Lower Inventory Levels Sell Homes Quicker

Lower Inventory Levels Sell Homes Quicker

Low inventory levels are bringing a faster turnaround for today's sellers. From 1987 through 2011, analysis of the NAR Profile of Home Buyers and Sellers series showed the typical time on market was 6.9 weeks, while the existing-home sales series showed an average supply of 7.0 months, just above the high end for a balanced market.

Today's median time for a home to remain on the market is 69 days (July 2012). This is down nearly 30 percent from the 98 days seen in July 2011. The NAR reports that during periods which see close to a 6-month supply, such a now, homes have a median selling time of 6 weeks.
Inventory levels remain low, with a 6.4-month supply of homes on the market in July. This is down 31.2 percent from a year ago. Last July saw a 9.3-month supply of homes on the market.

Lawrence Yun, NAR chief economist, said there is a clear relationship between inventory supply and time on market. "As inventory has tightened, homes have been selling more quickly," he said.  "A notable shortening of time on market began this spring, and this has created a general balance between home buyers and sellers in much of the country.  This equilibrium is supporting sustained price growth, and homes that are correctly priced tend to sell quickly, while those that aren't often languish on the market."

"Our current forecast is for the median existing home price to rise 4.5 to 5 percent this year and about 5 percent in 2013, which is somewhat stronger than historic norms because of the inventory shortfall that is most pronounced in the low price ranges," Yun said.  CPI growth is projected at 2.1 percent for 2012 and 2.3 percent next year.

There's a new measure today from the NAR for days on market, which is showing a longer selling time than historic findings -- which measured traditional sellers of non-distressed homes. The new measure includes short sales, a significant part of today's marketplace.
"Factoring out short sales, the median time on market for traditional sellers appears to be in the balanced range of six to seven weeks," Yun explained.

How do today's numbers compare to the peak of the housing boom? Between 2004 and 2005, when inventory levels were historically low, the median selling time was 4 weeks. Prices rose in response -- at an annual rate of 10.3 percent, historically higher than the 3.1 percent average growth in CPI during the period.

In the economic downturn, time on market for non-distressed sellers peaked at 10 weeks in 2009 with a 10.0-month annualized supply.  The median price fell 12.9 percent that year, which was the biggest annual decline on record.

"Ironically, if housing construction doesn't pick up to normal levels within two years, supply shortages could be sustained for an extended period and lead to above average appreciation," Yun said. "Therefore, any unnecessary hindrance to housing starts, such as excessive local zoning regulations or stringent bank capital rules for construction loans, should be carefully re-examined."
Written by Carla Hill

Five Pitfalls That Keep Buyers From Finding The Right Home

Five Pitfalls That Keep Buyers From Finding The Right Home
Buying a home is like searching for a mate. You'll go on many first dates and in the end, the one that has most but maybe not all of the characteristics that you want, will win your heart. However, first-time buyers and sometimes even serial homebuyers are disappointed by how long the process takes. Yet they may not understand how their expectations, beliefs, and lack of action may be causing the delay in finding the right home. Here are five pitfalls that buyers can fall into that cause them to let the right home slip by.
  • Seeing a home "as-is". I don't mean that buyers should not view homes on the market that are listed for sale "as-is"; rather I mean not being able to see beyond the "as-is" home. In other words, some buyers walk into a home and are immediately turned off by something as simple as the color of paint which can be easily changed, or maybe it's the carpet or wallpaper. Regardless, when buyers see the home "as-is" without the ability to envision it differently, they do themselves a huge disservice and fall into a pitfall of thinking that the home is not right simply because of the condition they are currently seeing it in.
  • Not working with an expert agent. Buyers can weed through the paper and click around the Web looking for open houses and listings but a quality agent can help identify the best-suited properties much faster. An expert agent also often knows about other listings that are about to come on the market and would not be in the paper or on the Web yet. It's worth it to spend time interviewing agents to find the right one who can help you find the right home. If you fall into the pitfall of trying to do everything on your own, you're likely going to miss seeing some of the houses that might offer the best match for your wants and needs.
  • Letting the important things slide. We've all done this when making an expensive purchase. We compromise on something that is important simply because it's less expensive. Later we regret it. Whether it's a new car, new house, or flat screen TV, when you're making large purchases, you need to know which things are important and non-negotiable and then stick to that list. Of course, there may be some small, less important things that you'll compromise on, but if you compromise on something big that is important to you, you're likely going to be disappointed down the road. There is a reason you were searching for a three-bedroom home. So, for instance, when you fall in love with that quaint, cozy two-bedroom home, remember that you had specific reasons for needing an additional bedroom. If you've clearly defined your living needs and wants before you begin house hunting, you'll have guidelines to keep you on track. You might find that the smaller home has a secondary unit on the property and, while it's not a third bedroom, it will suit your needs. So, yes, be flexible and think of the possibilities, but do remember your list of what you originally deemed important. The tendency is to get caught up in the moment, either because a home is so charming or because it appears to be such a good deal that you start to say, "Well, I can make-do without that." Maybe you can...but you'd better be certain before you close escrow.
  • Living strictly in the moment. Most of the time I write about practicing living in the moment because so many of us lead hectic lives. But when you're buying a home, you'd better be thinking about the future. What's good for you today will likely need to be good for you for many years to come. So, do your homework to find the right home. Work with your agent to find out how the neighborhood is changing. What future plans are there for the community? Pay attention to the congestion of an area and to the types of retail shops and restaurants that are coming into the community...then compare that to your future plans. You can't always know what lies ahead but many times you can see what types of projects have been proposed for undeveloped land in the area.
  • Skipping an inspection. I've written a lot about this one. Inspections are critical. They're the equivalent of taking a car you want to buy to your car repair shop for a look before you buy. Just like you don't want to end up with a lemon for a car, you don't want a home that has too many and too costly repairs needed. Inspections give you a "health" check of the home. They let you know what you're in for should you buy the home. You'll be glad you have a report to help validate your reasons for wanting to purchase this home over others. Avoiding these pitfalls will help you more quickly find the right home and the right investment for your future.

