If you’re wondering if 2014 is a good time to purchase real estate, at least from an investment perspective, why not ask the ones that invest their way to riches, as reported on Bloomberg.com:
Real estate, at least from this agent’s perspective, is moving in a healthy direction. Buyers are shoring up their finances and entering the market in droves. Prices continue to climb and home builders are getting back to business. The only negative news to report so far this week is the stock market insecurities about world economics and a rise in distressed inventory despite fewer foreclosures.
Stay tuned to our web blog for further real estate updates, including California and the entire Southern California…
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Oh, the speculation are abound! Many talking heads, writers, bloggers, real estate agents, brokers, home sellers and buyers are talking about, or more accurately debating, about the health and status of the housing market. Historically, that is always the case! As long as I can remember, whether I was working in the real estate industry or before, people, including myself and my partner, have talked, discussed and argued over the state of housing and if the values are going up, down or sideways.
That’s never going to change. Real estate and the buying and selling of it is at the core of the U.S. economy and industries, no matter what they are. Even Google owns real estate, and their business has nothing to do with land or structures. And every single soul in this country should have a place to reside. Yes its true some rent, but does not the landlord own the property?
The current discussion about real estate is not whether the crash is over. Anyone that doesn’t know that has not been paying attention. The discussion now is how much of a rebound are we in. In this real estate professional’s opinion there are two indicators that can help us answer that question:
The first is the inventory currently for sale on the market. The answer is simple- there is not enough inventory! Buyers are still scrambling to find a home to buy; buyers are still in bidding wars with each other; prices are still rising as these bidding wars continue. But don’t just take my word for it, check out this graph of sample cities around Southern California that highlight and back up the comments I just made:
Time frame is from Jan 2010 to Dec 2013Cities used for sample: ‘Beaumont’, ‘Corona’, ‘Redlands’, ‘Riverside’, ‘San Bernardino’Your search has been modified to fit the selected preset.Results calculated from approximately 68,000 listings
As you can see days on the market have decreased significantly, albeit with an increase as of late but I attribute that to the holidays and typical market slowdown during those months. As you can also see prices have taken a dramatic upswing since January of 2012. This is pure economics at work: while availability of inventory decreases, prices naturally increase.
The second indicator to help us determine where the real estate market is headed is shadow inventory. Shadow inventory is industry speak for homes with a high potential for entering the marketplace. Good examples of shadow inventory are homes already foreclosed on by banks and lenders, but yet have not been placed on the market. The bank will not simply keep the home; they will sell it off to recap capital invested. Another good example of shadow inventory are homes with current mortgage delinquency. Many of the distressed homeowners with these properties will not cure their defaulted mortgage and eventually they will either short sale the home or let it go to foreclosure. Either way, these properties will end up on the market.
As just reported by Corelogic (read the article here), the shadow inventory is set at 1.7 million nationally as of October 2013. That is a significant drop from one year prior of 2.1 in October 2012. The depletion of shadow inventory is real. The housing inventory is not just chugging along, its on a warpath.
The only components still missing for a completed rebound, and subsequent housing market surge to surpass years prior to the crash is employment. Employment in California still plagues not just the housing market, but most of our livelihoods as a whole. Does 2014 hold a brighter future for employment and the working class? I don’t have that answer. In fact, economists with serious degrees would only have an educated guess. But I can say from the housing indicators mentioned above that the rebound has legs and everything is going its way.
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Pending home sales are down 5.6% in September 2013, according to the National Association of REALTORS®. Here in California and other the western states, sales are down a whopping 9%. These are pending sale numbers, not closed sales.
The rise in mortgage rates, PMI (Private Mortgage Insurance, and a decreasing lack of confidence in our federal government are the main culprits being blamed for the decline. Here is a link to a CNBC video that reports on the pending home sales drop.