Hi all: I wanted to add to the excellent piece just posted by my good friend Gene Mundt. Gene indicated that we're in the middle of a cycle and those who wait to buy or refinance may pay a higher price down the road.
This morning in our sales meeting one of our managers shared with us some slides from an economist's presentation at the last NAR convention. What was gleaned from the slides was the following:
1) There is no inventory and little is being built to replace it. We all know this. Average housing starts used to be about 1 million/year. Although housing starts are on the rebound from the low of 2009, they are still well under where we need to be. The bottom line is prices are rising due to lack of inventory.
2) There has been quite a bit of talk about shadow inventory. No one honestly knows if the banks are sitting on a bunch of inventory and we concluded that the banks aren't necessarily going to let anyone know. But the amount of distressed property being sold is much lower these days. It used to be at least 33% of sales and in some cases more. Again, it stands to reason that with less distressed property being sold, prices are rising.
3) Unemployment currently stands at 7.9% nationally. It has come down from a high of 10%. The thought is there will be a trigger point at 6.5%. At that point the prediction is mortgage interest rates will be at 5.5%. The predictions now are for the unemployment rate to hit 6.5% or below sometime in 2015.
What does the above mean for the real estate market? We all know we're slowly recovering off the lows. It also means that if you're a consumer waiting for the perfect time, you'll want to stay abreast of the economic news mentioned above. There's a big difference in payments between 5.5% and 3.625%, for example, not to include the added price paid for a home.
In sum, thanks for reading. If you find this valuable, please share or