© W.Scott – Fotolia.com

The problem becomes evident with a quick look at the stats – last December saw the number of properties listed for sale nationwide decrease by 8.5% from the month before to just 1.82 million in total, which is the lowest we have seen for several years, reports Investor’s Business Daily. As of today, existing inventories are 22% lower than they were just one year ago, with homes in the ‘low-priced’ category thought to be even scarcer than that.

Walter Molony, spokesperson for the National Association of Realtors, warns that the market is now entering an uncertain phase:

“We’re not sure what’s going to happen this spring, but it’s going to be very interesting to see what happens in the next couple of months.”

The big worry is that sustained price increases without any new inventory will ultimately hurt the real estate recovery. Homes could quickly become unaffordable as more properties are subject to multiple bidders, reversing the impact of current low interest rates we’re seeing now.

According to Molony, one of the biggest reasons for a lack of inventory is down to the restrictive lending standards of banks, which limits both buyers and new home construction. Loosening these standards would result in inventories going back up, but the problem is that banks refuse to entertain the idea.

Brian Moynihan, CEO of the Bank of America, said at a recent forum that the tight standards were necessary to avoid a housing bubble from reappearing:

“Credit has been restricted for a while, but … it had to be restricted because this is what helped open the problem up.”

Another reason why inventories are falling is because there are still legions of homeowners that remain underwater on their homes. For anyone in this situation, it simply isn’t worth selling as they would walk away from the sale with debt.

The Investor’s Business Daily says that things will pick up eventually when people who purchased their homes at the peak of the last cycle deem it profitable to sell up, although this won’t happen until 2014 at the earliest.

Housing outlook 2013. Image by NapaneeGal via flickr.com

While many markets are slowly but surely shrugging off the recession, several are still facing a rocky road ahead and it may be some time before we see a return to ‘normality’. So without any further ado, here’s RealtyBizNews’ lowdown on the worst housing markets to watch out for in 2013:

Detroit, Michigan

Sorry, no prizes for guessing who’s in the sorriest state – Detroit remains by far and away the sickest housing market going into 2013, even though it has shown some signs of improvement. While some might be encouraged by the 22% increase in home prices last November, the fact remains that Detroit’s housing landscape was hit by a ton of bricks during the crisis – and it will take a long time before it picks itself up.

Real estate prices in Detroit slumped by an average 60% during the housing crisis, and to this day foreclosure rates remain sky high – so much so that some of its homes continue to fetch prices as low as $1.

A sign of the times in Detroit… Image by dharder9475 via flickr.com

Fort Lauderdale, Florida

While the signs are that Fort Lauderdale’s pitiful housing market may have bottomed out in 2012, the city is being held back by an enormous backlog of foreclosures – Florida accounts for the third highest foreclosure inventory in the US, and many of them can be found right here. It’s likely that this oversupply will continue to dog Fort Lauderdale’s recovery prospects for some time to come.

On the up side, there are some positives – home sales rebounded by 14% between September and November 2012, while prices rose by 20% during the same period. Fort Lauderdale might just be entering its recovery period, but it will be a while before the situation normalizes.

Palm trees are about the only thing seeing positive growth in Fort Lauderdale at the moment. Image by wallyg

Miami, Florida

Miami is something of a special case, with a huge spate of foreign buyers taking advantage of its crippled market to snap up its luxury real estate on the cheap. This has even led to talk of a possible bubble, although the prospect remains slim given Miami’s pitiful job market at present.

The poor unemployment rate means that Miami is still seeing a steady flow of delinquencies and foreclosures, with more than 24,000 homes in the process of being repossessed by banks, according to Trulia’s latest figures.  Until Miami can sort out its job situation and address the foreclosure rate, its market will continue scrape along at the bottom.

Miami’s housing outlook remains uncertain heading into 2013 © kenzo – Fotolia.com

West Palm Beach, Florida

Florida’s nightmare extends to West Palm Beach as well, where one in 349 homes was foreclosed upon last July.

