Daily Archives: April 15, 2013

Real estate market off to hot start in 2013 | Waccabuc NY Real Estate

LONGMONT — Following a year in which the Longmont real estate market saw a 21 percent jump in total homes sold and a median sale price increase of 12 percent over 2011, numbers through the first quarter indicate 2013 could be another strong year.

Through March 31, both of those categories are on the upswing year-to-date in Longmont, while the average days on the market has fallen by more than one-fifth, according to statistics gathered for the Longmont Association of Realtors by Kyle Snyder of Land Title Guarantee Co.

Janet Thompson, who runs Thompson Daviau Realty with her daughter — and business partner — Kirsty, under the Metro Brokers umbrella, said the market today is a far cry from just a few years ago, after the

Area home sales

market came crashing down in 2008.

“By 2011 we had our best year ever, and last year we matched our best year ever,” said Thompson, who’s been in the business 11 years. “And the reason I’m telling you this now is, in the first quarter of this year, we’ve had the best quarter ever.”

She said she’s seeing strong movement in single-family homes, condos and townhomes in just about all of the markets she works in, which are primarily Boulder and surrounding counties. Multiple offers, often either at asking price or above, are common, Thompson said.

The biggest issue in the real estate community at the moment, she said, is lack of choice for buyers.

“I don’t really know why — people have stopped listing their homes,” Thompson said. “The interest rates are so low, there’s no problem getting a loan. As long as you’ve got good credit and you’ve got a down payment you can get a loan.

“The problem for the buyers is there’s nothing for them to buy. … We’ve got a lot of qualified buyers that we can’t find properties for.”

“As far as inventory, we’re probably down 60 to 65 percent of where we should be in a normal year,” agreed Edward C. Regel of Regel & Associates. “And I think that’s creating a false seller’s market, because we wouldn’t be in a seller’s market if we had the inventory.”

That lack of homes for sale is creating some intense competition in the real estate community, Regel said.

“Right now we’re seeing things go to contract in 24 to 48 hours — we’re talking $250,000 or less (for a single-family home). … (In that range) if you go see a property and it’s something your client likes, you’d better put in an offer.”

Dene Yarwood, a broker/associate with Wright Kingdom Real Estate and president of the Longmont Association of Realtors’ board of directors, agreed about the tight inventory, but cautioned sellers that their homes still need to be priced appropriately.

“It’s not a free-for-all right now,” she said.And she added that it’s not just the $250,000-and-under market that’s hot right now.

“In the southwest part of (Longmont), if you’re correctly priced, the $350,000 range is also moving fast. Really, anything under $500,000, Yarwood said. “There are some areas that are selling faster than other ones. But really, across the board, we’re doing very well.”

Asked to break out her crystal ball, Yarwood said she doesn’t feel like excessively tight inventories are something real estate agents — and those in the market for a house — are going to have to deal with all year.

“I think there are pent-up sellers,” she said. “I think once sellers see what’s going on they’ll be more inclined to put their houses on the market.”

Tony Kindelspire can be reached at 303-684-5291 or at tkindelspire@times-call.com.

U.K. Home Sellers Raise Asking Prices for Fourth Month | Katonah NY Real Estate

U.K. home sellers raised asking prices in April for a fourth consecutive month amid a shortage of properties for sale, according to Rightmove Plc. (RMV)

Prices sought rose 2.1 percent from March to an average 244,706 pounds ($376,000), the property-website operator said in a report published today. In London, they fell 0.5 percent. U.K. asking prices increased 6.9 percent in the first four months of the year and were 0.4 percent higher than a year earlier.

U.K. Home Sellers Increase Asking Prices for Fourth Month

U.K. Home Sellers Increase Asking Prices for Fourth Month

Chris Ratcliffe/Bloomberg

Pedestrians pass an estate agent’s sign advertising a property as sold in Saffron Walden, U.K. The number of properties advertised for sale nationwide fell 4 percent from a year ago, the report showed.

Pedestrians pass an estate agent’s sign advertising a property as sold in Saffron Walden, U.K. The number of properties advertised for sale nationwide fell 4 percent from a year ago, the report showed. Photographer: Chris Ratcliffe/Bloomberg

The scarcity of homes on the market is supporting prices and masking the weakness of demand in many areas as Britain risks falling into a third recession in five years. In his budget last month, Chancellor of the Exchequer George Osborne pledged 3.5 billion pounds of loans plus 130 billion pounds of guarantees to spur housebuilding and help people struggling to afford a home.

