Are you thinking about selling your house? Is it the right time?
13,918 houses sold yesterday, 13,918 will sell today and 13,918 will sell tomorrow. 13,918!
According to the National Association of REALTORS Existing Home Sales Report, annualized sales now stand at 5.08 million. Divide that number by 365 (days in a year) and we can see that, on average, almost 14,000 homes sell every day.
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Nation-wide, the housing market continues a return to proper form from the sickly state of nearly 5 years ago. Everywhere one turns, new indicators can be seen as to support this claim. In a Denver market where housing inventories are tight, highly motivated buyers are creating an environment where multiple bid offers on listed properties are becoming the norm. This growing trend is reflected by home prices that in turn are steadily on the rise both here at home in the 5280 city, and across the country.
As indicated by the following chart, the housing recovery continues across 20 cities covered by the S&P/ Case-Shiller Home Price Indices.
At year’s beginning, the composite was -as a whole- up 8.1% from 12 months prior. What this means is that of the 20 major cities included, the average home price increased slightly over 8% year-over-year (YOY). This gain is the greatest YOY gain experienced since June 2006 when home prices peaked
Well, The S&P/Case-Shiller Home Price Index measures the average change in value of residential real estate given a constant level of quality. It is included in the S&P/Case-Shiller Home Price Index Series which seeks to measure changes in the total value of all existing single-family housing stock. The Index can be qualified into single city areas as to gain specific quantifiable information.
The thing that is so exciting about the Case-Shiller Home Price Index –Both from a Consumer and Broker’s standpoint- is that the data is a “third party” source that provides unbiased data on the state of the industry. The index is followed closely by agents, brokers, investors, and other real estate industry professionals as to gain a feel of overall trends within various markets.
According to Denver’s Case-Shiller, home prices in Denver have rebounded to their 2007 levels.
Why is this exciting?
Well, the home price index for January, 2013 was 134.17, meaning that the local market home resale prices averaged 34.17 percent higher than they were in the bench mark year of January, 2000. The last time that Denver had reached this price level was back in October of 2007 when the Index was reported at 136.09. As most can attest, a lot has happened between then and now so this return to a strong showing in housing sales pricing comes as a joy to many.
The numbers do not lie.
Year-Over-Year, home prices in Denver rose 9.2% in January 2013.
As data from non-biased parties such as S&P Case-Shiller continue to roll in, the current “housing recovery” continues to be supported. Denver seems to be holding strong in the midst of the city’s current record price appreciation that goes back to 2011. January marked the 13th straight month of year-over-year gains, which were preceded by 18 straight months of declines.
Being that the Denver market is running so lean on inventories, prices are sure to keep steadily on the gain. Gains that are expected to reach double-digit returns in the very near future. With Denver mortgage interest rates being so low (As of March 26th, 2013 3.46% avg.) this will undoubtedly continue to create a feverish environment with a hyper-affordability appeal.
These factors -coupled with the understandable element of pent-up buyers that have been patiently waiting for the market to show improvement and lend steady signs of stability before re-entering- further prove that (pardon the cheesy cliché) NOW, MORE THAN EVER, IS THE TIME TO BUY!
For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market, as it is in the markets for every other sale able item, will be determined by the concept of ‘supply and demand’.
According to dictionary.com:
“The relationship between supply and demand determines the price of a commodity. This relationship is thought to be the driving force in a free market.”
In real estate, supply and demand is represented as the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).
While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:
- 1-4 months supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
- 5-6 months supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
- 7-8 months supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.
What is happening across the country right now?
In most parts of the country, home values are rising. This is for two reasons:
- According to NAR’s latest Existing Homes Sales Report, raw unsold inventory is at the lowest level since December 1999 when there were 1.71 million homes on the market.
- According to this month’s Pending Sales Report from NAR, houses going into contract reached levels last seen in April 2010 which was the month the Home Buyers’ Tax Credit expired.
This has resulted in a 4.2-month supply at the current sales pace which is the lowest housing supply since April 2005 when it was also 4.2 months.
Based on the table above, we can see that the supply/demand ratio is leaning toward a sellers’ market where prices will appreciate. That has created positive movement in housing values in most parts of the country.
When your real estate professional discusses home values, he/she should be prepared to show what the supply/demand ratio for homes similar to yours is in your area.
Case Shiller released their latest Home Price Index yesterday. The headlines that followed were true but, in our opinion, a little misleading. Here are some of the highlights of the report that have dominated major media coverage:
- Home prices rose 5.5% in the 12 months ending in November 2012 (the latest data available).
- In the 12 months ended in November, prices rose in 19 of 20 cities.
- Housing is clearly recovering. Prices are rising as are both new and existing home sales.
Great news for the housing industry. Realize however that all the highlights mentioned above refer to year-over-year comparisons.
What is NOT Being Reported
There is another finding in the report that hasn’t garnered many headlines – month-over-month prices are softening.
There is no doubt that prices are up over the same time period last year. However, home price movement is seasonal. During the winter months for each of the last three years, prices have softened. That is taking place again this winter. As the report states:
“Winter is usually a weak period for housing which explains why we now see about half the cities with falling month-to-month prices compared to 20 out of 20 seeing rising prices last summer.”
This does not mean the housing recovery is slowing. It just means that home values are following their historic trend. As explained in the report:
“The better annual (year-over-year) price changes also point to seasonal weakness rather than a reversal in the housing market.”
If you are thinking of selling, you really need to know what will happen to home values in the short term. Prices, based on history, will soften over the next several months in many markets. Therefore, if your plan is to move by next summer, waiting for higher prices before putting your house on the market may not make sense.
According to the Cas-Shiller Home Price Index, the value of residential real estate continues to appreciate. In Denver, Case-Shiller reports “a change of 0.98% from last month and 6.72% [increase] from one year ago.”
CNN Money reports: This latest rise comes as the housing market has shown numerous other signs of recovery in recent months. The rebound is spurred by a combination of record low mortgage rates, an improving jobs market and a drop in foreclosures to a five-year low, reducing the supply of distressed homes available.
The confluence of historically low interest rates, and rising real estate values is unprecedented. With rental rates on the climb in the Denver Metro Area, this is an excellent time to consider an investment in residential real estate.