings on of the market. It’s refreshing and actually very encouraging to note that most of the news and numbers are heading in the right direction.
The hottest topic over the past few years has been foreclosures. As we’ve noted, in the Mount Washington valley, with both Jackson NH real estate and North Conway NH real estate, we really dodged this bullet on a broad scale. Other parts of the country were no so fortunate. Currently, foreclosure filings have dropped to their lowest levels since 2007. Defined as default notices, scheduled auctions or bank repossessions, overall foreclosure activity dropped 5 percent from March to April and is down 14 percent year-over-year. One of the main reasons for this is a higher percentage of distressed loans are being converted into short sales. While still not the ideal solution, at least this puts some of the control and responsibility on the homeowner instead of passing that burden onto the bank and the overall economy.
As you have all heard me say time and time again, real estate is local. This foreclosure activity has winners and losers. For example, while the national activity number dropped 5 percent, other states had incredible drops. Arizona and Nevada both saw foreclosure activity drop 70 percent and there was a 50 percent drop in California. It stands to reason that states like those, that were hit the hardest, are going to show the most marketed drops as the economy strengthens. On the flip side of that, those states which require judicial review, 26 in all, actually saw an increase in activity. Since the process is more laden with red tape, they are simply running behind the more efficient states. (Source: RealtyTrac and CNNMoney)
The Wall Street Journal reported that there was also a nice increase in mortgage applications, 9.2 percent, in the last week. It is nice to see more folks taking advantage of these record low mortgage rates. The majority of those applications were for refinancing. People are continuing to realize the benefits of locking in a lower rate, especially for the longer term loans. Refinancing applications alone rose 13 percent last week. In general, refinancing applications make up about 75 percent of all applications. Applications for home purchases dropped by about 2.5 percent. Overall, the tougher lending standards have kept many prospective buyers from taking on the new debt, but the great rates are still pulling in refinancers.
But even with these more realistic and (typically) logical lending standards, new home sales still saw an increase of 7.5 percent in March over last year. The Census Department also published data stating that new homes sold at the strongest pace since April of 2010 and enjoyed an increase of 7.3 percent in February from January of this year. They also updated their previously reported numbers of new-home sales in December and January to higher numbers than originally published. Shorter term figures showed a drop in new-home sales, of 7 percent from February to March of this year. (Source: The LA Times, 4/24/12)
The chief economist for the National Association of Realtors, Lawrence Yun, offered some great insights and figures for us. The first quarter of 2012 has been the strongest quarter for real estate in five years, and current figures for pending contracts also indicate the trend is going to continue into the second quarter. Of course the NAR is going to be optimistic about the future, but the fact that rental costs continue to rise and conditions are perfect for home ownership indicate that we could see a very strong second half of 2012.
Investors have been enjoying these conditions for a couple of years now, especially in the second home market. The more traditional buyers are starting to see the advantages and are dipping their toes in the market. This will manifest itself with an increase in home values and a strengthening of the market overall. Areas like Phoenix and Miami have already seen double digit percentage increases in home prices year-over-year (March 2011 to March 2012). Yun went on to say that as the market strengthens and consumer confidence and general thinking about home ownership changes, the conditions remain right for a sustained housing recovery.
I think it is important to note that market numbers can be deceiving. I tend to try and take a step back and look at the overall trends taking place. It is obvious that the market is still bumbling around trying to get a foot hold, but on the broader scale the future is looking very bright. Those that are in a position to take advantage of the current conditions are going to be very glad they did.