“With mass-market buyers still sitting on the sidelines, the size of the active market is a lot smaller, making it easier for an upswing in activity to feed through to an upturn in prices,” said Miles Shipside, a director at Rightmove. “This should not be confused with an overall market recovery, as while spring may be here the ongoing chill of the recession is still in the air.”

Message Received

The number of properties advertised for sale nationwide fell 4 percent from a year ago, the report showed.

Sellers in East Anglia led the increase by raising asking prices by 4.4 percent in April, followed by 3.9 percent gains in Wales and Southwest England, Rightmove said. In London, sellers reduced average values sought for the first time this year to 493,635 pounds, though prices remained 6.2 percent higher than a year ago.

Data from the Council of Mortgage Lenders today showed the number of home loans fell 0.8 percent to 37,900 in February from the previous month. Still, it was up 4.7 percent from a year earlier.

In a separate report, Ernst & Young’s Item Club said the government has “got the message,” noting the measures to help the mortgage market announced by Osborne in his March 20 budget. They follow the Funding for Lending Scheme, introduced by the Bank of England last summer to boost credit.

In the report, Item cut its 2013 economic growth forecast to 0.6 percent from 0.9 percent in January and said weak demand in Europe will hold back Britain’s recovery. It sees growth accelerating to 1.9 percent next year and 2.5 percent in 2015.

‘Home Front’

“With export markets continuing to disappoint, the chancellor has focused his firepower on the home front,” said Peter Spencer, chief economic adviser to Item. “Although it’s not a long term strategy, stimulating the housing market and the high street will keep gross domestic product growth positive. Unbalanced growth is better than no growth.”

Item said it expects the government’s 3.5 billion-pound “Help to Buy” program to be “popular” because of pent-up demand for new-build homes. Still, it’s “not clear” whether the demand will lead to an increase in construction or just be satisfied from houses that would have been built anyway, it said.

Recent house-price data have been mixed, with Nationwide Building Society saying in a March 28 report that the outlook for home values was “unusually uncertain.” Halifax, the mortgage unit of Lloyds Banking Group Plc, said this month that prices may continue on a “modest” upward trend this year.

China Slowdown

In a blow to global expansion, data today showed China’s economic growth unexpectedly lost momentum in the first quarter as gains in factory output and consumption weakened. Gross domestic product rose 7.7 percent from a year earlier, the National Bureau of Statistics said. That compares with the 8 percent median forecast in a Bloomberg News survey of 41 analysts and 7.9 percent in the fourth quarter.

European (SXXP) stocks retreated after the China data and as investors awaited a report on manufacturing in the New York area. The Stoxx Europe 600 Index declined 1 percent and the FTSE 100 Index dropped 1.2 percent.

Manufacturing in the New York region expanded for a third month in April, a report at 8:30 a.m. local time may show. The Federal Reserve Bank of New York’s general economic index declined to 7 this month from 9.2 in March, economists forecast in a Bloomberg News survey. Readings greater than zero mean that activity increased.

Why Home Prices Change (or Don’t) | Bedford NY Real Estate

WHAT prices will today’s home buyers get if they sell a decade from now?

Most people live in their home for many years. They don’t need to view it as an investment at all, but if they do, they surely need a long forecasting horizon.

The problem is that modern economics has a poor understanding of past movements in home prices. And that makes the task of predicting the state of the market in 2023 challenging, at the very least. Still, we can learn something by analyzing the factors that affect home prices in general.

There has been some good news lately: home prices have risen over the last year, and with those gains there has been a renewed sense of optimism. But do these price increases mean that homes are now good investments for the long haul?

Unfortunately, no. We do know one thing from economic research: one-year home price increases, after correcting for inflation, have had almost no statistical relationship to increases 10 years down the road. Thus, the upturn last year is irrelevant to long-run forecasting. Booms are typically followed by busts, usually in far less than 10 years. In a decade, an entire housing boom, if there is one in inflation-corrected terms, is likely to have been reversed and completely washed away.

Inflation has a major impact on long-term home prices. So do the costs of construction. We’ll examine these factors now, and turn to other important influences like speculative pressures and cultural and demographic trends in subsequent columns.

Home prices look remarkably stable when corrected for inflation. Over the 100 years ending in 1990 — before the recent housing boom — real home prices rose only 0.2 percent a year, on average. The smallness of that increase seems best explained by rising productivity in construction, which offset increasing costs of land and labor.

