by Dan Krell
As indicated by the slight increase in the Consumer Confidence Index (ConferenceBoard.org), which edged up in August to 56.9, signs may point to a slightly improving economy. As consumer confidence increases, we may see home sales increase as well. Take for example the Mortgage Bankers Association reporting an increase in mortgage applications (8/27/2008 mortgagebankers.org), as well as the National Association of Realtors (Realtor.org) reporting that nationwide existing home sales have increased 3.1% in July (which is reported to be a five month high!).
Does this mean that the real estate market has turned a corner? Many remain cautious.
Other housing related reports are mixed, however. The NAR reports that although overall housing inventory (homes listed for sale) is up, single family home inventory has declined. The increased housing inventory is attributed to a sudden increase of condominium inventory.
Locally, Montgomery County single family home inventory has dropped slightly in July 2008, while sales have also dropped slightly in July from June 2008 sales (data reported by the Greater capital Area Association of Realtors). However, a few individual zip codes and neighborhoods continue to show signs of recovery by posting sales increases, price increases, or both (data derived from Metro Regional Information Systems, Inc.; MRIS.com). Neighborhoods hit hardest by foreclosures continue to lag behind in sales.
What do home buyers think? A recent Harris Interactive poll, commissioned by Move.com (news.move.com), reports that 81% of home buyers polled are anxious about the current housing market and feel there are barriers to their homeownership. However, of those polled, 44% of home buyers believe the real estate market will improve with a new president. Additionally, 41% of current homeowners polled plan to purchase a home again, 80% of all renters polled plan to purchase a home someday with 47% planning to purchase a home within the next five years.
Of those reporting barriers to homeownership, the top barriers reported were current home prices (31%), lack of down payment (28%), “lack of confidence in economy” (26%), and various personal and financial concerns. Although many polled report a barrier to home ownership, 78% of home buyers polled report that they were willing to save for down payments as well as compromise on various criteria they are searching for in their home (including neighborhood and local amenities).
So what can we expect? Lawrence Yun, NAR Chief Economist, was reported as saying in a NAR news release (8/25/2008) that home prices could increase in the few localized markets where sales have appreciably improved. He continued to say that many market area inventories remain high and will take time to shrink; however he reports that 2009 will be a more “balanced” market. He expects that “long term appreciation patterns” will eventually return.
According to MRIS’s “Trends in Housing” (mid-year 2008), foreclosures will continue to trouble the local market; the Washington, DC region’s foreclosure rate this past spring (131 per 10,000) has outpaced the national rate (87 per 10,000). However, expectations are that decreased inventory along with increased housing demand (due to job growth and relatively low interest rates) will increase market activity by early 2009. It is expected that close-in neighborhoods will see these signs of recovery first, shortly followed by the outer suburbs.
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 1, 2008. Copyright © 2008 Dan Krell.