Recent news suggests that the housing market might be moving in the right direction. According to the National Association of Realtors (NAR), existing-home sales rose 3.4 percent in April compared to March and were 10 percent higher than a year ago.
The inventory of homes for sale increased 9.5 percent at the end of April to a 6.6-month supply, up from a 6.2-month supply in March. A year ago, there was a 9.1-month supply of inventory solidly in a buyer’s market range. Nationally, homes listed for sale in April were 20.6 percent below a year ago, approaching a balanced market that gives neither buyer nor seller a decided advantage.
NAR reported that the national median home price jumped 10.1 percent in April from a year ago, following a 3.1 annual improvement in March. This is the first time we’ve had back-to-back median home price increases since June and July of 2010. Median home sale and price improvements were seen across all regions.
Lawrence Yun, NAR’s chief economist, believes the housing recovery is under way. He expects modest price gains nationally in the 1 to 2 percent range this year, “with stronger improvement in 2013.” However, he notes that in areas of tight supply like the Washington, D.C., area; Miami; Naples, Fla.; North Dakota; Orange County, Calif.; and Seattle, stronger price increases are expected.
Leslie Appleton-Young, chief economist of the California Association of Realtors (CAR), predicted at the end of last year that inventory would pick up in 2012 as homeowners who have been waiting for a better time to sell would decide to wait no longer. The recent good news has many prospective sellers giving this sales strategy a second thought. Would they be better off financially if they waited a couple of years for a stronger rebound and possibly a higher sale price?
There is still a lot of uncertainty. The consumer confidence index dropped from 68.7 in April to 64.9 in May (1985=100), according to the Conference Board. Lynn Franco, the director of economic indicators, believes that consumers are less optimistic about current business and labor conditions and that the “pace of economic growth in the months ahead may moderate.” If she’s right, this could interrupt a solid recovery.
You need to examine the value of your home in the context of your local area to determine if it is worth more, the same or less than it was last year. Some micromarkets, particularly in the San Francisco Bay Area, defy the economic and home sale activity in the rest of the nation. There is not enough housing to satisfy the demand from tech employees being recruited into the area. This is putting upward pressure on prices in some areas.
The phenomena is highly localized, and not just geographically. In Piedmont, an affluent city neighboring Oakland, Calif., that is noted for its excellent public schools, the demand for homes in the $1 million to $2 million price range outpaces the demand for homes in the “over $4 million” range. A home in the desirable Rockridge neighborhood of Oakland might bring in double-digit offers. A similar house in the Montclair area a mile or two away might receive none to several offers.
No one knows how long this frenzied market in some areas will last. Is it a mini-bubble market that you should take advantage of now? Or is there solid economic growth in the area that can sustain a housing recovery for years to come?
HOUSE HUNTING TIP: Keep in mind that two months of improved home sales and median price increases does not indicate a trend. We need to see many more months of improvements before we can say with confidence that the tide has turned and the housing market is on course for a solid, sustainable recovery.
THE CLOSING: Do your due diligence carefully before making a decision about whether to sell now or wait.