West Palm Beach’s foreclosure rates are, sadly, fairly typical for Florida and can be taken as a sign that it’s still feeling the effects of the housing market crash. This is evident in the market’s continued volatility, with home prices continuing to fluctuate wildly. Sales prices fell by almost 15% between June and July, in spite of a general improvement in overall sales numbers. We can expect more of the same during the next 12 months.

West Palm Beach’s homes are looking good, but only from up here.. Image by Captain Kimo via flickr.com

Cape Coral-Fort Myers, Florida

There’s not much going on in Cape Coral either at the moment. The only bright spot to speak of has been the rise in new construction permits, which indicates that building activity might be about to pick up. Even so, no new major developments have got out of the ground just yet, so it will be a while before this has an impact on the market.

Cape Coral’s biggest hurdle – like most of Florida – remains its depressing foreclosure rate. So bad was the area hit that it’s now possible to go on a tour of the city’s foreclosure-hit neighborhoods, which the New York Times says have seen massive drops in property values.

A tour of Cape Coral’s foreclosures isn’t for the feint of heart. Image by ifmuth via flickr.com

The next twelve months should see yet more improvements in the nation’s housing markets, propelled by record-breaking low mortgage rates and improving unemployment statistics, according to several real estate experts.

Steve Storti, Prudential Fox & Roach REALTORS’ senior vice president of marketing, told the Philadelphia Inquirer that by the time we look back on 2012, many people will see it as a transitional year:

“Just as you can only declare a recession after the fact, maybe we’ll be able to say this is when it changed over.”

Storti cites the fact that home prices are on the up across the nation, and most markets are expected to see this trend continue for the near future at least. Phoenix, Arizona, which was one of the hardest hit markets in the housing crisis, has seen home prices jump by an incredible 21.7% over the last twelve months. Meanwhile, the National Association of Realtors said that nationwide, sales of previously owned homes soared by 5.9% in November compared to the previous month, with sales increasing by a whopping 14.5% compared to November 2011.

One of the biggest factors behind these rising prices is thought to be the decline in inventory. Across the nation, inventories have fallen to just 4.8 month supply on average, the lowest level since December 2011.

Another area showing promise is that of new home sales. Last month, total sales of new homes reached their highest level in two years, while the median sales price rose to $246,200, up from $237,500 the month before. However, IHS Global Insight warns that while the new home market is improving, it still has a long way to go before we can reach what is considered a ‘normal’ level of sales, and will not likely do so until 2015 at the earliest.

Main image © SVLuma – Fotolia.com

Image by 401(K) 2012 via Flickr.com

Some 103 markets across the country are on the list – the largest number since the index was created a year ago. The October list comprises of markets from 33 states and the District of Columbia.

In order to make the list, a market has to have shown improvement in the number of housing permits, employment, and house prices for at least six back-to-back months. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau.

New markets on the list include Santa Cruz, Calif.; Pocatello, Idaho; Abilene, Texas; and Savannah, Ga.

“While 11 new housing markets were designated as improving in October, 92 metros retained their spots on the IMI and just seven slipped from the list,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “This is an encouraging sign that the housing recovery is proceeding at a steady pace as firming prices and employment help spur new building activity, which in turn generates new jobs and more home sales.”

“The fact that most markets are maintaining their spots on the improving list from month to month is an important indication that the recovery trend is solidifying,” agreed NAHB Chief Economist David Crowe. “At the same time, overly tight credit conditions are certainly constraining consumers’ ability to purchase homes as well as builders’ ability to construct them.”

Meanwhile, the National Association of Realtors reported this week that existing-home sales this year are expected to rise 9 percent to 4.64 million, and gain another 8 percent in 2013 to nearly 5.02 million. With generally balanced inventory conditions in many areas, the median existing-home price is projected to rise about 5 percent in both 2012 and 2013.

A complete list of all 103 metropolitan areas currently on the Improving Market Index, and separate breakouts of metros newly added to or dropped from the list in October, is available at www.nahb.org/imi.

