Keeping you updated on the market! - Palo Alto Area Real Estate

Keeping you updated on the market!
For the week of

April 27, 2009


Change is fickle: Sometimes it comes gradually, other times it comes instantaneously. One thing is for certain; change will come eventually because trends can’t last forever. With that prelude in mind, change is occurring in the housing market, and the good news is it’s the kind of change we can all believe in.
To wit: sales of existing homes stayed near a four-month average in March while prices rose from February’s levels, a sign the housing recession has at least abated if not improved. While recent numbers from the National Association of Realtors showed sales fell slightly more than forecast to an annual rate of 4.57 million, economists noted that the sales level is hovering near the level it reached in November. What’s more, prices for home resales posted their biggest monthly gains since June 2005, according to NAR economist Lawrence Yun.
Meanwhile, purchases of new homes were higher than expected in March, posting at an annual pace of 356,000, with inventories of unsold homes falling to a seven-year low. Federal Reserve efforts to bring mortgage rates down combined with tax credits for first-time buyers are expected to continue supporting new-home sales in coming months. Homebuilder confidence is another positive, having risen from a record low in January to a six-month high in April.
Low mortgage rates continue to aid recovery efforts, but for how long? Keep in mind, change will occur in this market as well. We’ve been saying for the past month that additional rate drops will be hard to come by, and that appears to be the case: Bankrate’s national survey has shown rates leveling, if not rising, in many markets. The Federal Reserve has exerted great effort to keep the benchmark 30-year fixed-rate mortgage under 5.5 percent. It can’t keep exerting great effort in perpetuity.

An Impending Seller's Market
The Wall Street Journal reported last week that falling home prices are starting to ignite bidding wars in some areas of the country, noting several real estate brokers who say multiple offers have become more common in parts of California, Arizona, Washington, D.C. and the Minneapolis-St. Paul metropolitan areas. The Journal even reports that some markets are running into shortages of moderately priced homes in middle-class neighborhoods.
A tighter housing market seems plausible, given that the Federal Housing Finance Agency reported that home prices nationwide rose a seasonally adjusted 0.7 percent in February from January. In short, all signs are signaling that the worst has ended and that a recovery is near, if it isn’t already occurring. Many housing economists remain cautious though, believing the market will gradually recover over the next year or two, with some parts of the country stabilizing before others.
But economists are often wrong. Recoveries, or deteriorations for that matter, almost never occur at the smooth, even pace economists predict. More often, recoveries move swiftly, and before you know it sellers are getting 10 percent more for their homes this month than the month before. It’s still a buyer’s market today, but today becomes yesterday a lot sooner than most people perceive. That’s something to consider for any buyers sitting on the fence.