  • Written by Phoebe Chongchua

  • NVAR: Rising Prices, Low Inventories...and the Fiscal Cliff

    The Northern Virginia housing market has been one of the strongest in the country. Because of its location in the job-rich Washington area, Northern Virginia has attracted thousands of new residents during the last few years. With Northern Virginia’s many amenities, its residents want to stay in the region, moving from renter to owner or moving from a starter house to a larger house. As a result of comparatively resilient demand, inventories of homes for sale in the NVAR region have been drawn down to near historically low levels.

    The low level of supply of existing homes, which has not yet being augmented by new construction, has created a sellers’ market and robust price growth in Northern Virginia during the past two years. The road ahead is not so clear.

    The steady regional economic growth that drove the housing market recovery has slowed and the federal budget “fiscal cliff” looming at the beginning of 2013 has left the region—along with the rest of the country—uncertain about what’s ahead.

    After about 18 months of slow sales activity and price declines during the housing downturn, sales picked up in 2009 in Northern Virginia, beginning a turnaround many months earlier than most of the rest of the country. While the early acceleration in sales was driven in large part by investor purchases of distressed properties in Prince William County, sales rebounded relatively quickly throughout the NVAR region.

    The demand in Northern Virginia was due to the strong economy in the Washington D.C. area following the end of the recession. For months after the official end of the recession, the Washington D.C. metropolitan area was the only major metro area in the U.S. that was adding jobs—many in the relatively high wage professional services and government sectors that are fueled by federal spending.

    As a result of the region’s favorable economic situation, prices have been up in Northern Virginia. In fact, the NVAR region has seen price growth for 30 out of the past 33 months, and average prices in July 2012 were back to 90 percent of the 2006 peak. Nationally, home prices are still at 2002 levels, according to the Case-Shiller Index.

    The inventory of existing homes for sale ballooned in the lead up to the downturn, but they have been drawn down fairly quickly. One reason for the drawdown—at least initially—was the slowdown in the number of homeowners putting their homes on the market. More recently, however, the shrinking inventories are a result of stronger demand for housing by new workers.
    In July 2012, there were just over 6,600 homes listed for sale in the NVAR region, down 25 percent compared to July 2011. There was a precipitous drop in inventories between 2006 and 2009, a modest uptick in 2010 (as potential sellers began feeling more confident about finding a buyer), and declines in 2011 and 2012.

    Single-family detached homes comprised 68 percent of active listings at the end of July (4,498 total listings), while single-family attached/townhouses accounted for 17 percent and condominiums were 15 percent of the NVAR inventory. Condos remain an outsized share of the inventory, though that share has been dropping as financing has eased.

    The overall housing inventory is comprised of these existing homes, as well as new homes. New home construction slowed dramatically during the housing downturn. After a decade of nearly 10,000 new residential building permits each year in the NVAR region, half that number has been typical since 2007.

    The homebuilding sector is recovering slowly, and most of the new construction in the region is multi-family rentals. As a result, there is little new construction being added to the for-sale inventory. It likely won’t be until 2013 before the single-family sector will begin adding to inventory in earnest.
    What does the low inventory mean for prices? Not surprisingly, low supply in a recovering housing market leads to faster sales and upward pressure on prices. The average days on market in the NVAR region in July 2012 were 46, with 35 percent of homes selling in less than 10 days. Last July, the average days on market was 50, with 21 percent selling in fewer than 10 days.

    This demand and the robust performance of the market recently have been predicated on the attractiveness of the Northern Virginia region and strong job growth in the Washington metro area. The region’s future economic picture is more uncertain than it has been in some time.

    The proposed $1.2 trillion federal spending cuts, known as sequestration, are currently scheduled for the beginning of the year. A July 2012 report conducted by Dr. Stephen Fuller of George Mason University Center for Regional Analysis concludes that 2.14 million jobs could be lost nationally if the sequestration mandate takes effect. These job losses include direct losses of federal government workers and federal contractors, as well as spin-off jobs that are associated with these sectors.