Emerging housing trends this summer - ddpavumba / FreeDigitalPhotos.net

Intense Competition

Housing affordability has never been so high, thanks to super-low mortgage rates and steadily declining home values. As such, more buyers are emerging out of the woods to take advantage of the situation – and all of a sudden, there’s a lot of intense competition where there was none.

Investors especially, are muscling on to the scene in growing numbers, tempting sellers with their all-cash deals, which means that those needing to finance a deal are facing stiffer competition than they’ve had to deal with in quite a while.

According to Jed Smith, MD of Quantitative Research at the NAR, the circumstances have never been as encouraging for investors as they are now:

“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest.”

For first-time buyers especially, the competition for the best deals on the market is going to be a lot tougher this summer, adds Smith.

Homeownership Becomes More Desirable

One of the quirks of the housing market at present is that homeownership these days is for many people, more affordable than renting a home. Due to this, growing numbers of renters are beginning to desire a home of their own.

We can already see signs of this – according to a survey by Kingsley Associates, just 59.5% of tenants are planning to renew the lease on their home, the lowest number recorded since the beginning of 2009.

Mortgage Costs Increase

Despite home affordability remaining at record lows overall, some home buyers are seeing a slight increase in their mortgages. Fannie and Freddie, and the FHA have all increased their loan fees in recent weeks, and these costs will be passed on to homeowners.

Ed Conarchy of Cherry Creek Mortgage, Gurnee, Illinois, states that this will be a problem for buyers who lack high credit ratings, as they’ll be forced to take an FHA loan, leaving themselves stuck with the increased fees.

FHA mortgage premiums have gone up to 1.75% of the total loan amount, and so those buyers who can only afford a small down payment can expect slightly higher premiums with an FHA mortgage.

In addition, borrowers with more expensive mortgages can also expect to pay increased premiums soon. Starting in June, the FHA is going to raise its annual insurance costs for mortgages valued over $625,000.

Source: Bankrate, Inc.

December saw the third straight month of increasing home sales. © Andy Dean - Fotolia.com

The National Association of Realtors reported that last month’s surge was the third consecutive month in which the pace of sales had shown improvement, with fourth quarter sales lifting the volume of full year sales to 4.26 million.

The pace of sales is positive proof of a real estate recovery, claimed the NAR’s chief economist Lawrence Yun:

“The pattern of home sales in recent months demonstrates a market in recovery. Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

Even so, while the NAR might be encouraged, there is no denying that housing markets remain depressed. The median price of a home in December was given as $164,500, 2.5% less than 12 months ago. For the year as a whole, median prices were given as $166,100, some 3.9% less than 2010’s levels.

The NAR reported that foreclosures were continuing to have a negative effect on local markets, selling for an average of around 22% less than local market value last month, an increase on the 20% discount recorded in December 2010. Short sales were also hurting markets, selling at a 13% discount, although this was down from December 2010’s 16% discount.

Altogether, distressed homes amounted to 33% of all sales, 21% of them being foreclosures and another 12% being short sales.

One good piece of news however, is that inventories are getting tighter.  Even with the flood of distressed properties to contend with, the NAR calculates that the supply of homes will only last for around 6.2 months at the current pace of sales, the lowest inventory level recorded since March 2005 and a notable improvement on the 8-month supply of one year ago.

Economists are hopeful that current market conditions will lead to a significant improvement in both sales and prices over the next few months. Speaking to CNN Money, Joseph LaVorgna of the Deutsche Bank pointed out a number of encouraging signs which led him to take a bullish view of current sales conditions:

“Coming on the back of a dramatic improvement in homebuilders’ sentiment, the latest existing-home sales report corroborates our thesis that a housing recovery has finally begun.”

LaVorgna’s views are also backed up by findings in the latest report from the US Census Bureau, which showed that new home construction was also on the up.

Foreclosure process has doubled since 2007

But while all this sounds hopeful, real estate will be unable to mount a true recovery until we deal with the millions of foreclosed homes that have yet to be sold off. The problem with this however, is that we seem to be taking longer than ever to get through the foreclosure process these days, reports CNN Money.

