It Looks Like a Bottom. Home Prices Increase in February 2009
On April 22, 2009, the Federal Housing Finance Agency issued a Press Release showing that "U.S. home prices rose 0.7 percent on a seasonally-adjusted basis from January to February". In other words, home prices have gone up for the second month in a row. Do two months make a trend? Only time will tell, but there are other indications that the real estate market has made a drastic turn upwards.
The above graph starts at the peak of the housing boom in April 2007, and shows how prices continued downward until December 2008. The first significant rise in nationwide real estate prices was during the month of January. The trend continues with another consecutive month of price increases from January to February 2009.
The Low Inventory of Quality Homes for Sale
At the low end of the market, consisting of mostly bank owned properties, there are several obstacles for first time home buyers:
- Condition of most bank repos is only fair to very poor.
- Bank repos in fairly decent condition are getting multiple offers.
- Some bank repos in Whittier have received over 40 offers because they were priced low and in decent shape.
- Most first time home buyers are planning to use an FHA loan to buy their home. Unfortunately, when competing against a dozen other offers on the same house, there will usually be a few buyers using a conventional loan, with 20% or more down payment, or all cash. A bank will take conventional financing or cash over an FHA offer any day.
- If a property requires repairs, don't expect the bank to pay for them. Usually, they won't, which is another reason why they don't want to deal with FHA and its requirements that the home be in livable condition.
The Looming Prospect of Shadow Inventory, Increasing Unemployment and a Continuing Bad Economy
Although the trend shows home prices continuing upward, the overall economy could throw them into a downturn at any time.
Shadow Inventory: Banks have had a moratorium on foreclosures for the past few months, resulting in a huge inventory of homes that have not yet started the foreclosure process. Banks have also put a throttle on releasing their existing inventory of foreclosed properties onto the market to sell. They have held back because they do not want to flood the market with properties, and thus cause prices to go down. It appears as if they have gone too far in holding back because it is getting harder to find good properties for sale, especially where there are not multiple offers, and prices are rising. Some experts have estimated this shadow inventory to be so huge that it could have devastating effects on home prices.
Increasing Unemployment: If more and more people continue to lose their jobs, there will be more foreclosures. If, on the other hand, job losses decrease, people will start feeling more confident in the economy, and more people will want to snatch up today's low priced homes before prices go up.
The Overall Economy: If the economy gets worse, real estate prices will follow. If any of the Big Three auto makers go bankrupt, look for the rest of the economy to tank. On the other hand, if the auto makers survive, the economy will improve, consumers will have more confidence, and sales will increase.
Real Estate May Lead the Way Out of the Recession
It may be happening already. Home buyers are smart people, and many of them, who have been waiting for the bottom, have jumped into the market now, all at the same time. Competition for homes is fierce in Whittier. Don't let anyone tell you it is a Buyers' Market anymore. A Buyers' Market means that there is at least 6 months of inventory and buyers can make offers that are lower than the asking price. Buyers in this market have no leverage if the house they are buying is under $400,000. That price range is a Sellers' Market. Is now still a great time to buy? Absolutely. But be prepared to make an offer at market price. Forget about low ball offers; but with prices as low as they are, you can still get a great deal.
Real Data Strategies reports that Whittier had 9.2 months of housing inventory available on May 8, 2008. Their latest report, dated March 3, 2009, shows only 4.4 months of inventory.
The Fed Sees Recession Easing
According to the Federal Reserve, the recession is easing its downward slope. An Associated Press article dated April 29, 2009 reports that stock prices rose for the day due to the Fed statements on the economy. Consumer confidence is also high, and the economy is improving.
The BOTTOM?
The bottom line is, if you find a home that you want to live in for at least five years, then buy it now. Don't wait for prices and interest rates to go back up!
-Blog End-
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About the author: The above Report about the Whittier Real Estate Market and National Real Estate Trends was provided by Rob Willis, a locally recognized Realtor®.
For Whittier real estate, see this website.
Thinking about selling your home? Go to The Home Sale Site.
I service the following towns in the greater Whittier area: La Habra, La Habra Heights, La Mirada, Norwalk and Santa Fe Springs.
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