Momentum is picking up in the real estate market, but proper positioning in the market remains the key to drawing an offer. Chicago’s Near North Side has a shortage of inventory, but there are buyers out there and money is still cheap. Wary buyers are thoroughly analyzing the market and the home before they initiate an offer. Homes that are well positioned in the market may sell quickly or even get more than one offer. However, remember, homes today will have to be sold twice: once to the buyer and once to the bank. The National Association of Realtors reported in February the just over 30% of contracts failed, due largely to declined loan applications or failures in underwriting due to the appraised value coming in below the negotiated price. The market will continue to improve, but you may not have a successful sale if you try to push the market.
There was just an article in Reuters which talked about what is REALLY going on in the market. Recovery is in sight, but there will be several stages of recovery. We’re seeing increases in the volume of sales, and stronger prices will come down the road. Buyers who are looking to hold on to property have already entered the market: investors, second-home buyers and retirees. Across the country this has been demonstrated, as well as here in Chicago. Although wary, conventional buyers are coming back to the market to, and we can see that especially on Chicago’s near north side.
Chicago’s real estate inventory is low, with less than 6 months worth of inventory. Well maintained homes that show perfectly and are priced at the market are selling in weeks. A lot of homes (discounted and not discounted) have sold this year. This is reflected by the increase in sales volume across Chicago’s north side, and prices are showing signs of stabilizing. These are positive signs of improvement, but we are not totally out of the woods yet. At the end of June, 111 leading financial analysts are predicting a further drop of .4% before the end of the year, and it’s expected that Chicago and Illinois will have another wave of distressed/discounted property come into inventory – especially after the election.
Election years can be tough on growth because of the uncertainty of which party and who will next be in office, but the following year is better. On a national level, we can expect modest increases as part of this recovery which indicates that things are starting to turn the corner. By the end of 2013, we can expect a gain of 1.3 which when you take away the .4 drop leaves a 1% gain. To put this into the context of the question whether to sell or hold, let’s take a look at some numbers. If your home’s present value is $300,000, you’d have an increase of $3,000 by the end of 2013. If your home’s value is $500,000, then it would be about $505,000 by the end of 2013.
Whether you stay put or decide to rent out our home, there are other factors to consider: your home will 1 year older – may require decorating and updating, taxes may go up (no longer eligible for homeowner exemption), routine and/or emergency maintenance and how many other people are waiting to do sell – will you have more competition? If you become a landlord, consider that the tenants will likely not keep your home as nicely as you did and your home will not show as well as it did when you lived there – especially if it’s vacant. If you bought near the bubble and haven’t paid down much of the principal on the loan, the other important factor to weigh is whether you will be better able to absorb the loss that will come with selling. Will you be able to save more than you stand to gain by waiting?
Spring’s robust housing market looks to be continuing its streak into summer.
Spring’s strong housing market doesn’t seem to be an aberration of our tepid winter. The pending-home sales index shows demand is strong. In this week’s Friday Five, we take a closer look at those numbers, a prediction for the next hot real estate markets, and more.
Wall Street Journal: Housing’s Boost: Time to Stop Blaming Weather?
For months, economists have mused over whether the surprisingly strong start to the spring housing market has come from an unseasonably warm winter that simply led buyers back into the market earlier than usual. But Wednesday’s report on pending-home sales shows that housing demand hasn’t eased heading into the traditional peak buying season, despite an early start to the spring, the economic storm clouds in Europe, and a slower rate of job growth at home.
Business Insider: Small Cities Will Be the Best Housing Markets for Next 20 Years
During the housing bust, two hypotheses made the rounds. The first one stated that the American attachment to home ownership is over. The second one was home owners will eschew suburbs in favor of the convenience and vitality of urban living. I don’t believe either of these to be true. People are practical and know that buying, when factoring in today’s historically low mortgage rates, is currently more affordable than it has been in several decades, and that buying is currently a much better deal than renting in many metros across the country. And my best guess is that the biggest winners in the housing market two decades from now are going to be small- to mid-sized cities.
Herald-Tribune: Household Formation and Jobs are Keys to Housing Market
In the early 2000s, which was a “normal” time in the American housing market, more than 1.3 million households were formed each year. But in the past five years, only about 590,000 households have been formed annually as the Great Recession has lingered and the real estate market collapsed. “There’s been a sharp increase in the number of young adults living with Mom and Dad. That isn’t a sustainable lifestyle for either the mom or the kid,” said David Crowe, chief economist for the National Association of Home Builders. “Something has to change, but we need jobs and the number of jobs has been slow to increase.”
Time: Can the Economy Get Healthy Without a Housing Recovery?
This spring has been filled with disappointing economic news, but one bright spot has been the possible bottoming out of the housing market. The conventional wisdom is that a stable housing market is important not only because housing as an industry takes up a large part of the nation’s yearly output but also because the home is most Americans’ largest source of wealth. Rising home prices, or even the absence of falling home prices, would go a long way to motivate the American consumer to feel more confident.
Pittsburgh Tribune-Review: More Documentation Needed for Loan Approval Today
Strict rules now used by lenders to qualify home buyers for mortgages are a direct result of the relaxed requirements during the housing boom in the mid-2000s that led to the Great Recession and millions of foreclosures. Now it’s more difficult to loan get approval than in the past. A new federal agency — the Consumer Financial Protection Bureau — is attempting to add clarity to the process and help potential home buyers understand and evaluate the costs and information needed to obtain a mortgage.