History demonstrates that housing recovery = economic recovery. You can’t have one without the other, and that’s precisely why numbers are constantly being reported and analyzed.
For example, sales of existing homes sold at an annual rate of 4.75 million, according to the most recent report released by the National Association of Realtors® (NAR). While this number was slightly lower than the 4.83 million pace of the previous month, it’s still up 11% from a year earlier.
Even more, despite the slip, September's pace was the second best in more than 2 years, falling just short of August’s strong finish.
So even though existing home sales fell 1.7% from August to September, there’s still some very good news for the economy since real estate sales have been consistently picking up in recent months.
This trend is the result of a number of factors all coming together.
Mortgage rates remain near record lows. Yes, we’ve been saying that for some time now, but what’s important to note now is the fact that when you combine these low rates with affordable housing prices, buyers eventually take notice. Those who have been on the sidelines waiting for prices to bottom out are now getting back in the game.
The recently reported drop in unemployment gives more people looking for mortgage loans better opportunities.
Foreclosures have fallen to a 5-year low, reducing the supply of distressed homes on the market. NAR reports that 24% of homes sold in September were from distressed sales, down from 30% a year ago.
Overall, the supply of homes available on the market fell to 5.9 months, the tightest inventory of homes since March of 2006, which was near the peak of the housing bubble. Even as the pace of home building reaches a 4-year high, the tightening supply of homes on the market is beginning to drive prices up.
According to the latest report released by the Greater Northwest Indiana Association of Realtors® (GNIAR) more homes are selling for a higher price, in a shorter amount of time.
Numbers calculated from January 1 to September 30 of this year compared to the same time period last year show single-family existing home sales increased to 3,323 this year over 2,893 last year in Lake County and 1,332 over 1,208 in Porter County. The average sale price was $133,010 this year over $130,936 last year in Lake County and $183,704 over $174,352 in Porter County.
Also noteworthy, the number of days a property is listed on the market was down to 101 this year from 107 last year in Lake County and down to 145 from 157 in Porter County.
The demand for homes continues to show signs of stabilization as record low mortgage rates and improved consumer confidence continue to pull buyers back into the market, according to Bill McCabe, broker/owner of Century 21 Executive Realty in Schererville who brings the real estate perspective to The Times Board of Economists.
“We’re moving in the right direction,” he reiterated. “Inventories of unsold homes in northwest Indiana continue to drop, and the year-end total of homes sold should increase this year for the first time since 2006.”
“With numbers improving across the board, it’s a great time to buy or sell,” Jeanne Sommer, broker/owner of Century 21 Alliance Group in Valparaiso, explained. “The biggest secret now is that we need more inventory. Inventories were as high as 22 months previously and are now at 6 months or lower in some price ranges, making it a great time to sell.”
As interest rates continue to stay low, it is also a good time to buy. Less than two years ago, the mortgage rate for a 30-year fixed conventional loan was 7%, which at the time was considered a great rate. In comparison, if you secured a rate of 3.5% today and put 20% down, you would be able to buy a home priced at $50,000 more and still pay the same monthly mortgage payment. (note: Rates change daily. Contact your local lender for current rates.)
“My advice is that if you think you are going to be looking for a home within the next year, I would start right now and get more home for your money,” Sommer said.
“Rates are the lowest they’ve been since long-term mortgages began in the 1950s,” McCabe added. “At the height of the recession, the high levels of inventory created downward pressure on pricing which hurt values. At the current levels, we are poised to see inflation in home values again.
“First-time buyers have been a huge help to the turnaround in housing over the last couple of years. They saw great prices and unbelievable interest rates that made homes affordable for them. Likewise, investors saw excellent price values and the potential for large long-term profits. However, many existing homeowners saw their equity diminished and just couldn't sell without hurting their credit in a short sale. We are hopeful a return in market values will help them achieve their dreams of a move to a new home.”