The CNN Money article reported today that the average length of a foreclosure process in the US has more than doubled since the housing crisis gripped the nation in 2007. Back then, the average length of time for a home to be foreclosed was just 253 days, approximately 8 months. Now, the average length of a foreclosure process is almost two years – 674 days, to be absolutely precise.

Foreclosures are one of the main reasons why our housing markets are still depressed after all this time. Neighborhoods across the country are littered with empty, foreclosed properties, and this is dragging down prices in local markets.

Unfortunately, things look like they are going to get worse before they get better. The Wall Street Journal recently revealed that the number of foreclosures rose by 21% over the third quarter, and say that around 1.3 million homes were going through the foreclosure process as of September 2011. The volume of foreclosures is expected to grow steadily over the next year as banks are finally getting through the backlog created by the robo-signing scandal.

We’ve seen dozens of experts making dozens of different predictions as to when we might see a recovery in housing and prices on the way back up, but whatever these so called experts claim, common sense says we’re unlikely to see much improvement in the year ahead.

Image © Andy Dean – Fotolia.com

Things are looking better for real estate in 2012

The article made a number of predictions for housing over the next 12 months. One of the most important of these is that home prices are expected to stabilize at long last. Although Mark Zandi of Moody’s Analytics is predicting that home prices will drop by a further 3% to 5% nationwide, he also claimed that in around 12 months time things will finally stabilize, before we finally start seeing some gains in 2013.

Housing affordability is also expected to grow higher. Housing affordability is worked out according to the ratio of median home prices to median family incomes, and this is likely to remain at the current record levels we are seeing now. The article in Kiplinger notes that many homes across the US are “substantially undervalued”, and predicts that we could even see a mini-bubble in places, with some areas seeing prices rise by as much as 10% to 15% in a given year.

One factor that will help keep houses affordable is low mortgage rates, which are set to continue where they left off in 2011 – at record low levels. 30-year fixed rate mortgages have been hovering under 4% for quite a few weeks now, and Kiplinger predicts this will stay around the 4% to 5% mark throughout 2012.

We may also finally start to see some more sales. While we still have huge inventories flooding many local markets, the big slow-down in new homes has led to a gradual easing of surplus inventories, something that should lead to an increase in existing-home sales.

Foreclosures of course, remain one of the big problems that are blighting many markets, so what will happen with those? The number of foreclosures coming onto the market slowed down for a while as lenders had to go back and reprocess paperwork for thousands of homes, but the pace is starting to increase once more. According to the Kiplinger article, there are around 1.84 million homes which are delinquent by 90 days or more, while a further 2.17 million homes have already been foreclosed but are still waiting to go on the market, according to data provided by RealtyTrac. Still, it’s hoped that so long as lenders don’t flood the market with all those foreclosed homes at the same time, home prices shouldn’t be impacted by them.

All in all then, we can expect an improved year for real estate. Not a great year by any stretch of the imagination, but hopefully a year of transition as we move towards bigger and better things by the middle of the decade.

Image © Carsten Reisinger – Fotolia.com

As unemployment decreases, it’s hoped that housing markets will see an increased demand from buyers. So how can real estate agents prepare themselves for the year ahead?

The clock is ticking, time to get yourself organized! © iQoncept - Fotolia.com

Realtors should aim to position themselves at the forefront of next year’s much hoped for recovery, and to do so they need to focus on marketing themselves. Agents have tons of options for increasing their visibility in the local community – through billboards, signage in front of their listed homes, through newspaper ads and social media.

Another thing to do is to get yourself organized for the year ahead. There’s no time like the New Year for a good clean out! Update your contacts list – delete the old ones you no longer need, and check to see if any of them need updating.

Sort out the files in your computer as well. Free up your hard drive by trashing any old files you no longer need, and uninstall programs that you no longer use. Doing this will speed up your computer and see that it runs more smoothly. Check for upgrades – are any of the programs you use out of date? How about your antivirus?

