UNITED STATES, Feb 23 — It’s been a long haul, but several market indicators are finally showing positive signs for real estate. Fueled by the two home buyer tax credits and an unexpected surge in the US economy due to growth in the GDP (gross domestic product), both home buyers and home sellers can rejoice.
Economic Uptick The GDP took an unexpected jump in the fourth quarter of 2009, growing at a rate of 5. If you remember the days of the early 1980’s when rates peaked at 18
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t’s been a long haul, but several market indicators are finally showing positive signs for real estate. Fueled by the two home buyer tax credits and an unexpected surge in the US economy due to growth in the GDP (gross domestic product), both home buyers and home sellers can rejoice.
Economic Uptick The GDP took an unexpected jump in the fourth quarter of 2009, growing at a rate of 5.7 percent. Forecasts by economists were set at about 4.5 percent, so this higher than predicted rise shows that our economy is headed in a positive direction. In addition, the manufacturing sector is showing signs of a faster rebound than originally thought. According to the Institute for Supply Management, manufacturing orders hit their highest point since August 2004 with a gain of four percent.
Pending Contracts and Home Sales Up
The number of pending homes sales is also on the rise. Even with a decline in November last year, the numbers bounced back strong in December and are pointing to a better than expected spring market. Overall, pending contracts in December 2009 were 11 percent higher than the previous year.
Lawrence Yun, chief economist for the National Association of Realtors, noted that the trends we are seeing now are “a broad improvement over year-ago levels” even with the month to month ups and downs. He also commented on the two tax credits – the extended $8000 credit for first time home buyers and the new $6500 credit for existing homeowners - and forecasts that this in itself will stimulate 2.4 million sales in 2010. Existing homes sold also had positive numbers, showing an encouraging increase of 27.2% in the fourth quarter of 2009, which was a 13.9% increase over the previous quarter. 32 states actually saw double digit gains in this area, and the number of transactions that were distressed properties has started to decline.
National PMI Index
This index monitors local employment, household income, economic growth and demographic changes to predict changes in home values in 384 market areas covered by the survey. As this index was one of the first to throw the red flag about the coming housing crash, its findings are closely watched by many mortgage analysts. What’s their latest word this most recent quarter? Home values are increasing in many major metropolitan markets. This, in turn, causes the average risk rating to drop – in this case, it was by 2.6 percent.
The Zillow index also shows encouraging numbers. It monitors the amount of home owner negative equity, and recent findings show the national average dropped to 21.4 percent in fourth quarter 2009, down from a previous average of 23 percent. New Home Builders Taking More Orders
Even this area is showing some positive numbers compared to previous year averages. Reports from DR Horton, a publicly traded national builder, show orders are 45 percent above levels from the prior year and cancellation rates dropping from 38 percent to 26 percent. After multiple years of steady decline, builders may be seeing a light at the end of the tunnel that isn’t a freight train.
Mortgage Rates Still In the Equation
Yes, everyone’s been talking about mortgage rates. But, they still play a role in the overall positive picture. While they are expected to rise with the predicted steady expansion in market activity, they are still low and make homes affordable for many. If you remember the days of the early 1980’s when rates peaked at 18.19 percent, you can certainly appreciate what a great deal 5 percent is!
The Take Away
While we still have a way to go to full recovery, all indicators point to the fact that we are well on our way. Stabilizing median home prices, increases in positive equity by homeowners, and positive numbers from the leading indices all agree that the Real estate market train appears to be back on track and moving in the right direction, a welcome change after the roller coaster ride we’ve been on!
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