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Tuesday, July 17, 2012
More Sales, Fewer Homes on the Market
Home prices have stabilized in many cities, but certain areas could still see
a decline in values -- especially those in judicial foreclosure states.
Overall, homes have been selling at a faster pace, and sellers who had
unrealistic price expectations have taken their homes off the market. That will
continue to contribute to a decline in the number of homes for sale, and it will
support home values.
If you're a buyer, there are great deals out there -- but don't be surprised
if you find yourself in a bidding war. Depending on where you live, there might
not be as many homes available for sale as you think.
Two dark clouds hang over the housing recovery: the dire job market and the
European debt crisis. If the euro crisis deepens or isn't dealt with soon, the
housing market could suffer.
Here are some of the housing trends you should expect to see this
More Sales, Fewer Homes on the Market Horror stories about homes lingering on the market for sale are becoming less
common in many parts of the country. In general, homes are selling at a quicker
pace, and that situation is expected to continue through the summer.
One example is Oakland, Calif. Of the homes for sale on Realtor.com in the
Oakland area this May, half had been on the market for 23 days. In May 2011, the
median time on market had been twice that -- 46 days.
"What a difference a year makes," says Curt Beardsley, vice president of
Realtor.com, speaking about the improvements the housing market has seen this
year. "The consumer engagement is beginning to grow."
Some areas have been less fortunate than others. In Naples, Fla., you'll find
that homes have stayed on the market for about four months.
These younger listings can be interpreted as a sign the market is recovering
and inventory is declining. But the trend is partly a result of frustrated
sellers simply taking their homes off the market, said David Crowe, chief
economist and senior vice president for the National Association of Home
"They've given up," he says.
Home Prices Rise -- Maybe Would you be surprised if home prices went up 10% in a few months? The National Association of Realtors' official forecast says home prices will
rise about 3% to 5% this year and next year. But based on recent trends, NAR's
chief economist, Lawrence Yun, says rising prices could surprise many in coming
"I would not be surprised if prices went up 10%," he says. Prices are not likely to increase in states where foreclosures have to go
through the judicial system, among them Florida and Nevada.
Mark Fleming, chief economist for CoreLogic, agrees the market has started to
recover, but his optimism comes with caution. Whether the recovery trend will
continue in the next few months depends on the local economy and on how the debt
crisis in Europe unfolds, he says.
"What we've seen this spring season is a very healthy market, fundamentally
in balance between supply and demand," he says. "Supply is at six months now,
nationally. In many markets, (it is) much less than that. I'm bullish that we
won't slide back and lose the gains that we've made, but that could be a
function of what happens economically in Europe."
Mortgage rates will likely remain low longer than expected, especially after
the Fed said it would extend its bond-buying program, known as Operation Twist,
through the end of the year. Rates are expected to stay around 4% in the third quarter of this year,
according to the Mortgage Bankers Association's latest forecast.
Forecasts aside, there are no guarantees that rates will remain low, says
John Stearns, a mortgage banker for American Fidelity Mortgage Services in
Mequon, Wis. "It's impossible to predict," he says. "I'm surprised they are this low."
Those who can refinance now shouldn't take a chance by waiting, he says.
More Help for Struggling Homeowners -- But Not for All What good are record-low rates for borrowers who don't qualify to refinance
or can't afford to pay their mortgages?
Homeowners who owe more than their houses are worth will find programs
available this summer that could make it easier for them to refinance their loans.
The revamped HARP, or Home Affordable Refinance Program, will continue to
help underwater borrowers refinance their mortgages with lower rates. But there
are still obstacles in the program, especially for those who are trying to
refinance with a lender other than the one that already services their
For those with Federal Housing Administration-backed mortgages, the
streamline refinance program will help qualified borrowers refinance with fewer
documents and at significantly reduced fees.
Some lucky borrowers have been receiving offers from their lenders to have
part of their mortgage balances forgiven. Lenders are not doing this out of
mercy. This is a result of the national mortgage settlement signed this
Bank of America says it has started to mail offers to about 200,000
borrowers. Many homeowners have not responded, says Ron Sturzenegger, a legacy
asset servicing executive for Bank of America. "This (principal forgiveness offer) is the best modification you'll ever
get," he says.
Tight Credit and Low Appraisals Remain Obstacles Appraisal issues will remain an obstacle in the way of sellers and buyers,
who often see deals fall apart because the home appraisal is lower than the
Industry analysts say there has been an overcorrection in the appraisal
industry, and appraisers have been too conservative when estimating the value of
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