    The “fiscal cliff” looms large for Virginia and the Washington D.C. metro area. Nearly 10 percent of the anticipated job losses nationally will be in Virginia. Only California will experience larger losses.
    When D.C. and Maryland are combined with Virginia, the three-state region will account for 21 percent of the national losses, or 450,000 jobs. Some of those D.C. and Maryland jobs that will be lost belong to Northern Virginia residents.

    There is already substantial uncertainty in the local economy. Federal agencies have been downsizing through attrition—that is, not replacing retiring workers. Contractors are putting employees on notice and are delaying their hiring. In the first half of 2012, there has been virtually no growth in the federal government and professional and business services sectors in the Washington D.C. metro area. These sectors have traditionally been our region’s high growth, high wage sectors—and an important share of the Northern Virginia potential homebuyer pool.

    The impending budget cuts create uncertainty, and when people feel uncertain, they tend to wait on major decisions. This uncertainty will likely lead to a slowdown—though not a decline—in the Northern Virginia housing market this fall. The level of inventories may remain about the same, edged up a bit by new construction that is already in the pipeline, but pulled down a bit as cautious homeowners sit tight in their current homes. At the same time, the size of the potential buyer pool could shrink in the fall as job growth continues to slow.

    Increasingly there are signs that agreements will be made to avoid the “fiscal cliff”—at least for now. But it is almost guaranteed that nothing will happen before the November elections, and the uncertainty in and of itself is enough to result in more cautious buyers and sellers in the fall.

    The recent strength of the market is a testament to the attractiveness of the Washington D.C. metro area and Northern Virginia to homebuyers. The region will continue to be a place people will want to call home. In the near term, the approaching “fiscal cliff” has many in a wait-and-see mode, which may slow—though not derail—the pace of sales activity and price appreciation in the second half of 2012.

    By Lisa A. Sturtevant – Assistant Research Professor, George Mason University Center for Regional Analysis

    Best Buy List

    Sign up below and you will be emailed weekly our Best Buy List of the Best Foreclosures in Northern Virginia

    Free Guide To Buying Distressed Properties

    Make Your Home Appealing to Buyers

    As you start to gather up your belongings and pack them away for your move, many sellers question which items they should leave out for buyer appeal.

    Often the wrong items are left on display; things like family photos, personal keepsakes, and treasured belongings. All of these items should be safely packed away which very often creates open space (a plus for buyers) on shelves, refrigerator doors, and desktops.

    Buyers often make a decision within just seconds of seeing your home about whether or not they want to buy it. So picture your home through the eyes of your potential buyers. What do you see in about 10 seconds?

    When you walk up do you see children's toys scattered across the front lawn? Do you see overgrown shrubs and weeds? Do you see chipped paint on the front door, a screen that's torn? Do you spot oil spills on the driveway?

    Even answering yes to just one or two of those questions can be damaging, and that's before your potential buyer has entered your home. Sometimes, those seconds are all the buyers need to decide to simply do a "drive by" and not even stop to go inside.

    Of course, the goal is to get the buyers inside. To get them to spend time, feel like your home could be their home. But even though that goal is so widespread and common among sellers, somehow the decisions some sellers make are almost completely polar to the goals.

    Let's look at five tips that can make your home appealing to buyers.

    Check all the screens and molding around your windows and doors. This isn't at the top of a seller's list but it ought to be. Even slightly torn screens send a careless message to buyers. It gives an unconscious uneasiness that there's been, at the very least, lack of care for this home.

    Something simple like fixing a screen is often overlooked by a seller because it is so simple, yet, just seconds of seeing the ripped screen can cause a negative impact for buyers.

    Add artwork to long hall ways. You don't have to buy artwork that costs thousands of dollars but, if your home has long hall ways, it's nice to break up the monotony with some tasteful artwork. Use contrasting shades and hues to coordinate with the flooring. When you're shopping for the artwork or borrowing it from a friend or your real estate agent or homestager, bring swatches of the carpet or flooring and wall paint to match the artwork colors.

    Make the kitchen a focal point. Whether they cook or not, the kitchen is of primary interest to many buyers. Winning over buyers with an appealing kitchen can often convince them that they must have the home. Make sure your appliances are clean, sparkling, and working. Return on investment in the kitchen is usually high and worth every penny, and more, you put into it.

    Put the "ah" in the bedroom. The bedroom needs to look like a bedroom. Sounds funny, but many people use their bedroom for other things such as an office or storage. Boxes or newspapers are scattered or stacked in a corner. There's no "ah" or sense of relaxation with that kind of room. So even if that's how you've been living, understand that's not how you should show a home.

    If there isn't much space, clear the clutter out. Remove excess furniture. It doesn't matter if you use it. You can walk to another room to get what you need if it means you sell the home faster because it now looks more inviting and spacious.

    Making your home more appealing is about seeing your home through the eyes of your potential buyers. When it comes time to go over the offers, you'll be glad you did.

    Written by Phoebe Chongchua