We hear this question all the time! The real estate market improved noticeably in 2012, and activity in the first two months of 2013 has been the strongest we have seen since the downturn began seven years ago. Closed and pending sales are increasing dramatically in most segments of the market. According to BrokerMetrics®, which pulls data from MRED (Midwest Real Estate Data, LLC), Prudential Rubloff’s pending sales, which is a more accurate reflection of current market conditions than closed sales, are up an amazing 77% over pending sales for the same period in 2012. Days on Market have fallen from 183 days to 159 days. We consistently hear agents complain of too little inventory of homes on the market: a 180-degree change from a year ago.
Average price was flat in 2012 compared to 2013, although we saw significant gains in the second half of the year after prices declined in the first half. In the first two months of 2013, average closed price has increased over 8%. Existing home inventory fell at the end of February to a 3.7-month supply, and we expect further declines. Currently, MRED reports 40% fewer properties on the market than one year ago. We project an increase in average sale price of about 5 to 10% in 2013, largely due to an increase in higher-end sales, fewer distressed-property sales, and lack of inventory.
Interest rates for both 30- and 15-year fixed-rate mortgages are still at near historically low and extremely attractive levels. Qualification standards have eased somewhat, and the vast majority of those who apply qualify for some type of financing as a result. The combination of low prices and low interest rates makes it a great time for qualified buyers.
OUTLOOK FOR SELLERS
This is the strongest sellers’ market we have seen since the downturn, with multiple offers becoming commonplace. Sellers would still be well advised to price conservatively, however, if for no other reason than the fact that appraisals tend to lag the market. It does no good to agree to a contract at a price that appraisers cannot support, and then have the transaction fall apart, costing valuable marketing time. Short sales and foreclosures, while declining, will continue to be factors that appraisers have to take into account. While the economy is improving, conditions both here and abroad continue to raise concerns.
OUTLOOK FOR BUYERS
We expect to see continued strong sales activity in the market. Buyers are well advised to make their highest and best offers immediately, as inventories are tight and homes are selling quickly. The days of a large selection and significant discounts from list prices are over.
Improving market with strong sales activity in most segments General feeling of optimism among real estate professionals Improving consumer confidence, though there is still concern over economic conditions here and abroad with employment being a significant contributor, extremely favorable interest rates continuing at near historically low levels should remain through 2013. Inventory shortages, resulting in multiple offers and rising prices; a great sign for sellers. For a quick sale, sellers should continue to price conservatively and do everything they can to make their homes outshine the competition. Moving from a buyers market, it is still a great time for qualified buyers, but they will have to act quickly or lose out.