Of course, home prices are likely to be much higher in 2023 when measured in nominal dollars — those that aren’t inflation-adjusted. Inflation is the deliberate policy of the Federal Reserve, with a target rate now of 2 percent a year as measured by the personal consumption expenditure deflator, or about 2.4 percent on the Consumer Price Index. At those rates, nominal prices will be roughly 25 percent higher, over all, in a decade.

All else equal, the current Fed policy would have this effect: a home selling for $200,000 today will sell for around $250,000 in 2023, though the real price — corrected for inflation — would be unchanged. But because people often forget to correct for inflation, they may have the illusion that the market is improving.

In an ideal world, steady and uniform inflation would have no effect on rational decision-making because it affects incomes as well as prices. But in the real world, inflation does affect our psychology. People feel more optimistic when their nominal pay rises or when a neighbor’s house sold for more than they paid for theirs. But in thinking about investments for the long term, we should focus on fundamentals — on real, inflation-corrected values and on the economics behind them.

Here is a harsh truth about homeownership: Over the long haul, it’s hard for homes to compete with the stock market in real appreciation. That’s because companies whose shares are traded on a stock exchange retain a good share of their earnings to plow back into the business. The business should grow and its real stock price should also grow through time — unless the company makes poor decisions, as some certainly do.

By contrast, real home prices should decline with time, except to the extent that households shell out some money and plow back some of their incomes into maintenance and improvements, because homes wear out and go out of style.

Housing is an ambiguous investment to evaluate, because a good part of its real return typically comes in its providing a place to live, not in providing dividends paid in cash. For example, a homeowner may gradually realize that she doesn’t need all of the space in her house, but may not be emotionally prepared to start recapturing some of its economic value. The owner may not want to take in roomers, to use the old phrase, just as a modern renter may not want to live in a room in someone else’s home (though new markets like airbnb.com are aiming to change that mind-set).

Then there is the role of the construction industry, which is very good at building new homes and will crank out many more of them if prices rise relative to construction costs. It’s logical that homes’ ultimate values should be affected by home construction costs.

In a 1956 study of home prices by the National Bureau of Economic Research, Leo Grebler, David M. Blank and Louis Winnick documented a substantial decline in inflation-corrected construction costs per housing unit in the first few decades of the 20th century. They traced this decline to multiple causes, including a decline in the number of rooms per home, the use of gypsum wallboard in place of plaster and of asphalt shingles in place of slate, a shift in construction to lower-cost Southern climates and a relative increase in the number of multifamily housing units and apartment buildings. The authors concluded that the long-run movements in construction costs and home prices are “remarkably similar.”

This was the prevailing theory of home prices at the time: construction costs drove the entire housing market. That view — which implies that increasing productivity has restrained prices and could do so in the future — is very different from the focus on financial pressures and speculative bubbles that drives much of our thinking now.

Steady progress in developing new construction equipment, materials and techniques can be seen in something as simple as the history of power drills. A big step forward came in 1889, with the invention of the electric drill. Then came a series of other inventions: the portable electric drill in 1895, the pistol-grip-and-trigger-switch portable electric drill in 1917 (by S. Duncan Black and Alonzo G. Decker), the Phillips head screw in 1935 (by Henry F. Phillips), the first cordless electric drill in 1961 and the first lithium ion battery, which improved cordless drills, in the 1970s. Each set in motion a string of other improvements that, over decades, penetrated the construction industry and vastly improved its productivity. We can expect more such inventions in the future.

It is hard to imagine the next advances in home construction technology, but there are some clues. For example, Behrokh Khoshnevis of the University of Southern California is developing “contour crafting” robotics that he says will be able to accept computer instructions and, like gigantic 3-D printers, build houses. We cannot tell how well this will work, but computer technology has produced some amazing results. Why is it that we worry about the effect of information technology on our jobs but usually don’t link such uncertainty to the outlook for home prices?

Technical advances affect other industries, too, of course, and the performance of housing as an investment relative to others depends ultimately on the comparative rates of progress.

THESE variables alone suggest how tricky it is to forecast your home’s value when the time comes to sell. Prices can go down as well as up. That is also true for investments in general, of course, and is why generations of portfolio analysts have advocated assessment of risks, and not just extrapolation of recent trends, as the key to intelligent investing.

Next week, a look at real estate bubbles. Robert J. Shiller is the Sterling Professor of Economics at Yale.