According to a recent article from the AP, the housing market has improved for 3 consecutive months, which hasn't happened since 2004. Joel Naroff, president of Naroff Economic Advisors Inc., stated, "The turnaround in the housing market appears finally to be here and indeed may be gaining some speed." Even the stock market responded positively with the Dow Jones industrial average rising above 9,000 for the first time since early January.
So what exactly does this mean? Well in California it means more of the same. We tend to bottom out and rebound before other states, so what we read today has actually been our reality for a few months now. Agents on the street have been seeing rising activity, more offers, more buyers putting pen to paper, and more closings. My own office set an all-time record for closings in June and 90% of that was representing buyers.
The good news is that buyers know this is a great time to buy...and they are buying for the right reasons! Not to use their house as an ATM machine, but because they have been priced out of the market for so long and they can now finally get the home they want for their family. And guess what? In 5, 6 or 7 years, they will sell that house and take their equity to that bigger and better home! We are also seeing more investors come back, as evidenced by the cash offers we are seeing. This is a great opportunity to revitalize areas that have been blighted by the foreclosures and abandoned properties.
On the surface there seems to be an abundance of inventory, the AP article mentioned a 9.4 month supply of homes. Typically when the market reaches a 7 month supply it balances out and we see prices stabilize. The reality is we have a very stale inventory...homes have been on the market for 6, 7 and 8 months. Many of these properties are short sales and have had multiple offers and are waiting for bank approval. This has caused a bottleneck and created frustration for buyers desperate to get into a home.
With another wave of foreclosures expected to hit the market soon, many real estate experts think prices will drop. I tend to disagree because this fresh inventory will be scooped up fast by buyers who have been trying to buy. We are already seeing offers coming in over asking price, with no loan or appraisal contingency. The new inventory will most likely cause a frenzy and that usually drives prices up. Add in low interest rates, sellers/banks covering closing costs for buyers, the $8000 federal tax credit, low downpayment criteria (3.5% for FHA financing) and other factors and it's easy to see why it's a great time to be a buyer. Now if I could only find that perfect home that just came on the market and no one else has seen it yet!