As well as deleting all of the old stuff, how about adding some new tools to help you out as well? Modern technology has all kinds of innovations that can make the lives of a real estate agent easier. Check for new apps you can download onto your phone, send out some video newsletters, check for new ways of contacting your clients, such as through text messages.

Now’s also a good time to get your tax information organized, if you haven’t already done so. Make sure you have all your receipts filed neatly and any other information you will need. Doing this now can save you lots of stress during the spring when you’ll likely be much busier.

2012 promises to be a much more interesting year for real estate agents and real estate in general. By getting yourself organized and getting your name out there to the masses as early as you can, you’ll be well positioned to take advantage of any opportunities that come your way.

Merry Christmas!

Property markets are in decline, but where is worst off? Image courtesy of howzey @ flickr.com

Okay, but we knew that already right? Ever since 2008 when the recession kicked in, housing markets across the country have fallen on hard times, with thousands of homeowners going into foreclosure or suddenly owing more on their mortgages than what their home is actually worth. But while some areas have seen a gradual decline, other areas have quite literally fallen into the abyss. Let’s take a look at just how bad things have gotten in those areas with a look at America’s top five WORST housing markets:

(Results based on percentage change in median sales price between now and 2006. Data courtesy of Zillow)

5: Altamonte Springs, FL

% Change: -41.3

Altamonte Springs fortunes have fallen fast with the housing bust. According to the latest stats from Zillow, the median value of a home in the city stands at $86,000, while the median sales price comes in at a poor $66,900.

4: Lehigh Acres, FL

% Change: -42.2

Leihigh Acres, in Fort Myers, is what’s known as a “census-designated place”. During the early 00s, the area saw a huge boom in its housing market, reaching its peak in 2006 with 7,500 new homes being built. Fast-forward three years to 2009, and home sale prices had crashed by a whopping 80%. Naturally, foreclosures have sky-rocketed, while unemployment shot up from just 3.5% in 2007 to 9.8% in 2011. Zillow lists the median home value at $63,700, while median sales were recorded at $65,200.

3: Trenton, NJ

% Change: -46.0

Trenton has fallen a long way from its glory days of the post World War II period. Formerly a big manufacturing center, like many other industrial cities, Trenton’s economy has steadily declined for decades. As manufacturing jobs slowly dried up, the city fell on hard times and many residents moved away from New Jersey’s state capital. Crime levels have shot up, and Trenton is now ranked as America’s 4^th most dangerous city for those with populations ranging from 75,000 to 100,000. Naturally, once the housing market collapsed and the recession hit home, things got a whole lot worse. The city faces record unemployment levels, and while median home values average $60,700, median sales come in at just $38,000.

2: Pontiac, MI

% Change: -47.4

Being so close to Detroit, it comes as little surprise that Pontiac has been hard hit. Pontiac’s fortunes declines alongside those of the American auto industry, which served as its economic base. The city was once the home of both the extinct Pontiac brand and the primary truck factory of General Motors. Not any more. With the loss of those two facilities, Pontiac crashed to the extent that in 2009 the city had to go into receivership.  The city’s population has declined by 30% since the 1970s, standing at just 59,575 in the last count (US Census). Zillow’s Home Value Index gives median home values at $33,800, and median sales prices at a miserable $24,000.

1: Homestead, FL

% Change: -48.8

Take a glance around Homestead, and you’d be forgiven for thinking it was just another ordinary working-class area in Florida. But a closer look reveals a staggering amount of disarray. Homestead was one of Florida’s prime boom towns pre-2006, but many of the homes built during that period are now either in foreclosure, delinquent, abandoned or not even finished. Even worse, Homestead has seen a far greater deterioration of its home values than most other Florida cities. With a percentage decline of 48.8% in its home values, Homestead stands out as the worst city in the whole of the US. Zillow lists median home values at $76,000, while median sales were $96,400 last August. With high unemployment and high levels of crime thrown into the mix, Homestead is all in all, a rotten place to be stuck in right now.